The commercial lease regime was modified by the law of June 18, 2014, known as the Pinel Law, regarding rent, the allocation of charges, and assignment. These provisions apply to leases renewed or entered into on or after September 1, 2014.
The rent for a 3-6-9 commercial lease is determined by an agreement between the landlord and the tenant. However, the tenant can reduce their rent during the lease term, every three years (rent review), or at its expiry, after nine years (renewal). Clauses initially included in the lease may also allow for a rent reduction at a shorter timeframe (one year, six months, etc.).
The principle: rent review indexed to the Commercial Rent Index (ILC)
Every three years, the tenant can request a downward revision of their rent. In principle, this reduction is capped: it is indexed to the Commercial Rent Index (ILC). This reference index replaces the construction cost index (ICC), which was too volatile and to the detriment of the tenant.
The request for rent review can be made the day after the three-year period expires, either by bailiff’s notice or registered letter with acknowledgment of receipt.
The tenant must verify that the capped rent of the renewed lease does not exceed the market rental value. If it does, they can request that the rent be set at the lower market rental value. This is a useful factor in requesting a rent reduction.
The deterioration of local market conditions (for example, the lack of tourism in many cities) can thus justify these rent reductions. The judge will also have to verify this.
If the rent index is falling at the time of the request for review, then it must be applied. No contrary clause is permissible (French Court of Cassation, 3rd Civil Chamber, January 14, 2016, No. 14-24.681, cited by the Paris Court of Appeal, February 7, 2018, No. 16-07.034). If such a clause were to exist, it would be void (French Court of Cassation, September 10, 2020; French Court of Cassation, March 11, 2021; French Court of Cassation, January 12, 2022, 3rd Civil Chamber, appeal No. 21-11.169; Versailles Court of Appeal, January 12, 2023, No. 21/01893).
The law also prohibits a clause indexing rent to the variation of an index from referring to a period of index variation exceeding the revision period (Article L-112-1 of the French Monetary and Financial Code – French Supreme Court, Third Civil Chamber, February 6, 2020, No. 18-24.599).
Exceptions
The rent escalation clause and the revenue-based clause
A rent escalation clause and a revenue-based clause can be included in the lease agreement with the landlord to revise the rent at any time.
In both situations, the tenant can obtain a rent reduction, either because their current actual rent has decreased by more than a quarter (rent escalation clause), or because they have experienced a decrease in revenue (revenue-based clause). The current economic climate favors this type of clause. However, these clauses can backfire on the tenant if revenue increases, as they can either lower or raise the rent.
When a landlord ultimately agrees to renew a lease with a tenant after initially refusing, they cannot substantially modify the rent calculation terms.
In this case, the landlord had exercised their right of withdrawal and proposed, in their lease renewal offer, replacing the revenue-based rent clause (which varied the rent according to the tenant’s turnover) with a fixed rent clause. The judge rejected this replacement, stating that “the landlord’s exercise of their right of withdrawal constitutes a renewal of the lease and cannot include a proposal for a new lease incorporating a substantial modification of the rent calculation terms” (French Supreme Court, Third Civil Chamber, September 12, 2019, No. 18-18-218).
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