Many French commercial leases (bail commercial, the 3-6-9 lease) require the tenant to reimburse the owner’s property tax (taxe foncière). A tenant that finally declines renewal owes, for the elapsed period, an occupation indemnity (indemnité d’occupation, the sum owed for occupying the premises in place of rent) set, unless otherwise agreed, at the rental value: should that value be calculated as if the tax were still borne by the tenant? In a reported decision of 29 January 2026, the Third Civil Chamber of the Cour de cassation (the French supreme court for civil and commercial matters) answers that this transfer, made without consideration, “constitutes a factor reducing the rental value at which the statutory occupation indemnity must be set” (translated from the French).
The facts
A real estate investment company (société civile de placement immobilier, SCPI), owner of commercial premises let to a sporting goods retailer, served its tenant with notice and an offer of renewal with effect from 1 July 2015. The tenant accepted renewal in principle, but not at the rent proposed.
On 26 September 2017 the tenant exercised its right of option (droit d’option), that is, it declined renewal, and announced that it would vacate the premises on 30 November 2017. It then sued the landlord to have the occupation indemnity due between 1 July 2015 and 30 November 2017 set at the rental value, and to recover the sums overpaid over that period as rent and charges.
The expired lease provided that the tenant would reimburse the landlord for the property tax, on top of the rent. In a ruling of 21 March 2024, the Grenoble Court of Appeal set the rental value with no reduction for that clause: according to its reasons, as reproduced in the appeal, the occupation indemnity, “by reason of its statutory basis, must include the burden of the property tax”. It ordered the landlord to pay the tenant, on the account between the parties, €230,455.39 including VAT, with interest. The tenant, which complained that the ruling had limited that award, appealed.
The decision
The Cour de cassation partially quashed the ruling under articles L. 145-33, L. 145-57 and R. 145-8 of the French Commercial Code (Cass. 3e civ., 29 January 2026, appeal no. 24-17.227, reported).
It combined two texts. Under article L. 145-33, the rental value is “determined in particular having regard to the respective obligations of the parties”; it follows from article R. 145-8 that “obligations normally incumbent on the landlord which it has shifted onto the tenant constitute a factor reducing the rental value”.
It then recalled that the indemnity owed by a tenant for the period preceding the exercise of its right of option “originates in the application of article L. 145-57 of the Commercial Code”. That statutory occupation indemnity, “which, failing agreement to the contrary, must be set at the rental value determined according to the criteria of article L. 145-33 of the Commercial Code, retroactively replaces the rent due”, as the Court had already held on 5 February 2003 (no. 01-16.882) and 16 March 2023 (no. 21-19.707, reported).
Hence the rule: “If the lease makes the tenant liable, without consideration, for payment of the property tax which normally falls on the landlord, that transfer constitutes a factor reducing the rental value at which the statutory occupation indemnity must be set.” The Court of Appeal, which set the rental value “without reducing it on account of that exorbitant clause”, breached the texts. The award of €230,455.39 including VAT was quashed and the case sent back to the Lyon Court of Appeal; the other ground of appeal was not examined.
The decision does not touch the validity of the clause; it says neither what would amount to consideration nor by how much the value must be reduced.
What this changes for valuation
A period that goes back to the renewal date. The statutory indemnity, owed for the period preceding the option, retroactively replaces the rent. Here the tenant sought to have it set from 1 July 2015 to 30 November 2017, its announced departure date; the decision does not rule on the period after the option, exercised on 26 September 2017. The valuer establishes the rental value over the relevant period, with evidence, then compares it with the rent and charges paid for the account between the parties. Where the landlord exercises the option, the starting point depends on another decision: the occupation indemnity is due from lease expiry if the landlord opts out.
The property tax, quantified year by year. Where the lease makes the tenant bear the property tax without consideration, the valuer records its amount year by year, from the tax notices and the recharges, and treats it as a factor reducing the rental value derived from the comparables. The report shows the calculation: value before adjustment, amount of the tax, reduction adopted and the reasons for it, value retained. The decision prescribes no method of reduction and does not say that the reduction must equal the tax.
Comparables on the same charges basis. A rent agreed with the property tax recharged to the tenant cannot be compared, without adjustment, with a rent for which the landlord keeps it. The Charte de l’expertise en évaluation immobilière (the French property valuation charter, 6th edition, November 2025) lists the property tax among the charges the owner bears without reimbursement, which separate gross rent from net rent (Title III, chapter 7), and states that the renewal rental value takes account of usual annual charges, such as property tax (Title III, § 1.6). The report states, for each comparable, who bears the tax.
The test of consideration. The same reasoning led the Court, in 2025, to hold that rent paid in advance beyond two terms does not in itself reduce the rental value, because the law gives it a counterpart, the interest owed by the landlord under article L. 145-40 (Rent paid in advance does not lower the French rental value). The valuer looks in the lease and the negotiation documents for any consideration, for example a rent reduction expressly linked to that charge; the report documents it and leaves its assessment to the court.
Classify the occupation before quantifying. The decision concerns the indemnity under article L. 145-57, owed for the period preceding the tenant’s option. A tenant holding over after a refusal to renew owes the indemnity under article L. 145-28, set according to rental value and without the rent cap (Occupation indemnity: rental value applies, rent cap does not). The report first states which sum it quantifies and on what legal basis.
What the valuer takes from it
- The indemnity owed by the tenant for the period preceding its option is set, unless otherwise agreed, at the rental value of article L. 145-33, and retroactively replaces the rent.
- Property tax made payable by the tenant without consideration reduces that rental value (article R. 145-8).
- The report quantifies the tax year by year and shows the reduction.
- For each rent comparable, the report states who bears the property tax.
- The valuer looks for and documents any consideration for the transfer; the decision does not say what amounts to consideration.
Further reading
The Commercial rent and leases page describes the assignment, its timescale and its fee. The guide Lease renewal in France: my landlord wants to uncap the rent and the glossary entries indemnité d’occupation, droit d’option and valeur locative de renouvellement complement this article. The decision of 27 February 2025 on the landlord’s option is discussed in Occupation indemnity: backdated to lease expiry after the option. On the same theme: Occupation indemnity: rental value applies, rent cap does not and Occupation indemnity during site restoration: the lease rent. The decision is available on Légifrance.
What next
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