Commercial Leases/Business Goodwill

The principle of an escalation clause consists of the parties agreeing on the automatic variation of the rent, at determined intervals, based on a legally admissible index directly related to the object of the commercial lease or the tenant's activity . The indexation clause applies by operation of law without being subject to any expression of will by the landlord, and the mere fact that the land …

Escalation clause

The principle of an escalation clause consists of the parties agreeing on the automatic variation of the rent, at determined intervals, based on a legally admissible index directly related to the object of the commercial lease or the tenant's activity . The indexation clause applies by operation of law without being subject to any expression of will by the landlord, and the mere fact that the landlord has not claimed the amount of increases as soon as they take effect does not imply a waiver on their part to invoke the clause . The fact that the parties agree that the rent can only take effect after prior notification by the landlord does not undermine the automatic nature of the revision, which is by operation of law and exempts the landlord from any request, the notification of the revised rent amount being merely a method of implementing this stipulation that requires an express manifestation of will by the landlord . Nevertheless, the landlord is required to inform the tenant of the revised rent amount to enable them to pay it . However, neither the landlord's letter mentioning a monthly rent lower than that claimed by the operation of the indexation clause, nor the fact of having accepted a new rent with the transferee of the business, also lower, characterize a waiver to claim indexation . Such a clause is valid and must apply if neither party requests its judicial adaptation in accordance with Article L. 145-39 of the Commercial Code .

Article L. 145-39 provides for a special regime of judicial review of the indexed rent, which differs from the automatic rent review under the sliding scale clause . Indeed, it states that “by way of derogation from Article L. 145-38, if the lease includes a sliding scale clause, the review may be requested whenever, through the application of this clause, the rent is increased or decreased by more than one quarter compared to the price previously set contractually or by judicial decision.” When questioned about the constitutionality of Article L. 145-39, the Court of Cassation held that the review of the indexed rent does not undermine the free negotiation of the initial rent and applies only when the parties intended to include a sliding scale clause in the lease, so it does not infringe on either property rights or contractual freedom. It added that the implementation of this review, which can be requested by either the lessor or the lessee and requires a variation threshold of 25% to be reached, is surrounded by sufficient procedural and substantive safeguards and does not infringe on either the principle of equality or the guarantee of rights .

Since Law No 2014-626 of 18 June 2014 , which replaced the nullity of clauses intended to defeat these provisions with their deemed unwritten status, applicable to leases in effect on that date , Article L. 145-39 has a public policy nature. Therefore, contrary to these mandatory provisions is the clause stating that “the lessee waives, for the entire duration of this lease, the right to have the rent judicially set at an amount lower than the contractual rent, even if the rental value proves to be lower than the contractual rent” . Indeed, the waiver by one of the parties of their right to obtain a revision can only validly occur once this right is acquired, i.e., after noting an increase in rent of more than one quarter through the operation of the escalator clause . This rule does not apply to leases containing a turnover clause. In this case, the setting of the revised rent for a lease stipulating a dual rent is governed only by the agreement of the parties, who have freely agreed on each of its components, and therefore escapes the provisions of Article L. 145-39 . The court cannot deem an entire clause to be unwritten without verifying whether the prohibited stipulation precluding any reciprocity in the index variation could be removed from the indexation clause without affecting overall coherence of the clause .

Unlike the triennial revision, Article L. 145-39 does not subject the implementation of the indexed rent revision to any deadline. Indeed, the variation in rent of more than a quarter is assessed solely with regard to the price previously set contractually or by judicial decision. This may be the initial rent   or that of the renewed lease  , or the last price set by agreement of the parties  . When the parties have agreed, at each signing of successive amendments, to an extension of the lease base and a new rent, only the last amendment prior to the request for legal revision should be considered as the price previously set contractually within the meaning of Article L. 145-39  . Conversely, the annual operation of the sliding scale clause stipulated in the lease does not constitute an amicable setting and therefore cannot be taken into account to assess the variation of more than a quarter of the rent  .

To verify the conditions for the application of Article L. 145-39 of the Commercial Code, it is necessary to compare the rent obtained through the indexation clause, and not the rent actually paid by the lessee , with the price previously set by the agreement of the parties or by judicial decision, excluding indexation , for example, by virtue of specific clauses granting a rent reduction or rebate . When the lessee must reimburse the property tax to the lessor under the conventional transfer of charges, since the sliding scale clause does not apply to it, its amount cannot be included in the annual rent set in the lease for calculating the variation provided for in Article L. 145-39 . The same applies to the entrance fee paid by the lessee at the signing of the lease , or the security deposit .

The request for rent revision, pursuant to Article L. 145-39 of the Commercial Code, and its setting at a certain amount, is admissible at any time as long as, through the operation of the escalation clause, the variation between the rent in effect at the date of the request and the rent previously contractually set reaches 25% . The triennial periodicity of the clause's operation does not prevent the rent from being subject to adjustment during the period in accordance with the provisions of Article L. 145-39 . The text, which imposes no other requirement than the simple observation of the increase or decrease in rent through the operation of the escalation clause , does not distinguish who, between the lessor or the lessee, is admissible to act. The request for the adaptation of the escalation clause to the rental value is therefore equally open to both parties. Thus, the lessor will have an interest in invoking the provisions of Article L. 145-39 when the rent, through the operation of the indexation clause, has increased by more than a quarter compared to that previously set contractually or judicially, and conversely, the lessee will request the rent revision on the same basis if it decreases under the same conditions. Neither Article L. 145-39 nor Article R. 145-22 specifies the formal conditions under which the request for revision must be notified, so the provisions of Article R. 145-20 of the Commercial Code  should be applied. Therefore, such a request must be made “by extrajudicial act or by registered letter with acknowledgment of receipt,” while specifying, “under penalty of nullity, the amount of rent requested or offered.”

When the rent is increased or decreased by more than a quarter, the applicant may request its revision to the rental value, without being required to establish a significant change in local commercial factors, as well as the actual rental value of the leased premises . Indeed, in accordance with Article R. 145-22, para. 1, of the Commercial Code, the judge is required, unless the parties agree on another date, to adjust the application of the sliding scale clause to the rental value on the date of the request , the effective date of the revised rent , with the setting of the revised rent having no impact on the amount of rents due prior to this request . Article L. 145-39 contains no provision that would restrict the discretion of the trial court judges who may set the revised rent, not by reference to contractual stipulations, but judicially . The rent may therefore be set at a price lower than the initial rent . However, a lessee cannot claim, based on Article L. 145-39, that the rental value cannot exceed the amount of the indexed rent, which would constitute a sort of ceiling beyond which the revised rent could not be set .

Article R. 145-21, para. 1, of the Commercial Code specifies that “the price set judicially cannot, in any case, exceed the limits of the offer and demand made, as the case may be, pursuant to Article L. 145-37 and in accordance with Article R. 145-20 or pursuant to Article L. 145-11, unless the parties have since changed their claims.” In this latter case, para. 2 states that “the price can only take effect, insofar as it would exceed the limits set by the original claims of the parties, from the date of notification of the new claims.” When one of the parties has proposed an annual amount to the other, based on Article L. 145-39, and then reduced it, after the submission of the expert report, to a lower amount as proposed by the expert, the trial court cannot retain this latter amount . Furthermore, since Law No 2014-626 of 18 June 2014 , when the rent has been revised upwards, “the resulting rent variation cannot lead to increases exceeding, for one year, 10% of the rent paid during the previous year” .

The rent thus assessed serves as the calculation basis for the application of the escalator clause, both regarding the subsequent variation of more than a quarter and the future indexation of the rent based on the variation of the reference index. In this case, the base index to be used for the application of the indexation clause will be the index published on the date of the request for revision . However, setting the rent at the rental value on the day of the request, in accordance with Article R. 145-22 of the Commercial Code, risks creating a distortion between the period of index variation and the time elapsed between each revision, which is prohibited by law. Indeed, Article L. 112-1 of the Monetary and Financial Code deems unwritten “any clause of a successive performance contract, and notably leases and rentals of any kind, providing for the consideration of an index variation period longer than the time elapsed between each revision.” However, the Court of Cassation has admitted the legality of an indexation clause, which stipulated that the rent would be indexed annually, and recognized that trial courts, when the upcoming revised rent is set at a date different from that provided by the clause, have the power to adapt the operation of the escalator clause to the rental value, such a revision itself not being able to organize the prohibited distortion .

The escalator clause does not, however, preclude the triennial review provided for in Article L. 145-38 of the Commercial Code . Indeed, the expression “in addition,” with which Article L. 145-39 of the Commercial Code begins, indicates that the legislator did not intend to exclude, for indexed leases, the possibility of a review under the conditions provided for in Article L. 145-38 . In this case, the revised rent must be equal to the rental value, even if it has varied in the opposite direction to the index, as long as the rental value has varied by more than 10% due to the material modification of local commercial factors between the effective date of the lease and the request for review, and no amicable or judicial review has taken place since the conclusion of the lease . On the other hand, in the absence of a modification of local commercial factors resulting in a variation of more than 10% of the rental value, there is no need for a rent review based on Article L. 145-38 of the Commercial Code, which, by way of derogation from the rule laid down in Article L. 145-33, excludes the principle reference to the rental value .

Finally, under the terms of Article R. 145-22, para. 2, of the Commercial Code, “if one of the elements used for the calculation of the sliding scale clause disappears, the revision can only be requested and pursued under the conditions provided for in Article L. 145-38.” If it follows from this text that the contractual revision of the lease price cannot replace the legal revision when one of the elements used for the calculation of indexation disappears, by analogy, the same must apply when one of the elements used for the calculation could never be determined . However, Article R. 145-22, para. 2, which only aims to address the parties' unforeseen circumstances, cannot prevent the application of the new index determined in execution of their lease agreement . Thus, when the contractual index has ceased to be applicable, the trial court judges have the ability to ascertain the common intention of the parties in order to establish a substitute index in accordance with the spirit of the lessor and lessee at the time of the lease's conclusion .

CA Nancy, 9 April 2014, LawLex202100004672JBJ.

CA Paris, 12 May 1993, No 92/004418; Toulouse, 23 May 2024, LawLex202400003983JBJ: insofar as the failure to exercise a right is insufficient to characterize its waiver, which requires the demonstration of positive acts indicating an unequivocal intention to waive it, the waiver of the application of the indexation clause cannot result from the fact that it has not been applied.

Cass. 3e civ., 30 March 2017, LawLex202100004788JBJ.

Cass. 3e civ., 6 October 2016, LawLex202200000228JBJ; 30 March 2017, LawLex202100004788JBJ, previously.

Cass. 3e civ., 5 March 2013, LawLex202200000225JBJ, which specifies that in this case, after lengthy negotiations, the parties had freely agreed on each component of the rent, comprising a fixed part and a variable part, which together formed an indivisible whole.

Cass. 3e civ., 22 May 2025, LawLex202500004357JBJ.

CA Paris, 30 November 2011, LawLex202300008544JBJ, according to which, pursuant to the provisions of Article L. 145-39 of the Commercial Code, in the absence of rent set by a judicial decision rendered on a previous request for revision or a modification made during the lease by an agreement of the parties, the basis for comparison is the initial rent provided for in the contract. - Add: Cass. 3e civ., 9 November 2017, LawLex202300008543JBJ, which considers that when a judgment has ordered the transfer of the tenant's assets to a third-party company without mentioning the commercial lease or obtaining the landlord's observations, which makes it the company's personal matter to transfer the contracts necessary for the resumption of commercial activity, the trial court, having noted that the rent previously contractually set at the conclusion of the commercial lease with the tenant, has, through the operation of the escalator clause, recorded a variation of more than a quarter, correctly deduced that the landlord's request for revision is admissible.

Cass. 3e civ., 15 December 2016, LawLex202200000230JBJ.

Cass. 3e civ., 9 July 2014, LawLex202200000226JBJ.

Cass. 3e civ., 17 March 2016, LawLex202200000227JBJ.

Cass. 3e civ., 16 December 1998, LawLex202100005694JBJ; 9 July 2014, LawLex202200000226JBJ, previously cited.

Cass. 3e civ., 15 December 2016, LawLex202200000229JBJ.

CA Nancy, 9 April 2014, LawLex202100004672JBJ, previously cited.

Cass. 3e civ., 9 July 2014, LawLex202200000226JBJ, op. cit.

CA Paris, 14 December 2011, LawLex202300008875JBJ.

Cass. 3e civ., 3 May 2012, LawLex202200000222JBJ.

Paris, 27 February 2013, LawLex202300008592JBJ, which specifies that the proof of the common intention of the parties to see this amount constitute, contrary to the terms of the contract qualifying it as compensation, an additional rent cannot result solely from the subjection of this amount to VAT.

Cass. 3e civ., 9 November 2017, LawLex202300008543JBJ, op. cit.

Cass. 3e civ., 17 March 2016, LawLex202200000227JBJ, which excludes the application of the clause when the variation between the rent in effect on the date of the request for revision and the rent previously set by agreement does not reach 25%.

Cass. 3e civ., 22 November 1989, LawLex202200000220JBJ.

CA Paris, 3 April 2013, LawLex202300008813JB; 28 May 2014, LawLex202300007440JBJ, which specifies that Article L. 145-39 of the Commercial Code refers alternatively and not cumulatively to the scenarios of variations of more than a quarter either downward or upward.

Cass. 3e civ., 3 November 2016, LawLex202100005111JBJ.

CA Paris, 12 May 1993, No 92/004418, previously mentioned.

Cass. 3e civ., 15 March 1989, LawLex202300008874JBJ.

Cass. 3e civ., 27 January 1988, LawLex202100006357JBJ, which specifies that the increase in the lease price, beyond the contractual rent, can only take effect from the date of the request made by the landlord. – Also see CA Paris, 6 January 2017, LawLex202300008873JBJ, which considers that when the landlord is admissible to request an increase in the rent of more than a quarter since the last determination, it must be set from the request at its rental value.

Cass. 3e civ., 10 September 2020, LawLex202200000236JBJ.

Cass. 3e civ., 18 May 1994, LawLex202300008617JBJ, which overturns the appellate decision that holds, to dismiss the landlord's request for rent adjustment to the rental value, who invokes an increase in rent of more than a quarter, that Article L. 145-39, intended not to amplify the effects of the escalation clause but to play a regulatory role, cannot allow the landlord to request the adjustment of the rent to the rental value when the operation of the escalation clause already results in a rent increase exceeding 25%.

Cass. 3e civ., 15 January 1992, LawLex202300008615JBJ.

CA Paris, 6 January 2017, LawLex202300008873JBJ.

Cass. 3e civ., 23 February 1994, LawLex202300008876JBJ, which overturns the appeal decision holding that the lessee may, to reduce the amount of their offer, rely on the provisions of Article R. 145-22 of the Commercial Code, according to which the judge must adjust the application of the sliding scale to the rental value on the date of the request, whereas, in the case of rent revision, the provisions of Article R. 145-22 remain subject to those of Article R. 145-21.

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

Law No 2014-626 of 18 June 2014, Art. 21, II, which specifies that the text applies to leases starting from 1 September 2014.

Cass. 3e civ., 12 February 1985, LawLex202200000219JBJ.

Cass. 3e civ., 21 January 2014, LawLex202300008542JBJ.

Cass. 3e civ., 17 May 2018, LawLex202100004783JBJ.

Cass. 3e civ., 16 December 1998, LawLex202100005694JBJ, previously cited.

Cass. com., 7 November 1961, LawLex202300008791JBJ.

Cass. 3e civ., 20 May 2015, LawLex202100004792JBJ.

Cass. 3e civ., 9 October 1984, LawLex202100004821JBJ.

Cass. 3e civ., 29 June 1977, LawLex202100004777JBJ, which approves the trial court for having substituted the index “medical care” or “any other index that would be substituted for it” with the index of the items “pharmaceutical products” and “health service” appearing in the new index of 295 items, as being, in the sense of the contract, a substitution index in accordance with the spirit of the parties at the time of the lease conclusion; 22 July 1987, LawLex202100004823JBJ, which holds that the court of appeal, in seeking the common intention of the parties, sovereignly determined that their intention was essentially focused on the principle of indexation and that the stipulation of the choice of index being an application thereof, it was necessary to substitute the annulled index with an index admitted by law.

Cass. 3e civ., 2 June 1977, LawLex202100004818JBJ.

Cass. com., 7 October 1964, LawLex202300008545JBJ, which approves the Court of Appeal for granting the action for payment of rent arrears filed by the lessor by admitting in its favor the automatic application of the escalation clause, subject to a variation of at least 10% of the chosen index, without it violating the provisions of Article L. 145-15 of the Commercial Code deeming unwritten the stipulations likely to defeat the provisions of Article L. 145-39, since it was not the action for revision of the lease provided for in Article L. 145-39 but rather for the trial court to determine the rent as it resulted from the application of the escalation clause.

Cass. 3e civ., QPC, 6 December 2012, LawLex202200000224JBJ.

Act No 2014-626 of 18 June 2014 relating to crafts, trade, and very small enterprises, OJ of 19 June 2014, Art. 6.

Cass. 3e civ., 19 November 2020, LawLex202200009544JBJ; 8 April 2021, LawLex202100005114JBJ.

Commercial Leases/Business Goodwill

167. Escalation clause

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

167. Escalation clause

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise