The operator of a classified installation (installation classée, an activity regulated for its environmental risks, such as a landfill) which stops operating must restore the site, which can take years. If it has itself ended the lease and stays on the land to carry out the works, does it owe the owners the agreed rent, or the very low rental value of land that the operation has depreciated? By a reported decision of 23 June 2016, the Third Civil Chamber of the Cour de cassation (the French supreme court for civil and commercial matters) quashed a Court of Appeal ruling that had used the rental value of farmland: the indemnity is set by reference to the lease rent.
The facts
A company, successor in title to another, was the tenant under a lease of 20 April 1984 of land at Lihons intended for use as an industrial waste landfill, a classified installation whose operation had been authorised until 30 June 2004. On 2 June 2004 the tenant filed an end-of-operation dossier; on 28 and 29 June 2004 it served on the landlords notice taking effect on 31 December 2004. It then continued to occupy the land to carry out a redevelopment in line with the prefect’s requirements. The landlords sought an order for payment of rent arrears or an occupation indemnity (indemnité d’occupation).
On 27 November 2014 the Amiens Court of Appeal set the indemnity due for the occupation of the land between 5 August 2006 and 10 November 2009 at €5,137.49. In its view, after 31 December 2004 the owners could no longer let their land for landfill or any other commercial or industrial use, given the environmental constraints of this former quarry used for burying waste. Their very limited loss could not be assessed on the basis of the rent agreed during the operation; the court compensated it at the low end of rental values for average-quality farmland, “the only potential use conceivable for that land once the thirty-year post-closure monitoring has ended” (all quotations translated from the French).
The decision
The Cour de cassation partly quashed the ruling (Cass. 3e civ., 23 June 2016, appeal no. 15-11.440, reported). It relied on article 1382 of the Civil Code, articles L. 511-1 and L. 512-17 of the Environmental Code, article 34-1 of the decree of 21 September 1977 then in force and the principle of full compensation for loss. It inferred that redeveloping the site of a classified installation forms an integral part of the activity carried on, and that the occupation indemnity owed during restoration, after the activity has ceased, is set by reference to the rent provided for in the lease.
Yet the Court of Appeal had itself 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 nonetheless using the rental value of farmland, it “did not draw the legal consequences of its findings” and breached those provisions.
The quashing covers that sum and the order against the landlords to pay the tenant €1,500 towards its legal costs (article 700 of the Code of Civil Procedure). The Cour de cassation does not set the indemnity itself: the case is remitted to the Paris Court of Appeal, which will quantify it.
The summary published in the Bulletin (the Court’s official reports) restates the rule for an operating tenant that stays on the premises to redevelop the site: the occupation indemnity “must be set by reference to the rent provided for in the lease during the performance of its legal obligation to restore the site”.
What this changes for valuation
The agreed rent, not the value of the depreciated land. The decision censures the Court of Appeal, which had reduced the indemnity to the rental value of farmland by treating the owners’ loss as very limited, although it had found that the occupation served to perform the statutory restoration obligation. For the Court, restoration forms an integral part of the activity carried on; the occupation used to perform it thus appears as a continuation of the operation for which the land was let, and the occupation indemnity is set by reference to the lease rent. The depreciation of the land, caused by the operation itself, is not the measure: the Court derives the reference to the rent from the principle of full compensation.
The reference rent is documented. The valuer starts from the lease: initial rent, review or indexation clauses, last rent payable at the date the notice took effect. The wording used, “by reference to the rent provided for in the lease”, does not say that the indemnity equals the rent, nor whether the rent keeps moving under an indexation clause during the occupation. The report sets out the contractual rent, its possible evolution and the alternatives for the judge.
The period is dated document by document. The rule covers the indemnity owed for the duration of the restoration of the site. The valuer reconstructs that time from the end-of-operation dossier, the prefect’s requirements, the works schedule and the actual date the land was handed back. Occupation continuing beyond the works, or for another reason, falls outside the terms of the decision: the report isolates and quantifies it separately.
Several occupation indemnities, several measures. A tenant holding over after a refusal of renewal, while awaiting eviction compensation (indemnité d’éviction, statutory compensation for a commercial tenant), owes the indemnity under article L. 145-28 of the Commercial Code, set by the rental value without a cap. After a lease is annulled for a reason unconnected with the tenant, the indemnity is the counterpart of the enjoyment of the premises. Here, the tenant had itself given notice and no eviction compensation was at stake; notices and refusals of renewal served by the landlord raise other questions, such as whether the replacement premises existed on the notice date or whether the tenant was registered for the activity carried on. The report states at the outset the regime set by the assignment or, where in doubt, quantifies the alternatives.
Decontamination remains the operator’s burden. On 22 June 2022 the Cour de cassation held that restoration falls on the last operator and that its cost is not part of the eviction compensation. The two decisions answer different questions and fit together: restoration is the operator’s responsibility and, when performed on the leased land after the lease has ended, the time it takes is paid by reference to the agreed rent.
What the valuer takes from it
- The operating tenant of a classified installation which stays on after its own notice to restore the site owes an occupation indemnity set by reference to the lease rent.
- The rental value of the depreciated land, here farmland, is not the measure of that indemnity.
- The report documents the contractual rent and its evolution, and sets out the assumptions the decision leaves open, such as indexation.
- The period is reconstructed from the administrative documents and the works schedule; any occupation unrelated to restoration is isolated.
- This indemnity is distinct from the one under article L. 145-28 and from the one following the annulment of a lease.
Further reading
The Eviction compensation page describes the assignment, how it runs and its fee. The guide My landlord refuses to renew my commercial lease and the glossary entries indemnité d’occupation, valeur locative and bail commercial complement this article. Two 2016 decisions on eviction compensation are discussed separately: Replacement premises offered by a landlord must exist at notice and Trade register entry must cover the activity actually carried on. On the same theme: Occupation indemnity: rental value applies, rent cap does not and Decontamination costs and eviction compensation in France. The decision is available on Légifrance.
What next
A tenant staying on the site to restore it, and an occupation indemnity to set?
I establish the reference rent provided for in the lease and the period of occupation devoted to restoration, from the contract and the administrative documents, then quantify the resulting indemnity, for the landlord, the tenant or the court.
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