Quarterly rent payable in advance, a six-month security deposit: some commercial leases leave the equivalent of nine months’ rent in the landlord’s hands. At renewal, can the tenant rely on this to obtain a lower rental value? In a reported decision of 7 May 2025, the Third Civil Chamber of the Cour de cassation (the French supreme court for civil and commercial matters) answers no: the law gives these advances a counterpart, the interest the landlord owes beyond two rent instalments (termes), so that the clause does not in itself constitute a factor reducing the rental value.
The facts
A company rented premises used as a factory, shop and offices under a commercial lease (bail commercial). It requested renewal of the lease; the landlord accepted the principle, but the parties could not agree on the rent. The tenant applied to the commercial rent judge (juge des loyers commerciaux) to have the rent of the renewed lease set, with effect from 1 October 2018, at the rental value, at a lower level.
It relied on the payment terms of the lease: rent payable quarterly in advance and a security deposit (dépôt de garantie) of six months’ rent, increased, it said, by VAT although the deposit is not subject to it, so that more than nine months’ rent net of VAT was paid in advance. In its view this financial burden, above the usual amount, justified a reduction of the rental value.
On 23 February 2023 the Grenoble Court of Appeal rejected the argument. It found that the lease provided for a security deposit equal to six months’ rent including VAT, plus service charges, and for a quarterly rent payable in advance on the first day of the calendar quarter: three rent instalments were thus paid to the landlord in advance, which article L. 145-40 of the French Commercial Code (Code de commerce) does not prohibit. The tenant appealed to the Cour de cassation, relying on articles L. 145-33, L. 145-40 and R. 145-8 of that code.
The decision
The Cour de cassation dismissed the appeal (Cass. 3e civ., 7 May 2025, appeal no. 23-15.394, reported). It rejected the other arguments without discussing them, as they manifestly could not justify quashing the decision (article 1014, paragraph 2, of the Code of Civil Procedure), and answered in detail only the argument based on the advance rent and the security deposit.
It first set out the rule: “Under articles L. 145-33, 3°, and R. 145-8 of the Commercial Code, from the point of view of the respective obligations of the parties, obligations imposed on the tenant beyond those arising from the law or usual practice, without a counterpart, constitute a factor reducing the rental value” (translated from the French, as are the quotations below). It then recalled that, under article L. 145-40, rent paid in advance, in whatever form and even by way of security, bears interest for the tenant’s benefit, at the rate applied by the Banque de France for advances on securities, on sums exceeding two instalments.
Hence the solution: “Since it has as its counterpart the landlord’s statutory obligation to pay the tenant interest at a rate fixed by law, a clause of a commercial lease requiring the tenant to pay in advance sums exceeding the amount corresponding to the rent for more than two instalments does not in itself constitute a factor reducing the rental value.” The Court of Appeal had therefore “rightly held that these contractual provisions did not entail a reduction of the rental value”.
The words “in itself” refer to the clause taken on its own; the Court does not say what circumstances might lead to a different outcome. It addresses neither the argument based on VAT charged on the deposit nor the actual payment of the interest: the counterpart it relies on is the landlord’s statutory obligation.
What this changes for valuation
The obligation, then its counterpart. Article R. 145-8 does not turn every burdensome clause into a ground for reduction: the rule restated by the Court concerns obligations going beyond the law or usual practice “without a counterpart”. It follows, for the valuer, that a general discount for unfavourable clauses is not justified: the valuer lists the tenant’s obligations, sets aside those that the law or the lease offsets, and puts a figure on the others. The Charte de l’expertise en évaluation immobilière (the French property valuation charter, 6th edition, November 2025, Title III, § 1.6) states that the charges and conditions of the lease may lower or raise the renewal rental value; the decision places rent paid in advance among the clauses that are offset.
Property tax, the other side of the same test. On 29 January 2026 the same chamber held that property tax passed to the tenant without a counterpart reduces the rental value used to set the statutory occupation indemnity (Occupation indemnity: property tax passed to tenant lowers it). The two decisions do not conflict: the 2026 decision, the more recent, applies the same test to a different obligation and leaves the 2025 solution intact. What separates them is a statutory counterpart: one clause has it, the other does not.
Describing the advances without deducting them. In this case, on the Court of Appeal’s count, three rent instalments were paid in advance; under article L. 145-40, only the fraction exceeding two instalments bears interest, here roughly one instalment, a calculation the decision does not itself make. The report describes how often the rent is paid, the payment in advance and the security deposit, states the portion that bears interest, and draws no discount from these advances on that ground alone. For consistency with the decision, although the Court did not rule on the point, it does not adjust a rent comparable merely because its security deposit differs either; it mentions the point to show that it has been examined.
The scope of this analysis. For premises built for a single use, the rent follows the practice of the trade and article R. 145-8 is excluded (Single-use premises rent: no allowance for tenant improvements). The respective obligations of the parties may also, where they changed materially during the expired lease, justify release from the rent cap (déplafonnement), as held in the decision of 23 January 2025 on the landlord’s new statutory duty.
What the valuer takes from it
- Rent paid in advance and a security deposit exceeding two instalments do not in themselves lower the rental value: the law gives them a counterpart, the interest of article L. 145-40.
- A tenant’s obligation going beyond the law or usual practice reduces the rental value where it has no counterpart; the report looks for that counterpart clause by clause.
- The report describes the advances and the portion bearing interest, without drawing a discount from them on that ground alone.
- For consistency with the decision, a different security deposit does not, on its own, justify adjusting a comparable; the Court did not rule on this point.
- The decision concerns the clause taken on its own: the report flags any particular circumstance without presenting it as settled by the Court.
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 valeur locative de renouvellement, abattement and bail commercial complement this article. Turnover rent (loyer binaire, a guaranteed minimum plus a percentage of turnover) is covered in a separate article: Turnover rent: the judge sets the minimum if the lease says so. On the same theme: Commercial rent uncapping in France: four ways out of the cap and Local commercial factors: a potential effect on trade is enough. The decision is available on Légifrance.
What next
A renewal rent to set, and lease clauses that weigh on the rental value?
I go through the lease clause by clause, separate the tenant's obligations that are matched by something in return from those that really weigh on the rental value, and assess the rent with verifiable renewal references, for the landlord as for the tenant.
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).
