Commercial Leases/Business Goodwill

The index used in the sliding scale clause must be directly related to the purpose of the commercial lease or the tenant's activity . According to Article L. 112-2, paras. 1 and 2, of the Monetary and Financial Code, any clause providing for indexation based on the variation of the national construction cost index, the quarterly commercial rent index, or the quarterly tertiary activities rent inde …

The index used in the sliding scale clause must be directly related to the purpose of the commercial lease or the tenant's activity . According to Article L. 112-2, paras. 1 and 2, of the Monetary and Financial Code, any clause providing for indexation based on the variation of the national construction cost index, the quarterly commercial rent index, or the quarterly tertiary activities rent index, which are published by the National Institute of Statistics and Economic Studies (INSEE), is deemed to be directly related to the purpose of an agreement concerning a building.

If the construction cost index (ICC) can still appear in an escalation clause, it was, however, removed by Law No 2014-626 of 18 June 2014  in the case of a legal triennial review (Art. L. 145-38 Commercial Code) or to calculate the capping of the rent of the renewed lease (Art. L. 145-34 Commercial Code) for leases concluded or renewed since 1 September 2014 . Article D. 112-2 of the Monetary and Financial Code specifies that the quarterly commercial rent index (ILC) applies when the lessee operates a commercial or craft activity, whereas the quarterly rent index for tertiary activities (ILAT) concerns tertiary activities other than the aforementioned commercial and craft activities, covering in particular the activities of liberal professions and those carried out in logistics warehouses.

Article L. 112-2, para. 1, of the Monetary and Financial Code prohibits, in statutory or contractual provisions, “any clause providing for indexation based on the minimum growth wage, the general level of prices or wages, or the prices of goods, products, or services that have no direct relation to the purpose of the statute or the agreement or to the activity of one of the parties.” Thus, the clause in the commercial lease providing for rent payment in foreign currency, which amounts to indexation unrelated to the purpose of the contract and whose reference has no relation to either party, contravenes public policy provisions relating to price indexation and must be deemed unwritten . However, indices published by INSEE are not the only ones permitted. Therefore, an indexation clause may refer to the construction cost index established by the Academy of Architecture when the landlords' activity is necessarily linked to the construction of buildings and is directly related to the index provided for by this clause .

The validity of an indexation clause must be assessed at the time of the contract's conclusion and cannot be affected by a subsequent change in the debtor's activity . The assessment of the relationship between the nature of the index and the object of the contract or the activity of one of the parties, which depends on the extent to which the product or service in question is likely to contribute to achieving this object or activity, constitutes a question of fact that is beyond the control of the Court of Cassation . Thus, it is through a sovereign assessment that trial judges declare null and void, as having no direct relation to the object of the lease contract or the activity of one of the parties, a rent indexation clause based on the construction cost index in the Paris region, established by the central section of architects, whereas only the national construction cost index published by INSEE is deemed to have a direct relation to the object of the agreement .

A sliding scale clause that refers to an unlawful index is sanctioned by nullity . However, the nullity of the indexation clause does not affect the validity of the entire commercial lease, even if it was deemed decisive by the parties. Indeed, the possibility for the lessor, under penalty of nullity of the lease, to require the lessee to comply with an indexation clause that has become unlawful would infringe on the right to renew the lease, whereas the indexation clause is merely an ancillary clause whose annulment does not destroy the balance of the contract, since the lessor retains the right to legal revision . When such a clause has been executed before being declared null, Article 1302-1 of the Civil Code, in its version resulting from Ordinance No 2016-131 , applies, and the lessor, who has received sums in error or knowingly that were not due, must return them to the lessee from whom they were unduly received. If the lessee is entitled to claim reimbursement of sums paid under a sliding scale clause that has become unlawful, having not waived this right, it is different for the tenant who, being aware that the contentious clause was null, paid the indexed rents knowingly, thereby knowingly placing themselves outside the scope of legislative measures .

Article R. 145-22, para. 2, of the Commercial Code specifies that “if one of the elements used for calculating the sliding scale clause disappears, the revision can only be requested and pursued under the conditions provided for in Article L. 145-38,” namely the legal triennial revision. However, Article R. 145-22, which only aims to address the parties' unforeseen circumstances, cannot prevent the application of the new index determined in execution of their agreement . In this case, the new index replaces the canceled index. This option is recognized by the trial courts, which, according to the Court of Cassation, can sovereignly determine that since the parties' intention in the lease primarily focused on the principle of indexation and the stipulation of the choice of index is an application thereof, the canceled index should be replaced by an index accepted by law . Article 1167 of the Civil Code seems to adopt the solution accepted by the Court of Cassation by providing that “when the price or any other element of the contract must be determined by reference to an index that does not exist or has ceased to exist or be accessible, it is replaced by the index that most closely resembles it.”

CA Nancy, 9 April 2014, LawLex202100004672JBJ.

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

Ord. No 2016-131 of 10 February 2016 on the reform of contract law, the general regime, and proof of obligations, Art. 2.

Cass. 3e civ., 12 June 1979, LawLex202100006246JBJ.

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

Cass. 3e civ., 22 July 1987, LawLex202100004823JBJ: in this case, the trial court upheld an indexation of the rent based on the variations of the quarterly construction index established by INSEE.

Cass. 3e civ., 2 October 2007, LawLex202300004759JBJ.

Cass. 3e civ., 22 January 1980, LawLex202100004819JBJ.

Cass. 3e civ., 6 June 1984, LawLex202300004760JBJ.

Cass. com., 4 March 1964, LawLex202300004761JBJ.

Cass. 3e civ., 7 March 1973, LawLex202300004763JBJ.

Cass. 3e civ., 7 March 1973, LawLex202300004763JBJ, op. cit.

Cass. 3e civ., 9 July 1973, LawLex202300004764JBJ.

Commercial Leases/Business Goodwill

140. Table of Contents

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140. Table of Contents

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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