A supermarket has rented premises since 1966 under a rent, reworked by successive amendments, made of a guaranteed minimum and a variable part of 1.50 per cent of turnover. At the 2015 renewal, the landlord asks the commercial rent judge to set the price at rental value, 800,000 euros instead of 247,623 euros, arguing that the twelve-year lease escapes the cap. The tenant replies that a turnover rent (loyer binaire, a fixed minimum plus a percentage of turnover) is governed only by the parties’ agreement and that the judge has no jurisdiction. The Aix-en-Provence court of appeal declares the claim inadmissible. On 30 May 2024 the Cour de cassation (the French supreme court for civil matters), in a reported decision, quashed and rewrote its doctrine: the objection drawn from the turnover rent is a defence on the merits, not a plea of inadmissibility, and “even in the absence of an express clause providing for recourse to the commercial rent judge, it is for that judge […] to look for that contrary common intention, either in the contract or in extrinsic evidence”. For the valuer, this means the rental value of premises under a turnover rent can again become the central question, and that the amendments must be read as closely as the market.
The facts
On 26 April 1966 a property company lets commercial premises to a supermarket company, succeeded by a national chain, for twenty-five years at a rent set by reference to the cost of the investment. A 1979 amendment raises the rent and adds a clause under which the annual rent may not be less than 1.50 per cent of the turnover before tax achieved in the premises. In 1996, for want of agreement on renewal, the rent is set by the court; in 1997 the parties adopt that amount by amendment and stipulate an identical clause; in 2001 they raise the rent and keep the clause; in 2003 they renew for twelve years with a guaranteed minimum of 247,623.20 euros a year and the same clause.
The tenant requests renewal in 2015; the landlord accepts the principle, then, by a preliminary memorandum of 2017, asks for the rent to be set at 800,000 euros a year, the twelve-year lease escaping the cap. The tenant first offers 545,000 euros with phasing, then pleads that the rent judge lacks jurisdiction and that the claim is inadmissible: the turnover rent is governed solely by the parties’ will. The Aix-en-Provence court of appeal, on 24 February 2022, declares the claim inadmissible, holding that the case-law rule removing turnover rents from the statute does not infringe the right of access to a court, since the ordinary court remains competent to decide the dispute.
The decision
The third civil chamber quashed, on a ground raised of its own motion (Cass. 3e civ., 30 May 2024, no. 22-16.447, reported), under former article 1134 of the Civil Code, articles L. 145-33 to L. 145-36 and R. 145-23 of the Commercial Code, and articles 71 and 122 of the Code of Civil Procedure. Article R. 145-23 “being applicable to any claim for the setting of the price of a renewed lease without exclusion for leases stipulating a rent including a variable part”, the plea drawn from the turnover rent “is a defence on the merits and not a plea of inadmissibility”: the rent judge cannot declare the claim inadmissible, he must examine it on the merits.
The Court then retraces the evolution of its case law, from the total exclusion of the judge (1993, 1999, 2002) to the admission of a clause providing for recourse to the judge to set the guaranteed minimum at rental value (2016, 2018), and lays down the rule: “While parties who stipulate a variable rent clause thereby show, in principle, an intention to exclude a judicial setting of the price of the renewed lease at rental value, it is otherwise where they have expressed a contrary common intention. Accordingly, even in the absence of an express clause providing for recourse to the commercial rent judge, it is for that judge […] to look for that contrary common intention, either in the contract or in extrinsic evidence.” The court of appeal therefore had to examine, as the landlord asked, “whether the parties had not expressed a common intention, in case of disagreement, to have the price of the renewed lease set judicially at rental value”. The case is sent back to the Lyon court of appeal.
What this changes for valuation
Rental value becomes possible again without an express clause. Until now, the valuer dealing with a turnover rent checked whether the lease contained a clause tying the guaranteed minimum to article L. 145-33; failing that, the rental value was only a negotiating figure. Since this ruling, the common intention to go to the judge can result from the contract read as a whole or from extrinsic evidence: here, a rent already set by the court in 1996 then adopted by amendment, increases negotiated at each renewal, a guaranteed minimum regularly revalued. Before any figure, the valuation report therefore retraces the history of the rent and notes what, in the amendments and exchanges, reveals that the parties meant to tie the guaranteed minimum to rental value. The article on the turnover rent and advance rent has been supplemented to reflect this development.
What the judge sets, and what he leaves alone. The rent judge “can only determine a fixed sum and cannot modify the variable rent clause, carried over into the renewed lease”. The valuer therefore assesses the guaranteed minimum at rental value, taking into account the existence of the variable part: a guaranteed minimum coexisting with a percentage of turnover is not comparable to a pure fixed rent. The trade-ratio method and the rent-to-turnover ratio, described by the French valuation charter (Charte de l’expertise en évaluation immobilière), make it possible to check that the minimum adopted and the variable part, applied to the turnover of the premises, produce a total rent consistent with the market. The guide on uncapping recalls the criteria of article L. 145-33.
The gap between 247,623 and 800,000 euros is a gap of method. The landlord reasoned in market rental value for a city-centre supermarket; the tenant in indexed contractual rent. Between the two, the valuer establishes the rental value under the five statutory criteria, characteristics of the premises, permitted use, obligations of the parties, local commercial factors, prices charged in the vicinity, and checks separately whether the twelve-year lease or a notable change justifies uncapping. A 1966 supermarket reworked by five amendments almost always has floor areas, accesses and a use that have changed; the report documents them at each date.
The option right as a way out. The Court recalls that disagreement on the price may lead to the previous rent being kept, “the parties being always able to exercise their option right”. A landlord who does not obtain rental value may refuse renewal against eviction compensation; a tenant may waive renewal. The valuer who quantifies the rental value therefore also gives, when asked, the order of magnitude of the eviction compensation, because it is the comparison of the two that guides the parties’ decision.
For the investor. Supermarket premises let under a turnover rent are valued on the effective rent, guaranteed minimum plus average variable part, and on the prospect of renewal. This ruling makes that prospect less fixed: depending on what the amendments reveal, the guaranteed minimum may be raised to rental value at the next renewal, or remain contractual. The report presents both scenarios and their effect on value.
The 2016 rulings: recourse to the judge provided by the lease, and the allowance for the variable part. Among the stages the Court retraces are two reported rulings of 3 November 2016 (Cass. 3e civ., no. 15-16.826 and 15-16.827), given for two tenants in a shopping centre whose leases referred the renewed base rent to rental value and, failing agreement, to a setting by the court. The Aix-en-Provence court of appeal had dismissed the landlord’s claim; the Court quashed, and the summary published in the Bulletin states that the judge then rules under the criteria of article L. 145-33 “assessing the allowance that follows from it”, that is, taking account of the variable part payable on top of the minimum. The 2024 ruling admits recourse to the judge even without an express clause; the valuation of the guaranteed minimum still follows the 2016 rule, rental value and then the allowance linked to the variable part. The article on the guaranteed minimum set at rental value in 2016 presents those rulings.
What the valuer takes from it
- The objection drawn from the turnover rent is a defence on the merits; the rent judge examines the claim for setting the rent, he does not declare it inadmissible.
- Even without an express clause, the judge looks for whether the parties wanted, in case of disagreement, the guaranteed minimum set at rental value, in the contract or in extrinsic evidence.
- The valuer retraces the history of the rent and the amendments before quantifying.
- The judge sets only a fixed sum and does not modify the variable clause; the rental value of the guaranteed minimum takes the variable part into account.
- The report gives the rental value and, where useful, the order of magnitude of the eviction compensation, to inform the option right.
Further reading
The Commercial rent and leases page describes the assignment, its timescale and its fee. The guide Commercial lease renewal: my landlord wants to uncap the rent and the glossary entries valeur locative, déplafonnement and droit d’option complement this article. On the same theme: Rental value in France: advance rent and turnover rent rulings and Commercial rent uncapping in France: four ways out of the cap. The decision is available on Légifrance.
What next
A rent with a guaranteed minimum and a variable part, a renewal under discussion, and a rental value to establish?
I establish the rental value of the premises under article L. 145-33 and the valuation charter, compare it with the guaranteed minimum, the variable part and the turnover, and document what the lease and its amendments say about the parties' intention.
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