When a French commercial lease (bail commercial, the 3-6-9 lease) expires and the tenant stays in the premises, the tenant no longer pays rent but an occupation indemnity (indemnité d’occupation). Its basis is the rental value, not the last rent, unless the parties agreed otherwise. Two reported decisions of the Third Civil Chamber of the Cour de cassation (the French supreme court for civil and commercial matters), handed down eleven months apart, settle two questions: from when that indemnity is due where the landlord exercises its right of option, and how the rental value must be calculated where the lease passed the property tax (taxe foncière) to the tenant.
The framework
Article L. 145-28 of the French Commercial Code provides that a tenant who remains in the premises pending payment of the eviction compensation (indemnité d’éviction, the statutory compensation due when a landlord refuses to renew) owes, from the expiry of the lease, an occupation indemnity distinct from the rent. Unless otherwise agreed, that indemnity corresponds to the rental value determined under the criteria of article L. 145-33.
Article L. 145-57, second paragraph, organises the right of option. Within one month of service of the final decision setting the rent of the renewed lease, the landlord may refuse renewal, or the tenant may decline it. A landlord who had accepted the principle of renewal may therefore, having seen the rent set at a level it does not accept, change its mind and evict the tenant against payment of eviction compensation.
First ruling: the indemnity runs from the expiry of the lease
Commercial premises had been let since 1 February 2005. The tenant requested renewal with effect from 1 January 2015. The landlord claimed an uncapped rent (déplafonnement, release of the renewal rent from the statutory cap), but a final ruling of 1 December 2016 set the rent under the capping rules. On 26 January 2017 the landlord exercised its right of option and claimed an occupation indemnity equal to the rental value from 1 January 2015. The Bourges Court of Appeal applied the rental value only from 1 January 2016.
The Cour de cassation quashed that ruling (Cass. 3e civ., 27 February 2025, appeal no. 23-18.219, reported). It held that “where the landlord exercises its right of option, the tenant becomes liable for an occupation indemnity, equal to the rental value, which retroactively replaces the rent due, from the date of expiry of the lease whose renewal the landlord had first accepted in principle” (translated from the French).
In other words, the option wipes out the rent for the whole period since the lease expired. If the rental value is higher than the capped rent, the tenant owes a top-up for the whole period. If it is lower, the landlord refunds the difference. In this case the difference for the year 2015 alone was €3,700.50.
Second ruling: property tax passed to the tenant lowers the rental value
A landlord had served a sports retailer with notice and an offer of renewal with effect from 1 July 2015. On 26 September 2017 the tenant exercised its right of option, announced that it would vacate the premises on 30 November 2017, and asked the court to set the occupation indemnity due between those two dates at the rental value and to order the refund of the overpayment. The lease made the tenant liable for the property tax. The Grenoble Court of Appeal refused to take that into account in the rental value.
The Cour de cassation quashed that ruling too (Cass. 3e civ., 29 January 2026, appeal no. 24-17.227, reported). It recalled that the rental value is determined “having regard to the respective obligations of the parties” (translated from the French; article L. 145-33), and that obligations normally borne by the landlord which it has shifted onto the tenant are “a factor reducing the rental value” (article R. 145-8). It then laid down the rule: “Where the lease makes the tenant liable, without consideration, for payment of the property tax which normally falls on the landlord, that transfer is a factor reducing the rental value at which the statutory occupation indemnity must be set.” The order requiring the landlord to refund €230,455.39 was quashed and the case sent back to the Lyon Court of Appeal.
What this changes in the report
The period to be valued starts at the expiry of the lease. As soon as a right of option is exercised, I establish the rental value at the date the lease expired, then follow it until the tenant leaves or the eviction compensation is paid, year by year if the market has moved. The overpayment or the top-up is calculated over the whole period.
The rental value is that of article L. 145-33, not gross market rent. The five elements of the text apply: characteristics of the premises, permitted use, respective obligations of the parties, local commercial factors, and rents commonly charged in the neighbourhood. Property tax passed to the tenant without consideration, like any landlord’s charge shifted onto the tenant, is deducted. The report puts an annual figure on it and deducts it explicitly, reference by reference.
The references must be like for like. Comparing a market rent where the tenant bears the property tax with a rent where the landlord keeps it distorts the comparison. The Charte de l’expertise en évaluation immobilière (the French property valuation charter) recommends analysing income by distinguishing gross, net and triple net rents (6th edition, November 2025, Title III, chapter 7), and defines market rental value at Title III, § 1.4. The European Valuation Standards 2025 give the definition at EVS 1.
The precarious nature of the occupation is open to debate. The statutory occupation indemnity is set at the rental value, with no automatic discount for precariousness. Some trial courts allow one, others do not. The report presents the full rental value and, if asked, the effect of a discount, with reasons.
Further reading
The Commercial rent and leases page describes the rental value report, its timescale and its fee; the Eviction compensation page covers the assessment of eviction compensation and the occupation indemnity that goes with it. On the same theme: French commercial lease beyond twelve years: no rent smoothing. The decisions are available on Légifrance: 27 February 2025 and 29 January 2026.
What next
Is a tenant staying on after notice, or has a right of option just been exercised?
Landlord or tenant, I assess the occupation indemnity at rental value, period by period, taking into account the charges passed to the tenant and verifiable rent references.
Free quote, by email or by phone. No commitment before the quote is accepted. Fees are never linked to the value of the property (Charte de l’expertise, Title I, §2.1).
