Commercial Leases/Business Goodwill

The rental value is, in principle, subject to the law of supply and demand. Indeed, while Article L. 145-33, para. 1, of the Commercial Code specifies that “the amount of rents for renewed or revised leases must correspond to the rental value,” this provision only applies in the absence of an agreement between the parties on the amount of the revised or renewed rent . Also, para. 2 provides that i …

Principles

The rental value is, in principle, subject to the law of supply and demand. Indeed, while Article L. 145-33, para. 1, of the Commercial Code specifies that “the amount of rents for renewed or revised leases must correspond to the rental value,” this provision only applies in the absence of an agreement between the parties on the amount of the revised or renewed rent . Also, para. 2 provides that in the absence of an agreement, this value is determined based on the characteristics of the premises in question, the intended use of the premises, the respective obligations of the parties, local commercial factors, as well as the prices commonly practiced in the vicinity. A first definition of the rental value, therefore, is to consider it as a market value, freely negotiated by the parties in an economically competitive context. Conversely, in the absence of an agreement between the parties on its amount, it will be judicially defined based on legally established objective criteria .

The determination of rent based on rental value is subject to legal and conventional limits. Thus, it encounters the rule of rent capping, which concerns revised or renewed rents. During the rent review, the rental value is only applicable if proof is provided, in accordance with Article L. 145-38 of the Commercial Code, “of a material modification of local commercial factors that has itself resulted in a variation of more than 10% of the rental value.” When setting the rent for the renewed lease, Article L. 145-34 also excludes the application of the rental value if it exceeds the capped rent amount, unless there is a significant change in the elements composing the rental value. Otherwise, the new rent is set at the rental value, even if it is lower not only than the last rent paid but possibly also the original rent of the expired lease .

The parties may also, in certain cases, conventionally derogate from the provisions of Article L. 145-33 of the Commercial Code, it being specified that the contractual setting of the rent between the parties implies a waiver of the judicial rent review procedure . This is the case with the turnover clause, which, in terms of review  or renewal , stipulates that the rent is calculated based on a percentage of the tenant's turnover. However, while it is impossible to derogate from the provisions of Article L. 145-38 relating to the triennial review, which are mandatory , nothing prevents the parties from agreeing, at the conclusion of the lease or subsequently, on the terms for setting the rent of the renewed lease .

Beyond the revised or renewed rent, the rental value applies to the occupancy indemnity in accordance with Article L. 145-28, para. 1, of the Commercial Code , which provides that it “is determined in accordance with the provisions of sections 6 and 7, taking into account all elements of assessment,” among which is Article L. 145-33. Finally, when the lessee remains in the leased premises upon the expiration of a derogatory lease, a new lease subject to the status of commercial leases takes effect, for which the rent must correspond, in the absence of an agreement between the parties, to the rental value .

There are also specific calculation rules, particularly for single-use premises such as hotels, garages, cinemas, theaters, or clinics, for which the determination of rent at rental value follows specific methods. This calculation method, based on operating revenues, is referred to as the theoretical revenue method or, for hotels, the hotel method . According to Article R. 145-10 of the Commercial Code, the rent price for premises built for a single use is determined according to the practices observed in the relevant business sector, if any . In the absence of any observed practice, the rent cap is excluded, and only the rental value applies .

In all cases, the trial courts determine the rental value according to the calculation method that appears to them to be the best, in the exercise of their sovereign power of assessment . However, the authority of res judicata cannot be opposed when subsequent events have modified the situation previously recognized in court, and the trial courts have the ability to proceed again with the setting of the rent when particular circumstances affecting the rental value have arisen after the previous rent-setting judgment . Without any calculation method being imposed, the judicial setting of the rent at the rental value must specify the criteria of Article L. 145-33 of the Commercial Code , namely the characteristics of the premises considered (Art. R. 145-3 and R. 145-4 Commercial Code), the purpose of the premises (Art. R. 145-5 Commercial Code), the respective obligations of the parties (Art. R. 145-8 Commercial Code), the local commercial factors (Art. R. 145-6 Commercial Code), as well as the prices commonly practiced in the vicinity (Art. R. 145-7 Commercial Code), it being specified that in the event of rent revision, no account is taken, for the calculation of this value, “of the tenant's investments nor of the capital gains or losses resulting from their management during the current lease term” (Art. L. 145-38, para. 4, Commercial Code).

Cass. 3e civ., 24 October 1979, LawLex202300005999JBJ. – See more recently, CA Paris, 29 September 2021, LawLex202200001061JBJ.

See, however, Versailles, 5 December 2002, No 01/00854, which considers that the law does not recognize the existence of a “market rental value” and a “judicial rental value” that would necessarily be more favorable to the lessee and to which the lessee would have an acquired right at the first renewal, and specifies that there is only one rental value determined primarily by the parties or, failing that, based on the criteria set by the texts.

See notably Cass. 3e civ., 24 October 1979, LawLex202200000001JBJ: in this case, the trial court disregarded the capping rules and independently assessed the lease price using the so-called hotel method, cross-referenced with the so-called weighted area method and the so-called comparison method.

Cass. 3e civ., 8 January 1980, LawLex202300007060JBJ.

Cass. 3e civ., 3 May 1978, LawLex202100005775JBJ.

Cass. 3e civ., 7 May 1986, LawLex202300006001JBJ. – Also see Cass. 3e civ., 18 January 2012, LawLex202200000460JBJ; Cass. 3e civ., 25 September 2002, LawLex202300007061JBJ.

Cass. 3e civ., 6 February 2020, LawLex202100005985JBJ.

CA Saint-Denis de La Réunion, 2 November 2022, LawLex202300006002JBJ.

CA Chambéry, 19 September 2017, LawLex202300006000JBJ.

Cass. 3e civ., 15 February 2018, LawLex202100005701JBJ.

Cass. 3e civ., 5 March 2013, LawLex202200000225JBJ.

Cass. 3e civ., 18 June 2002, LawLex202100004811JBJ.

Article L. 145-15 deems unwritten any contractual arrangements intended to circumvent it.

Cass. 3e civ., 10 March 2004, LawLex202100004756JBJ.

Cass. 3e civ., 30 June 1999, LawLex202200006995JBJ.

Cass. 3e civ., 14 December 2005, LawLex202200002048JBJ.

Commercial Leases/Business Goodwill

149. Principles

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149. Principles

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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