Commercial Leases/Business Goodwill

The eviction indemnity, whether for transfer or replacement of the business, cannot be less than the value of the leasehold right. This right constitutes the capital corresponding to the interest of being located at a given site to conduct a specific activity for a defined rent. The better the location, the broader the contractual purpose, and the more moderate the rent, the higher its value . Whe …

Value of the leasehold right

The eviction indemnity, whether for transfer or replacement of the business, cannot be less than the value of the leasehold right. This right constitutes the capital corresponding to the interest of being located at a given site to conduct a specific activity for a defined rent. The better the location, the broader the contractual purpose, and the more moderate the rent, the higher its value . When the location has exceptional quality, the trial court cannot refrain from investigating whether the value of the leasehold right is not greater than that of the business they have considered . The fact that the lessee has transferred their business to other premises does not exclude the consideration of the value of the leasehold right in calculating the eviction indemnity .

The assessment of the leasehold right must take into account the loss of the benefit of this right, in the event of the landlord's refusal to renew the lease, based on the characteristics of the premises from which the tenant has been evicted. The trial court must refer to the most appropriate method and mode of calculation for all the premises leased under the principle of indivisibility, even if they are mixed-use premises . The fact that the majority of the premises are intended for residential use and that the area dedicated to commercial use is reduced to the use of an ancillary space of the main premises is irrelevant .

The value of the leasehold right is calculated according to the rent differential method, which consists of the difference between the market rental value of the premises and the rent actually paid or that would have been paid in the event of lease renewal . It is customary to apply a capitalization coefficient to this value based on the commercial attractiveness of the area where the premises are located, the nature of the premises, and their intended use . Thus, when the lease has been terminated at the end of a three-year period, the evaluation of the leasehold right, while it must be based on the characteristics of the premises, their commercial interest, and their state of maintenance, must also take into account the uncapped rent resulting from a modification of local commercial factors that has led, by itself, to a variation of more than 10% in the rental value .

In certain situations, there is no value of the leasehold right to compensate, particularly in the absence of a difference between the rental value and the rent that would have been received if the lease had been renewed . The burden of proving the existence of a differential between the renewal rent and the rent of a future premises lies with the tenant. Failing to establish this, the tenant must be dismissed from their claim for payment of a principal eviction indemnity, which may be limited to ancillary indemnities .

When the premises are exclusively used as offices, the valuation of the leasehold right is the exception. Indeed, for such premises, it is impossible to establish a differential between the rent amount if the lease had been renewed and the market price for an equivalent premises . In fact, the renewal rent for office premises is not subject to the capping rule and must be set at the rental value pursuant to Articles L. 145-36 and R. 145-11 of the Commercial Code . In the absence of a difference between the renewed rent and the market rental value, the value of the leasehold right is zero . This principle applies particularly to the exclusive activity of real estate agencies . Consequently, the eviction indemnity is limited to transfer costs, without the tenant incurring any financial surcharge when transferring their business . However, the value of the leasehold right may be recognized for office premises when it corresponds to the difference between the theoretical renewal rent of the lease and the market rental value . In particular, the amount of the principal eviction indemnity owed to the tenant must reflect the value of the leasehold right according to the so-called rent differential method when the tenant proves having acquired the leasehold rights of the disputed premises, used as offices, from the previous tenant . The value of the leasehold right is also zero for single-purpose premises, since Article R. 145-10 of the Commercial Code specifies that “the rent price of premises built for a single use may, by derogation from Articles L. 145-33 and R. 145-3 and following, be determined according to the practices observed in the relevant business sector.”

CA Paris, 5 July 2017, LawLex202300012099JBJ.

Cass. 3e civ., 11 June 1992, LawLex202300012299JBJ.

Cass. 3e civ., 4 February 2009, LawLex202300012340JBJ.

CA Paris, 24 June 2020, LawLex202300012344JBJ.

CA Versailles, 2 June 2022, LawLex202200008441JBJ.

CA Versailles, 2 June 2022, LawLex202200008441JBJ, prec., which specifies that the activity of a real estate agency falls under intellectual services without the storage of goods, so the disputed premises must be considered as office premises.

Cass. 3e civ., 20 June 1995, LawLex202300012345JBJ.

Cass. 3e civ., 12 November 2008, LawLex202300012346JBJ.

Cass. 3e civ., 13 October 2009, LawLex202300011698JBJ.

Cass. 3e civ., 28 March 2019, LawLex202200004446JBJ; 13 October 2021, LawLex202100006472JBJ.

Cass. 3e civ., 1 April 2009, LawLex202300012301JBJ.

Cass. 3e civ., 1 October 1997, LawLex202100006506JBJ.

Paris, 11 September 2013, LawLex202200004416JBJ, according to which the value of the leasehold right is calculated using the so-called rent differential method resulting from the comparison between the rent that would have been paid if the lease had been renewed and the so-called market rent; 5 July 2017, LawLex202300012099JBJ; 4 April 2024, LawLex202400002966JBJ.

Paris, 6 February 2019, LawLex202300011746JBJ; 30 November 2022, LawLex202300011610JBJ; 19 April 2023, LawLex202300009197JBJ.

Cass. 3e civ., 25 June 1997, LawLex202300012302JBJ.

CA Paris, 17 September 2014, LawLex202300012337JBJ.

CA Paris, 4 May 2011, LawLex202300012339JBJ.

Commercial Leases/Business Goodwill

276. Value of the leasehold right

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276. Value of the leasehold right

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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