During the lease, the terrace a bar-brasserie runs on public land in front of the establishment is extended with the municipality’s permission. At renewal, the court of appeal refuses the uncapping sought by the landlords (déplafonnement, setting the renewal rent at rental value, free of the statutory cap), because the terrace is not part of the premises let. In a reported decision of 13 October 2021, the Cour de cassation (French supreme court for civil and commercial matters) approves it on that point, but quashes: the municipal permit “contributes to the development of the commercial activity” (translated from the French), and the court of appeal had to examine, as the landlords had asked it to, whether that permit changed the local commercial factors (facteurs locaux de commercialité). The same change can therefore fail under one criterion and count under another.
The facts
Landlords accept, from 1 November 2011, the renewal of the French commercial lease (bail commercial) of a company running a restaurant-bar-brasserie, subject to an uncapped rent. They then sue the tenant to have the rent of the renewed lease set at rental value.
During the expired lease, the open-air terrace in front of the establishment, set up on public land (domaine public, property held by a public body) and operated under an administrative permit, was extended. According to the landlords’ appeal, the expert appointed in the proceedings saw it as “an exceptional advantage for the tenants”, through its area, the low fee compared with the high turnover generated and the better visibility given to the establishment, justifying in the expert’s view an uplift of 10 to 15% on rental value.
On 11 September 2019 the Besançon Court of Appeal refused uncapping. It held that the extension of the terrace could not be treated as a change in the characteristics of the premises let, and noted that, of the four relevant valuation criteria, the landlords relied only on a change in the characteristics of the premises.
The decision
The Cour de cassation rejected the first complaint, upheld the second and quashed the judgment in its entirety (Cass. 3e civ., 13 October 2021, appeal no. 20-12.901, reported).
On the characteristics of the premises, the court of appeal is approved. It “rightly held that the extension, during the expired lease, of the open-air terrace in front of the establishment, set up on public land and operated under an administrative permit, could not be treated as a change in the characteristics of the premises let, since it was not part of them”.
On local commercial factors, the enquiry was required. Under articles L. 145-33, L. 145-34 and R. 145-6 of the French Commercial Code, the Court stated that “rental value is determined in particular with regard to local commercial factors, whose material change during the expired lease makes it possible, if it has a favourable effect on the business carried on in the premises let, to set aside the rule capping the rent of the renewed lease and to set it at rental value”. It criticised the court of appeal for confining itself to the only criterion which, in its view, the landlords relied on, “whereas the municipal permit granted, by allowing the operation of a terrace on public land to be extended, contributes to the development of the commercial activity”. The court of appeal, “which did not examine, although it had been invited to do so, whether that situation changed the local commercial factors and thereby constituted a ground for uncapping, failed to give a legal basis to its decision”.
The case was remitted to the Dijon Court of Appeal. The Court does not hold that the rent must be uncapped: it requires the terrace to be examined under local commercial factors. It rules neither on the uplift put forward by the expert nor on the precarious nature of the permit.
What this changes for valuation
One change, two criteria. Article L. 145-34 lifts the cap where one of the first four elements of rental value listed in article L. 145-33 has materially changed (see the four ways out of the cap). The characteristics of the premises, detailed in article R. 145-3, are assessed on the premises let alone. Yet the terrace depends on an occupation permit, not on the lease; public land falls outside the commercial lease regime, as the article Lease over public land: void, but the use must be paid for shows. Local commercial factors depend, under article R. 145-6, on the interest the location presents for the business concerned: the permit to extend the terrace belongs under that criterion.
Commercial factors carry one more condition. For the characteristics of the premises, a material change is enough: the decision of 9 September 2021 on the tenant’s works holds that a material change in the characteristics of the premises let, resulting from works by the tenant not claimed to be improvements, justifies uncapping on its own. For local commercial factors, the material change must also have a favourable effect on the business carried on. A reported decision of 18 September 2025 has since made clear that it is enough for the change to be likely to favour the business actually carried on, without proof of an actual and real effect: see the likely effect. The two decisions complement each other: the 2021 decision identifies the criterion for the terrace; the more recent 2025 decision clarifies what must be shown about the favourable effect.
Dating the permit and relating it to the business. The change must have occurred during the expired lease. The report reconstructs the history of the occupation of public land: successive permits, area authorised at the start and end of the expired lease, seasonality, fee. It relates these elements to the business carried on: seats outside and inside, visibility from the street. An element outside the premises is not dismissed for that reason: it is placed under the right criterion, on the basis of verifiable data, like tramway ridership in the case discussed in the tramway and changing customers.
Quantifying the advantage without reading more into the decision. If uncapping is accepted, the report does not add the terrace to the weighted floor area of the premises let; it reflects its contribution through a reasoned adjustment, supported by the rents of comparable establishments with and without a terrace, taking account of the fee paid to the municipality and the precarious nature of a revocable permit. The 10 to 15% uplift appears only in the appeal: the percentage adopted in a report is justified by its own references.
What the valuer takes from it
- A terrace set up on public land is not part of the premises let: its extension does not change their characteristics.
- The municipal permit to extend the terrace is examined under local commercial factors; when invited to do so, the judge must examine whether it changes them.
- Under that criterion, uncapping requires a favourable effect on the business; since 2025, it is enough that the change is likely to produce one.
- The report dates the change in the permit, relates it to the business carried on and quantifies its advantage through a reasoned adjustment to rental value.
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 déplafonnement, facteurs locaux de commercialité and modification notable complement this article. The decision of 9 September 2021 is discussed in Rent uncapping: tenant’s works and interest from the summons. On the same theme: Local commercial factors: a potential effect on trade is enough and Commercial rent uncapping in France: four ways out of the cap. The decision is available on Légifrance.
What next
An enlarged terrace, a location that has changed, and a renewal rent under discussion?
I analyse the four criteria of rental value, place each change that occurred during the expired lease under the right heading, terraces and municipal permits included, and quantify the renewal rent, for negotiation, the rent judge or a court-ordered expert appraisal.
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).
