Commercial Leases/Business Goodwill

Article L. 145-38, para. 3, of the Commercial Code provides for the uncapping of the revised rent when proof is provided of a material change in local commercial factors, which has itself resulted in a variation of more than 10% in the rental value. Article L. 145-47, para. 3, of the same code further specifies that in the context of partial despecialization, “during the first triennial revision f …

Material modification of local commercial factors

Article L. 145-38, para. 3, of the Commercial Code provides for the uncapping of the revised rent when proof is provided of a material change in local commercial factors, which has itself resulted in a variation of more than 10% in the rental value. Article L. 145-47, para. 3, of the same code further specifies that in the context of partial despecialization, “during the first triennial revision following the notification referred to in the previous paragraph, it may, by way of derogation from the provisions of Article L. 145-38, be taken into account, for the determination of the rent, of the ancillary commercial activities, if these have themselves resulted in a change in the rental value of the leased premises.”

The uncapping of the revised rent is subject to certain conditions, which depend, on the one hand, on the existence, between the effective date of the rent of the initial or renewed lease, or the previously revised rent and the date of the revision request, of a material change in the local commercial factors that has impacted the activity carried out by the lessee, and on the other hand, on the observation, during the reference period, of a variation of more than 10% in the rental value due to this change . When the conditions for uncapping are met, the revised rent must be uncapped and set at the rental value regardless of the direction of the variation, even if it is lower than the current rent . Conversely, in the absence of a change in local commercial factors, the revised rent can only change within the limit of the index variation in accordance with the index applicable to the lease contract, without exceeding the rental value, unless the latter is an amount between the current rent and the cap resulting from the index variation .

To be taken into consideration, it is imperative that the modification of local commercial factors occurred between the last amicable or judicial determination of the rent and the date of the revision request . Thus, the creation and commissioning of a tram line that took place before the lease renewal date cannot be considered, even if the effects of this creation continue over time .

It is up to the trial court to ascertain the evolution of local commercial factors , with the latter having to identify the elements that establish the modification of these factors and state how they have led to a variation of more than 10% in the rental value of the leased premises . The modification of local commercial factors is assessed differently depending on whether it is viewed from the perspective of a simple rent revision or the setting of the renewed lease. In the latter case, it is not required that the modification, which is not necessarily material, results in a variation of more than 10% in the rental value. It must simply have a notable character (Article L. 145-34 Commercial Code).

According to Article R. 145-6 of the Commercial Code, “the local commercial factors primarily depend on the interest presented, for the business in question, by the importance of the city, district, or street where it is located, the place of its establishment, the distribution of various activities in the vicinity, the means of transport, the particular attraction or constraints that the location may present for the activity in question, and the changes that these elements undergo in a lasting or temporary manner,” this list not being exhaustive.

The modification is necessarily external to the premises or the lease. Elements related to the characteristics of the premises or the obligations of the parties cannot be taken into consideration. The modification must be material and have a local character. It should only concern concrete and existing elements and refers to the transformation of local commercial factors and not their quantitative evolution . Thus, a decrease in tourist attendance, which is neither demonstrated nor even alleged to have occurred in the relevant catchment area, does not constitute a material modification of local commercial factors, which also does not include a potential decrease in turnover .

Constitute a material modification of local commercial factors, the transformation of a street into a pedestrian zone , a significant urban requalification operation, supported by the implementation of the tramway and materializing through the rehabilitation of Haussmannian buildings lining the street , the establishment of a cinema complex , or the condition of a neighborhood where many businesses are closed and premises remain vacant . However, this is not the case for the deregulation of parking space rental pricing , the difficulties encountered by other companies located in the same geographic area , or the renegotiation of rents by competing companies .

The material, local, and exceptional modification of local commercial factors must also have an influence on the business considered . It is up to the trial court to investigate, if necessary ex officio , and to assess concretely and objectively the interest of the modification for the commercial activity conducted in the leased premises . Thus, the conversion of a former commercial wasteland by the installation of retail brands and the establishment of a self-service bike station does not constitute a modification of local commercial factors of particular interest to the tenant's real estate agency . There is also no influence on the tenant's activity, which has a storefront, when its clientele is recruited either by door-to-door canvassing, in shopping centers or at fairs and exhibitions, or by advertising in the press, or by sponsorship, or inside sales outlets, but this last mode represents a small percentage of the total recruitment .

For it to be taken into account, the material modification of local commercial factors must have, by itself, caused a change in the rental value exceeding 10% , which the applicant for revision is required to prove . Therefore, the applicant for revision who does not demonstrate the existence of a causal link between the material modification and the variation of more than 10% in the rental value of the leased premises must be dismissed from their request to set the rent at the rental value . The variation in rental value must be assessed by comparing, on the one hand, the rental value at the effective date of the lease or the last amicable or judicial revision, which may differ from the contractually fixed rent, and on the other hand, the rental value at the date of the revision request . The trial court judges are not required to order an expert assessment to compensate for the applicant's failure to provide any justification in support of their request . The Paris Court of Appeal ruled that a lessee, who merely relies on general considerations about the decline in prices concerning the rental market, does not provide any evidence tending to prove the existence of a material modification having caused by itself a variation of more than 10% .

Finally, a negative evolution of local factors benefits the lessee who can request a reduction in the revised rent, while a positive evolution will benefit the lessor who can seek a rent higher than the index variation. However, in the latter case, the rent increase is regulated. Indeed, Law No 2014-626 of 18 June 2014  supplemented Article L. 145-38, para. 3, of the Commercial Code, which now provides that in the event proof of modification is provided, “the resulting rent variation cannot lead to increases exceeding, for one year, 10% of the rent paid during the previous year.” The text, which applies to leases concluded or renewed from 1 September 2014 , is of a public policy nature .

Cass. 3e civ., 24 May 2017, LawLex202200000088JBJ.

Cass. 3e civ., 16 December 1998, LawLex202100005694JBJ; 24 May 2017, LawLex202200000088JBJ, previously cited.

CA Aix-en-Provence, 16 February 2016, LawLex202300008373JBJ, préc.

CA Poitiers, 20 October 2020, LawLex202300008374JBJ.

Cass. 3e civ., 26 September 2001, LawLex202300008375JBJ.

CA Bordeaux, 25 February 2019, LawLex202300008377JBJ.

Cass. 3e civ., 25 October 2018, LawLex202100006301JBJ.

Cass. 3e civ., 21 January 2014, LawLex202300006731JBJ, on the lack of effect of the modification, by the restructuring and rehabilitation of the hyper city center on the activity considered.

Cass. 3e civ., 27 January 1999, LawLex202300006728JBJ; 7 April 2004, LawLex202300006732JBJ.

CA Douai, 6 July 2017, LawLex202100006465JBJ.

CA Douai, 6 July 2017, LawLex202100006465JBJ, previously cited.

Cass. 3e civ., 6 February 2008, LawLex202200000135JBJ.

CA Paris, 16 January 2004, No 2002/20145.

Cass. 3e civ., 28 September 2004, LawLex202300008396JBJ.

Cass. 3e civ., 6 February 1973, LawLex202300008397JBJ.

Cass. 3e civ., 18 February 2003, LawLex202300008405JBJ. – Also see CA Riom, 27 January 2021, LawLex202200000138JBJ, which refuses to set the revised rent beyond the variation of the index since, if the local commercial factors have experienced, during the three-year period preceding the revision request, a definite change with the establishment of new large retail stores in the commercial area where the leased premises are located, which have undeniably increased the automobile traffic of potential customers, it is not certain that these material changes have themselves caused an increase in rental value exceeding 10%.

CA Paris, 26 May 1999, LawLex202300008404JBJ.

Cass. 3e civ., 22 January 1997, LawLex202200000085JBJ.

Act No 2014-626 of 18 June 2014 on Craftsmanship, Commerce, and Very Small Enterprises, OJ of 19 June 2014, Art. 11.

Act No 2014-626 of 18 June 2014, Art. 21, II.

Article L. 145-15 of the Commercial Code deems unwritten, regardless of their form, the clauses, stipulations, and arrangements that have the effect of defeating the provisions of Article L. 145-38 of the same code.

CA Montpellier, 5 November 1997, No 95/0001767, for a material modification of local commercial factors to occur between the date setting the start of the commercial lease and that of the memorandum seeking the triennial rent review.

CA Aix-en-Provence, 28 November 2019, LawLex202200000062JBJ; 16 February 2016, LawLex202300008373JBJ.

Cass. 3e civ., 1 April 2003, LawLex202300008361JBJ.

Cass. 3e civ., 1 February 2012, LawLex202300008362JBJ.

CA Aix-en-Provence, 13 December 2016, LawLex202300008371JBJ: in this case, the establishment of new brands in an area with established reputation and strong commercial activity constitutes an evolution, but not a material modification of the local commercial factors.

CA Versailles, 12 December 2019, LawLex202000001848JBJ.

CA Versailles, 27 April 1989, LawLex202300008372JBJ.

Commercial Leases/Business Goodwill

166. Material modification of local commercial factors

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166. Material modification of local commercial factors

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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