Commercial Leases/Business Goodwill

When the elements mentioned in 1° to 4° of Article L. 145-33 of the Commercial Code undergo a significant change, the capping rules do not apply to the rent of the renewed lease (Article L. 145-34, para. 1, Commercial Code), whose price must correspond to the rental value (Article L. 145-33, para. 1, Commercial Code). According to Article L. 145-33, paragraph 2, in the absence of an agreement betw …

Notable modifications of rental value elements

When the elements mentioned in 1° to 4° of Article L. 145-33 of the Commercial Code undergo a significant change, the capping rules do not apply to the rent of the renewed lease (Article L. 145-34, para. 1, Commercial Code), whose price must correspond to the rental value (Article L. 145-33, para. 1, Commercial Code). According to Article L. 145-33, paragraph 2, in the absence of an agreement between the parties, this value is determined based on the characteristics of the premises in question, the purpose of the premises, the respective obligations of the parties, local commercial factors, as well as the prices commonly practiced in the vicinity. These elements mentioned in 1° to 5° of Article L. 145-33 are assessed under the conditions set out in Articles R. 145-3 and following of the Commercial Code, however, the uncapping cannot be based solely on the observation of a significant change, during the lease, of the prices commonly practiced in the vicinity . Conversely, even if the significant nature may result from the combination of several elements referred to in 1° to 4° of Article L. 145-33 , the modification of only one of them is sufficient to uncap the price of the renewed lease .

If the modification of the elements of rental value must be significant, the trial court judges have sovereign power to assess its reality on a case-by-case basis . Thus, when the parties have agreed to reduce the initial rent of the commercial lease to account for the general economic context, this contractual modification of the rent occurring during the expired lease, under conditions unrelated to both the law and the initial lease, is considered a significant modification of the respective obligations of the parties, justifying by itself the exclusion of the capping rule . Besides its significant nature, the trial court judges must investigate, if necessary ex officio , whether the modification concerns and impacts the tenant's business. They cannot, in particular, uncap the price of the renewed lease without establishing a causal link between the observed modifications of local commercial factors and the tenant's business . The burden of proof of the modification lies with the lessor . Also, when the lessor claims such a modification without providing any justification to support their request for uncapping, the trial court judges are not required to compensate for the lack of proof and order an expert assessment . The proof of a significant modification, likely to be of interest to the commercial activity conducted by the tenant and capable of justifying the uncapping, is not provided as long as the extension of a terrace on public property, operated under an administrative authorization, is not part of the leased premises .

The significant modification must have occurred during the lease to be renewed . This is not the case when improvement and extension works were carried out after the renewal, even if they were known and certain at the renewal date and were already acquired and included in the contractual scope  or the probable population evolution whose decrease will be almost inevitable in the coming years . The Court of Cassation even considered that this modification must have occurred at the time the new lease takes effect, which includes the tacit extension period . When the lessor exercises their right of repentance, the modification that occurred after the expiration of the old lease but before the notification date of repentance, which is the effective date of the new lease, may be taken into account . However, for the calculation of the uncapped rent, the modification that occurred before the conclusion of the commercial lease cannot be considered . This is the case with the establishment of a “market road,” which dates back to a time before the previous lease . Similarly, the damage resulting from the agent's wrongful failure to assert significant modifications of the premises' characteristics cannot be compensated during the second renewal of the lease since it is indirect, the renewed lease constituting a new lease, distinct from the one during which the fault was committed and compensated . A lessor also cannot invoke a modification of the characteristics of the leased premises, failing to do so during the first renewal of the lease following the completion of the works .

Cass. 3e civ., 19 March 2003, LawLex202100006367JBJ.

Cass. 3e civ., 2 December 1998, LawLex202300011311JBJ: when the lessee increased the area of the commercial premises and created a new room for storage use, and the replacement of the coal heating system, at the landlord's expense, led to the disappearance of the lessee's specific obligations related to heating, these combined elements constitute a modification whose significant nature was sovereignly assessed by the trial court, justifying the rent increase; 5 February 2013, LawLex202300011308JBJ.

Cass. 3e civ., 19 November 1975, LawLex202300011332JBJ; CA Riom, 20 March 2024, LawLex202400002615JBJ, which concludes that the installation of workplaces for several dozen or hundreds of people, occurring during the elapsed lease, is significant, and specifies that the fact that the tenant's business experiences a decline in activity, within the context of a crisis in the sale of organic food products, is irrelevant insofar as it occurred after the lease renewal date and is linked to the deterioration of general economic circumstances, which may themselves evolve again in a favorable direction; CA Paris, 21 March 2024, LawLex202400002643JBJ, which considers that the good visibility of the leased premises does not constitute a modification of local commercial factors when this situation existed from the beginning of the lease; CA Paris, 28 March 2024, LawLex202400002804JBJ, previously cited; CA Paris, 13 June 2024, LawLex202400004535JBJ, previously cited.

Cass. 3e civ., 9 March 2022, LawLex202200002323JBJ, which specifies that only the elements existing at the date of renewal can be considered for calculating the price of the renewed lease.

Cass. 3e civ., 4 February 1997, LawLex202300003291JBJ.

Cass. 3e civ., 21 December 1976, LawLex202300011333JBJ; CA Versailles, 23 May 2024, LawLex202400003986JBJ, previously cited.

Cass. 3e civ., 11 December 1996, LawLex202300011334JBJ.

Cass. 3e civ., 14 October 1992, LawLex202300011337JBJ, which overturns the appellate decision that held, to set the rent amount of the renewed lease by excluding the application of the capping rules, that the fact that an owner did not invoke the modification of the premises during a first renewal of the lease does not constitute a waiver to later invoke it, the lessor is entitled to decapping, even if the extension of the premises was prior to the previous renewal, whereas this significant modification of one of the elements mentioned in Articles R. 145-3 et seq. of the Commercial Code could only concern the course of the lease to be renewed until the effective date of the new lease.

Paris, 13 May 2016, LawLex202300011335JBJ.

Cass. 3e civ., 13 May 2009, LawLex202300011336JBJ.

Cass. 3e civ., 4 November 1998, LawLex202300006430JBJ.

Paris, 28 March 2024, LawLex202400002804JBJ; Paris, 13 June 2024, LawLex202400004535JBJ.

Cass. 3e civ., 5 February 2013, LawLex202300011308JBJ, which holds that the modifications made to the premises renovated to allow a tasting activity in a bakery-pastry shop are sovereignly deemed significant by the court of appeal to justify the removal of the cap on the renewed rent; 4 July 2024, LawLex202400005116JBJ.

Cass. 3e civ., 24 March 2004, LawLex202300011309JBJ.

Cass. 3e civ., 27 January 1999, LawLex202300006728JBJ.

Cass. 3e civ., 30 June 2004, LawLex202300006733JBJ.

Cass. 3e civ., 1 March 2000, LawLex202300011331JBJ, which quashes the appeal decision that, in deciding to set the rent at the rental value, reversed the burden of proof by holding that the lessee did not demonstrate that all the works leading to a significant modification of the premises were carried out prior to the expired lease; 4 July 2024, LawLex202400005116JBJ, previously cited; Paris, 28 March 2024, LawLex202400002804JBJ, previously cited; Versailles, 23 May 2024, LawLex202400003986JBJ; Paris, 13 June 2024, LawLex202400004533JBJ; Paris, 13 June 2024, LawLex202400004535JBJ, previously cited; Paris, 20 June 2024, LawLex202400004836JBJ, which specifies that the proof of significant modification of commercial factors lies with the lessor and can only constitute a reason for rent increase if it has a favorable impact on the commercial activity conducted by the lessee, which must be demonstrated.

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

CA Caen, 7 June 2024, LawLex202400004502JBJ.

Commercial Leases/Business Goodwill

222. Notable modifications of rental value elements

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222. Notable modifications of rental value elements

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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