Three reported rulings of 2016 concern the way out of a commercial lease (bail commercial, the French commercial lease). On 23 June 2016 the Cour de cassation (the French supreme court for civil matters) quashed a ruling that had set at the rental value of farmland the occupation indemnity of a landfill operator which had stayed on the land after its own notice: the company “had remained in the premises for nearly five years after ending the lease in order to perform its legal obligation to restore the site”. On 14 January 2016 it upheld the order to pay eviction compensation (indemnité d’éviction, the statutory compensation due to a commercial tenant refused renewal) made against a landlord rebuilding its shopping arcade, because “the premises offered as a replacement did not exist at the time the notice was served”. On 22 September 2016 it quashed the ruling that had recognised the right to eviction compensation of a tenant registered for an activity other than the one carried on in the premises. Three markers for the valuer.
The facts
In the first case, a company holds under a lease of 20 April 1984 land at Lihons used as an industrial waste landfill, a classified installation (installation classée, a facility regulated under French environmental law) authorised until 30 June 2004. On 2 June 2004 it files an end-of-operation dossier, serves on the landlords, on 28 and 29 June 2004, notice taking effect on 31 December 2004, then stays on the land to restore it in line with the requirements set by the prefect, the State’s representative in the département. On the landlords’ claim for rent arrears or an occupation indemnity, the Amiens Court of Appeal, on 27 November 2014, sets at 5 137.49 € the occupation indemnity due from 5 August 2006 to 10 November 2009, at the bottom of the range of rental values for average-quality farmland, the only use conceivable for that land once the thirty-year post-closure monitoring has ended.
In the second, the SCI (société civile immobilière, a French property-holding company) owning a shopping arcade serves on a married couple, commercial tenants, notice based on article L. 145-18 of the Commercial Code, taking effect on 30 December 2008, without eviction compensation but with an offer of replacement premises. The Pau Court of Appeal, on 28 March 2014, orders it to pay eviction compensation: on the day the notice was served, 30 June 2008, it had started building the new arcade and sent a plan of the premises offered, but those premises did not exist. It rejects, however, damages for the loss of enjoyment due to the lack of maintenance, the works ordered in summary proceedings having been carried out.
In the third, a tenant company requests renewal on 7 July 2010; the landlord serves, on 29 September 2010, a refusal of renewal with an offer of eviction compensation, then seeks forfeiture of that right for want of registration for the activity actually carried on. The Paris Court of Appeal, on 25 March 2015, assesses the registration condition at the date of the renewal request and refuses forfeiture, the landlord never having formally called on the company, registered for the sale of works of art, to amend its registration extract (K bis), and orders an expert appraisal of the amount of the compensation.
The decision
First ruling (Cass. 3e civ., 23 June 2016, no. 15-11.440, reported): partly quashed, as to the occupation indemnity, and remitted to the Paris Court of Appeal. The court of appeal had found that the company “had remained in the premises for nearly five years after ending the lease in order to perform its legal obligation to restore the site”; by retaining an agricultural rental value, it “did not draw the legal consequences of its findings”. The summary published with the ruling draws out the rule: “Since the redevelopment of the site, which the operator of a classified installation is bound to carry out when it ceases operating it, forms an integral part of the activity carried on, the occupation indemnity owed by the operating tenant which remains in the premises to satisfy that obligation must be set by reference to the rent provided for in the lease during the performance of its legal obligation to restore the site on which it operated a classified installation”.
Second ruling (Cass. 3e civ., 14 January 2016, no. 14-19.092, reported): the court of appeal, “having found that, although the landlord had, on 30 June 2008, started building the new shopping arcade and sent the tenants a plan of the site and of the premises offered, the premises offered as a replacement did not exist at the time the notice was served”, had “on that ground alone, given a legal basis for its decision”. The landlord’s cross-appeal is dismissed on this point. On the loss of enjoyment, quashed under former article 1147 and article 1719 of the Civil Code and article 484 of the Code of Civil Procedure: “the performance of measures ordered in summary proceedings to put an end to a manifestly unlawful disturbance does not exclude compensation for the loss that disturbance may have caused”. The quashing is partial, limited to that head, and the case is remitted to the Pau Court of Appeal differently composed.
Third ruling (Cass. 3e civ., 22 September 2016, no. 15-18.456, reported): partly quashed, because “the denial of the right to the statutory protection of commercial leases on the ground of a failure to register need not be preceded by a formal demand” and the tenant was “registered in the trade and companies register for an activity which was not the one actually carried on in the leased premises”. The heads of the ruling that recognised the tenant’s right to eviction compensation, stayed the decision on its amount and ordered an expert appraisal are set aside; the case is remitted to the Paris Court of Appeal differently composed, which must draw the consequences.
What this changes for valuation
During restoration, the lease rent is the reference. Restoring the site of a classified installation is part of the activity for which the land was let; the occupation used to perform it prolongs that activity, and the occupation indemnity (indemnité d’occupation) is set by reference to the lease rent, not to the rental value of the depreciated land. The tenant who stays in the premises after notice from the landlord while awaiting eviction compensation owes, instead, the indemnity under article L. 145-28, set at the rental value (valeur locative) without a cap (the occupation indemnity without a cap). If the landlord exercises its option, that indemnity runs back to the expiry of the lease, and property tax shifted onto the tenant without consideration reduces the rental value used (the two rulings of 2025 and 2026). Here, the tenant had itself given notice; no eviction compensation was at stake. The solution complements the 2022 ruling on decontamination costs: under that ruling, restoration falls on the last operator and its cost does not enter the eviction compensation; under the 2016 ruling, where the tenant, having itself ended the lease, stays in the premises to carry it out, the occupation indemnity for that period is set by reference to the lease rent.
Replacement premises are ascertained, not promised. A landlord taking back the premises to rebuild escapes eviction compensation if it offers the tenant premises matching its needs and means, at an equivalent location (article L. 145-18), and those premises must exist on the day of the notice: a building site and a plan are not enough. The valuer therefore first checks their existence and equivalence at that date. If the offer fails, the eviction compensation (indemnité d’éviction) is due in full, value of the business (fonds de commerce) or leasehold right (droit au bail), with ancillary heads that depend on whether the tenant actually relocates (the return of ancillary heads without relocation). If it is valid, the tenant still receives an indemnity for its temporary loss of enjoyment and the loss in value of its business, plus its normal moving-out and moving-in costs (same article): the report measures the margin lost during the transfer and compares the business in the two premises. The loss of enjoyment caused by the lack of maintenance of the premises, which is distinct from the eviction, is quantified separately, for the whole period it lasted, even if the works ordered in summary proceedings have been carried out. The guide My landlord refuses to renew my commercial lease describes the documents to gather.
Registration is checked against the activity actually carried on. The statutory protection presupposes the tenant’s registration in the trade and companies register (article L. 145-1 of the Commercial Code). Registration for an activity other than the one carried on in the premises does not meet that condition, and the landlord may rely on this without any prior formal demand. In the case decided, the ruling that recognised the right to compensation and ordered the expert appraisal to quantify it is quashed, and the court to which the case is remitted must draw the consequences. Before any calculation, the registration extract is therefore compared with the use clause and the activity carried on in the premises, at the relevant dates (the court of appeal had used the date of the renewal request, 7 July 2010), and the discrepancies are flagged without being decided. The article on eviction in 2017 recalls that a landlord which offered compensation after exercising its option may still deny the statutory protection until the compensation is definitively fixed; here, the landlord had refused renewal from the outset with an offer of compensation, in answer to the tenant’s request, and the 2016 ruling does not discuss the effect of that offer on the claim for forfeiture. The time-barred tenant left without title is another case where the right to compensation may vanish along the way.
What the valuer takes from it
- The tenant of a classified installation which stays after the lease to restore the site owes an occupation indemnity set by reference to the lease rent.
- It is distinct from the indemnity under article L. 145-28, set at the rental value; the report states at its outset the regime set by the assignment, or quantifies both assumptions.
- The replacement premises offered by a landlord which rebuilds must exist on the day of the notice; otherwise the eviction compensation is due.
- Registration must cover the activity actually carried on; the valuer compares the registration extract, at the relevant dates, with the activity carried on in the premises before quantifying.
- Measures carried out after summary proceedings do not erase the loss already suffered; the loss of enjoyment is quantified for the whole period it lasted.
Further reading
The Eviction compensation page describes the assignment, its timescale and its fee. The guide My landlord refuses to renew my commercial lease and the glossary entries indemnité d’occupation, indemnité d’éviction and valeur locative complement this article. On the same theme: Occupation indemnity: rental value without a cap, or nothing and Eviction compensation: right to remain, option, the expert. The decisions are available on Légifrance: no. 15-11.440, no. 14-19.092 and no. 15-18.456.
What next
A tenant staying on to restore the site, replacement premises offered with the notice, or a company registration that does not cover the activity carried on?
I establish the occupation indemnity due during restoration, the equivalence of the premises offered and the eviction compensation that depends on it, after checking the documents on which the tenant's right rests, for the landlord, the tenant or the court.
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