Commercial Leases/Business Goodwill

In principle, the amount of rent for the renewed lease must correspond to the rental value of the leased premises (Art. L. 145-33, para. 1, Commercial Code). However, Article L. 145-34 of the Commercial Code sets capping rules that limit its variation. According to the Court of Cassation, when seized with a priority question of constitutionality, the principle of capping does not infringe on the f …

Rent capping

In principle, the amount of rent for the renewed lease must correspond to the rental value of the leased premises (Art. L. 145-33, para. 1, Commercial Code). However, Article L. 145-34 of the Commercial Code sets capping rules that limit its variation. According to the Court of Cassation, when seized with a priority question of constitutionality, the principle of capping does not infringe on the freedom to conduct business, contractual freedom, or property rights. Indeed, the parties can exclude it from their contractual provisions or agree on the amount of rent for the renewed lease. Moreover, the capped rent is only the initially negotiated rent increased by the index variation if the lease environment has remained stable .

Under the terms of Article L. 145-34, para. 1, of the Commercial Code, unless there is a significant change in the elements of the rental value listed in 1° to 4° of Article L. 145-33, the rate of rent variation applicable upon the effective date of the lease to be renewed, if its duration does not exceed nine years, cannot exceed the variation, occurring since the initial setting of the rent of the expired lease, of the quarterly commercial rent index or the quarterly tertiary activities rent index mentioned in Article L. 112-2, paras. 1 and 2, of the Monetary and Financial Code, published by the National Institute of Statistics and Economic Studies. The capping rules do not apply to leases whose contractual duration exceeds nine years , nor to leases whose duration, by the effect of tacit extension, exceeds twelve years . If, during the tacit renewal period, a lessee requests the renewal of their lease before the twelve years have elapsed from the start of this original contract and to take effect at the expiration of these twelve years, the rent of the renewed lease must, however, be capped . In response to a priority question of constitutionality, the Court of Cassation clarified that the uncapping of the rent of the renewed lease, when the lease to be renewed has lasted more than twelve years by the effect of its tacit renewal, does not discriminate between commercial lease lessees who, all, can request, at the expiration of their lease with a contractual duration of nine years, its renewal and, thus, not allow the lease to be tacitly extended beyond twelve years . Thus, as soon as the lease has a duration exceeding twelve years, the renewal rent must be calculated based on the rental value .

Article L. 145-34 sets a ceiling. Thus, when the rental value of the leased premises is lower than the rent of the expired lease   or the ceiling rent  , the rent of the renewed lease must be set at the amount of this rental value  . This rule applies even in the presence of a conventional indexation clause governing the annual variation of the lease rent, which cannot prevent the setting of the renewed lease rent corresponding to the rental value when it is lower than the ceiling rent amount  . The setting of the renewed rent at the rental value is not subject, unlike the setting of the revised rent, to proof of a material change in local commercial factors  . While it is up to the lessee to provide proof of the actual rental value of the lease, this does not exempt the trial court from seeking it, if necessary, on its own initiative  .

The rules of Article L. 145-34 of the Commercial Code not being of public order, the parties may agree to derogate from them  . Indeed, they are free to arrange the financial terms of the lease and may exclude the capping rules when setting the rent for the renewed lease. Therefore, nothing prevents the parties from mutually agreeing to determine in advance, through a lease stipulation, the conditions for setting the price of the renewed lease  . Similarly, the setting of the renewed rent of a lease is not subject to the provisions relating to the status of commercial leases when it is governed only by the parties' agreement, which stipulates a rent consisting of a fee on the amount of net receipts and a minimum rent  .

The exclusion of the rules on capping may also result from an implicit waiver by the lessee during the renewal of the lease. Thus, an unconditional proposal by the lessee, through a legal professional, of a rent higher than the capped rent  , or the mention in the minutes of the Departmental Conciliation Commission that the lessee made a proposal for an uncapped rent without contradiction by the latter, who, moreover, upon receipt of this document, does not produce any evidence to establish the error which, according to him, affects the minutes  , constitutes a waiver by the lessee of the benefit of the capping. On the other hand, the lessee's proposal, through his lawyer, of a transactional offer consisting of the renewal of the lease in exchange for a rent amount higher than the capped rent, which became void following the lessor's refusal  , does not constitute an express waiver by the lessee to avail himself of the capping.

If, pursuant to Article L. 145-34 of the Commercial Code, the rate of rent variation applicable at the time the lease to be renewed takes effect cannot exceed the variation, occurring since the initial setting of the rent of the expired lease, of the quarterly commercial rent index or the quarterly tertiary activities rent index published by INSEE, when the agreement does not set the reference quarter for this index, the variation of the quarterly commercial rent index or the quarterly tertiary activities rent index calculated over the nine-year period prior to the last published index must be taken into account. To determine the capped rent amount of a renewed commercial lease, the rent to be considered for the application of the index variation is that set by the parties at the time the lease to be renewed takes effect, notwithstanding the setting of a progressive rent in stages in the expired lease  or the judicial setting of the revised rent during it , and not the rent actually paid at this time . When the renewal is after the initially scheduled expiration date of the lease, the variation is calculated from the last published index, for a period equal to that which elapsed between the initial date of the lease and the date of its effective renewal (Article L. 145-34, para. 2) . When one of the coefficients used as a calculation basis has not been published in the official journal, the rent of the renewed lease can only be calculated based on the rental value .

Finally, Article L. 145-34 in fine provides a smoothing rule for rent increases in the event of rent de-capping or when the lease term is contractually longer than nine years. Under this rule, the resulting rent variation cannot lead to increases exceeding, for one year, 10% of the rent paid during the previous year. According to the Constitutional Council, which was referred to with a priority question of constitutionality, the text, which allows the lessor to benefit each year from a 10% increase in the rent of the previous year until it reaches, if applicable, the new rental value, does not disproportionately infringe on the right to property. Since these provisions are not of public order, nothing prevents the parties from agreeing not to apply them, either at the time of the initial lease agreement or at the time of its renewal .

Cass. 3e civ., QPC, 13 July 2011, LawLex202300011160JBJ.

Cass. 3e civ., 7 June 1989, LawLex202300011161JBJ; 30 January 1991, LawLex202300011162JBJ.

Cass. 3e civ., 6 May 2021, LawLex202100005113JBJ, préc.

Cass. 3e civ., 3 December 2003, LawLex202100006547JBJ, which quashes the appeal decision that holds, to set the rent of the renewed lease according to the capping rule, that, at the time of lease renewal, the construction cost index is a priori the reference determining the evolution of rental value, unless proven otherwise, and that it is up to the lessee, who contests the application of this rate of variation as not corresponding to the rental value as it may have varied during the term of the lease to be renewed, to provide proof of a lower rental value at the renewal date, without investigating, if necessary ex officio, whether the rent of the renewed lease actually corresponds to the rental value.

Cass. 3e civ., 30 May 2024, LawLex202400003941JBJ; CA Paris, 22 April 2022, LawLex202200005190JBJ, which holds that since the provisions of Article L. 145-34 of the Commercial Code are not of public order, the parties may freely agree to derogate from them in order to set the rent for the potential renewal and successive renewals at the rental value.

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

Cass. 3e civ., 10 March 1993, LawLex202100004807JBJ.

CA Caen, 25 November 2021, LawLex202300011167JBJ, which adds that the lessee cannot claim that they were unaware of the amount of the renewed rent, which was perfectly determinable, especially since they had previously consulted an amicable expert.

Cass. 3e civ., 14 May 1997, LawLex202300011168JBJ.

Cass. 3e civ., 6 March 2013, LawLex202100005094JBJ.

Cass. 3e civ., 11 April 2019, LawLex202100006222JBJ.

Cass. 3e civ., 8 November 1995, LawLex202300011163JBJ, which quashes the appeal judgment setting the rent of the renewed lease according to the capping rule, while the trial court notes that by the effect of tacit renewal, the lease exceeded twelve years.

Cass. 3e civ., 17 May 2006, LawLex202300011169JBJ.

CA Douai, 13 June 2024, LawLex202400004540JBJ.

Cass. 3e civ., 12 January 1977, LawLex202300011170JBJ.

Cons. constit. 7 May 2020, No 2020-837 QPC, which in response to the Court of Cassation (Cass. 3e civ., 6 February 2020, LawLex202200000357JBJ) which was concerned about the disproportionate nature of the rule set by paragraph 4 of Article L. 145-34 that this rule not being of public order, the parties may choose not to apply it either at the time of the conclusion of the initial lease or at the time of its renewal. - See also Cass. civ., opinion, 9 March 2018, LawLex202300011339JBJ, which specifies that the last paragraph of Article L. 145-34 of the Commercial Code only establishes, in the cases it determines, a spreading of the rent increase resulting from the removal of the cap, without affecting the setting of the rent at the rental value.

Cass. 3e civ., 21 December 1993, LawLex202300010486JBJ.

Cass. 3e civ., QPC, 5 October 2010, LawLex202300011164JBJ.

Cass. 3e civ., 14 October 1992, LawLex202300009501JBJ: in this case, the lease, having taken effect on 1 January 1977, continued in the absence of notice and only ended on 31 July 1989, the date on which notice was given.

Cass. 3e civ., 6 May 2021, LawLex202100005113JBJ.

Cass. 3e civ., 5 November 2014, LawLex202300011165JBJ: when the lessee requests that the rent of the renewed lease be set at the rental value, which is lower than the indexed rent, the trial court cannot apply the rent cap without first determining the rental value.

CA Paris, 13 June 2024, LawLex202400004533JBJ.

Cass. 3e civ., 23 June 2015, LawLex202300011166JBJ.

Commercial Leases/Business Goodwill

221. Rent capping

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221. Rent capping

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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