Commercial Leases/Business Goodwill

The lessor who wishes to obtain the release of the premises must fully pay the eviction indemnity. This payment is a necessary condition for the effectiveness of the formal notice to vacate the premises . The full payment of the indemnity includes both the principal indemnity and any ancillary indemnities . Since full payment is required, the formal notice to vacate the premises has no effect if the lessor fails to deposit the entire eviction indemnity and interest at the legal rate, even if the difference between what is owed and what has been paid is minimal . However, the lessor may invoke the set-off of the eviction indemnity with amounts owed by the lessee under the commercial lease. For the set-off to be effective, the eviction indemnity must be a certain, liquid, and payable claim. This is the case when a judgment, which has become final, rules on the existence of an eviction indemnity, sets its amount, and allows the lessee to implement enforcement measures .

The lessee has, under the terms of Article L. 145-29, para. 1, of the Commercial Code, a period of three months from the date of payment of the eviction indemnity to themselves or from the notification of its payment to an escrow agent to return the premises to the lessor. If the use of an escrow agent must result from an agreement between the parties, they may be appointed by the judgment ordering the payment of the indemnity or, failing that, by a simple order upon request (Art. L. 145-29, para. 1). The escrow agent appears as a guarantee for the lessor of the proper execution of the lessee's obligations under the lease, but also for the lessee's creditors. Indeed, the lessee will receive from the escrow agent the amount of the eviction indemnity if there is no opposition from the creditors, upon handing over the keys to the empty premises, upon proof of payment of taxes, rents, and subject to rental repairs (Art. L. 145-29, para. 2). However, the scope of this rule seems limited insofar as no text organizes the publication of the judgment pronouncing the eviction indemnity and its notification to registered creditors. Thus, the Court of Cassation considers that the creditor holding a pledge on a business does not benefit from any right of preference or follow-up on the indemnity for the termination of the lease through which the business is operated .

When the lessor has not exercised their right of withdrawal within the fifteen-day period provided for in Article L. 145-58, they are required, in accordance with Article L. 145-30, para. 2, of the Commercial Code, to pay the eviction indemnity to the tenant or, where applicable, to the escrow agent within three months from the date of a formal demand made by extrajudicial act, which must, under penalty of nullity, reproduce the text of para. 2 of Article L. 145-30.

Pursuant to Article 1231-7 of the Civil Code, the award of an eviction indemnity entails, even in the absence of a request or special provision in the judgment, interest at the legal rate, the starting point of which is set, unless otherwise provided by law, on the date of the judgment, unless the judge decides otherwise. Indeed, the trial courts have the discretion to set the starting point of interest at the legal rate, which may be deferred to the day of the summons  or to the date of the decision determining the amount of the eviction indemnity . When a decision has definitively set the amount of the eviction indemnity but the landlord's obligation to pay this indemnity has only been pronounced by a subsequent decision, the starting point of increased interest, pursuant to Article 313-3 of the Monetary and Financial Code, must be set on the day of service of the decision of condemnation . Conversely, the eviction indemnity does not bear interest at the legal rate in favor of the evicted tenant during the period when this indemnity remains legitimately in the hands of the escrow agent . In this case, the financial products generated by the eviction indemnity benefit the tenant, creditor of this indemnity, as of right from the day of the escrow, which constitutes a liberating payment .

Finally, in the event of failure to return the keys by the set date and after formal notice, Article L. 145-30, para. 1, of the Commercial Code provides that the escrow agent retains 1% per day of delay on the amount of the compensation and returns this retention to the lessor upon their sole receipt . This retention constitutes a definitive penalty that effectively reduces the amount of the eviction compensation by the same amount . However, the 1% penalty can only apply if, on the date of notification to the lessee of the payment to the escrow agent, the escrowed sum covers the entirety of the eviction compensation, principal and accessories , and cannot begin to accrue until the amount of the eviction compensation has been determined by a final decision . The lessee incurs the 1% per day delay retention only if, and only if, they have been formally notified by the lessor to fulfill their obligation to return the keys and vacate the premises . Although no form or deadline is required by Article L. 145-30, para. 1, the formal notice must nevertheless be sufficiently explicit to inform the lessee of the nature of their rights and obligations .

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286. Payment