Commercial Leases/Business Goodwill

The determination of the amount of the eviction indemnity requires assessing the nature of the damage suffered by the lessee. The trial court must establish whether the refusal to renew resulted in a transfer or disappearance of the business.
The principal indemnity corresponds to compensation for the loss of the business whenever eviction results in the loss of clientele. When the lessee is unabl …

Nature of the damage

The determination of the amount of the eviction indemnity requires assessing the nature of the damage suffered by the lessee. The trial court must establish whether the refusal to renew resulted in a transfer or disappearance of the business.

The principal indemnity corresponds to compensation for the loss of the business whenever eviction results in the loss of clientele. When the lessee is unable to relocate near the premises, it is referred to as a replacement indemnity. This is the case when eviction involves the loss of the business, including a significant portion of the clientele, due to the lessee's inability to secure a comparable location within a reasonable time . In case of uncertainty regarding the transfer of the business, the estimation of the eviction indemnity must be based on the assumption of the total loss of the business. This is the case when the approval of the customs administration for the transfer of a tobacco outlet remains uncertain, and nothing suggests that the lessee will transfer their business to another location . When trial courts determine the non-transferable nature of the business, they cannot refuse to assess its market value and set the eviction indemnity solely at the value of the leasehold right .

When the lessee, despite relocating, continues to serve their clientele, they cannot claim to have lost their business, of which the clientele is the main element, even if they have suffered a loss in its operation . Thus, when despite losing a fixed location, the business retains its clientele, it has not disappeared with the eviction but has been transferred . The transfer of the business, characterized by the retention of clientele, is often explained by the lessee's reputation or the specificity of their activity. Such is the case of a renowned creator whose business's essential elements include their brand, ranking, and collection of designs and models , a globally known art gallery owner , or a garage owner whose personality plays an essential role in attracting clientele in this type of business where relationships and significant advertising, combined with technical knowledge, are indispensable conditions for success . The same applies to a passenger transport operator, who runs regular lines and organizes coach trips, who will not lose their clientele or equipment and can continue their activity as soon as they find another site to rent within the large area they serve , a lessee engaged in chair caning and reupholstering, which is by nature transferable, with clientele largely brought by furniture professionals, and whose skill and reputation are well-known beyond the neighborhood , or whose main activity does not target a neighborhood clientele, as their business is not tied to the location and in-store sales do not represent the core of the activity . However, the transfer indemnity cannot be denied to the lessee on the grounds that they did not make any financial effort in transferring their activity compared to the situation that would have been theirs in the event of lease renewal .

In certain cases, failure to transfer and loss of clientele may be intertwined. Thus, when eviction from the premises has not resulted in the disappearance of the tenant's business, which continued its activities but could not maintain a fixed location, and part of its clientele, attached to the rented premises, was consequently lost, this partial loss must be taken into account .

Finally, in the event of the material indivisibility of the premises, the conclusion of a single lease allows the main tenant to claim a right to renewal for all the premises . Consequently, the compensation awarded in the event of refusal to renew the lease must take into account all of these premises.

CA Paris, 12 December 2012, LawLex202300011701JBJ, for a dry-cleaning business subject to control as potentially harmful to the environment and for which co-owners are reluctant to accommodate.

Cass. 3e civ., 18 January 2011, LawLex202300012724JBJ.

Cass. 3e civ., 17 November 1998, LawLex202300011739JBJ.

Cass. 3e civ., 28 January 2016, LawLex202200006101JBJ.

CA Paris, 6 February 2019, LawLex202300011746JBJ.

Cass. 3e civ., 1 October 1997, LawLex202100006506JBJ, which considers that a court of appeal cannot determine, to set the eviction indemnity at a certain amount, that although it is true that the disputed apartment may appear as a materially indivisible entity, it follows from the analysis of the contractual purpose of the leased premises, defined by the parties as mixed, as well as from the actual use of the premises as a staff accommodation, primarily, that this apartment, although rented under a single commercial lease, is predominantly a residential lease and remains very partially for commercial purposes, on a reduced area used as an ancillary space to the main commercial premises.

Cass. 3e civ., 3 November 2021, LawLex202200004430JBJ.

Cass. 3e civ., 28 April 2009, LawLex202300011734JBJ.

Cass. 3e civ., 13 October 2021, LawLex202100005948JBJ, for an exhibition venue in the heart of a Parisian district where other art galleries are located, whose business is closely linked to the personality of the lessee, who is world-renowned in the field of art.

Cass. 3e civ., 21 March 1968, LawLex202300011735JBJ.

Cass. 3e civ., 13 October 2021, LawLex202100005948JBJ.

Cass. com., 8 November 1965, LawLex202300011736JBJ.

Cass. com., 8 June 1967, LawLex202300011737JBJ.

Cass. 3e civ., 13 February 2001, LawLex202300011738JBJ.

Commercial Leases/Business Goodwill

272. Nature of the damage

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Les notions juridiques connexes

272. Nature of the damage

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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