Court Fixing of Rental Value on Renewal: The Statement of Case Before the Commercial Rent Judge

An institutional landlord, whether a property investment company (foncière) or an asset management company, regularly receives from its tenant a challenge to the renewal rent, accompanied by a rental value figure far below its expectations. The tenant puts forward a reduced weighted surface area, outdated comparables and allegedly deteriorated commercial attractiveness. Faced with this proposal, the landlord has one precise route: to refer the matter to the commercial rent judge (juge des loyers commerciaux) by a statement of case (mémoire) so that the rent is fixed by the court at the real rental value. This guide details the procedural mechanics of this challenge, the preparation of the statement of case, the handling of the expert appraisal and the landlord's levers for obtaining, where appropriate, the lifting of the rent cap (déplafonnement).

The framework: when rental value is fixed before the judge

The rent under the renewed lease is first determined by agreement between the parties. Failing agreement, the dispute falls under a special procedure, distinct from ordinary law, entrusted to a specialist judge. The points open for discussion at the renewal stage are presented in our article on the new terms to negotiate on renewal of a commercial lease (bail commercial).

The commercial rent judge, a special court

The fixing of the price of the renewed lease falls to the commercial rent judge, that is to say the president of the judicial court (tribunal judiciaire) of the place where the property is located, or the judge to whom he or she delegates (Article R. 145-23 of the French Commercial Code). This judge rules under a special procedure, with representation by a lawyer (avocat) being mandatory, and not under the conventional route of a summons.

The judge's jurisdiction is a matter of public policy for everything relating to the fixing of the rental value of commercial leases on renewal or revision. By contrast, questions relating to the principle of renewal itself, to the eviction indemnity (indemnité d'éviction) or to the validity of the notice (congé) fall outside this judge's remit and come before the judicial court sitting as a panel. This dividing line has a practical consequence: a landlord who disputes both the right to renewal and the price will sometimes have to fight on two separate procedural fronts.

The distinction from the three-yearly revision

The fixing of the renewal rent must not be confused with the three-yearly revision under Article L. 145-38 of the French Commercial Code, which operates during the term of the lease. Renewal opens a new lease and is subject to its own rules on rent capping (plafonnement) (Article L. 145-34) and lifting of the cap. The rental value criteria are common to both mechanisms, but the conditions for exceeding the cap differ. This guide focuses on renewal, the moment when the financial stake is highest for an institutional landlord, since the rent fixed will bind the parties for the next nine years. The steps, time limits and formalities of the mechanism operating during the term of the lease are detailed in our step-by-step guide to the three-yearly revision of commercial rent.

The statutory criteria for rental value

The whole strategy of the statement of case rests on mastering the five factors of assessment laid down by Article L. 145-33 of the French Commercial Code. A landlord that challenges the tenant's figure must show, factor by factor, that the real rental value exceeds the opposing proposal.

Article L. 145-33 lists five cumulative criteria:

• the characteristics of the premises concerned
• the intended use of the premises
• the respective obligations of the parties
• local commercial factors
• the prices commonly charged in the neighbourhood

These criteria are specified by Articles R. 145-3 to R. 145-7 of the French Commercial Code. The landlord has an interest in addressing them in an order that suits its argument, and not in copying them out mechanically.

The characteristics of the premises and the weighted surface area

The physical characteristics of the premises account for a significant part of the value. Expert practice converts the actual surface area into a weighted surface area (surface pondérée): a square metre of highly visible ground-floor shop window is not worth a square metre of basement storage. The weighting coefficients reflect this hierarchy.

This is a frequent area of disagreement. The tenant tends to understate the weighting of secondary areas and to inflate discounts for obsolescence or layout. The institutional landlord must counter with an adversarial measurement, up-to-date plans and, if necessary, a surveyor. A difference of ten points of coefficient on a storage area of several hundred square metres can represent a considerable sum over the term of the lease.

The intended use and the respective obligations of the parties

The contractual use affects the value: a broad use clause, known as "all trades", enhances the premises because it gives the tenant freedom of operation and assignment. Conversely, a restrictive use argues for a more moderate value. The landlord has an interest in recalling the exact scope of the clause as drafted in the expired lease.

The respective obligations of the parties also carry weight. Where the lease places on the tenant works, maintenance of major structures or a significant share of costs normally borne by the landlord, these transfers justify an adjustment. Symmetrically, a tenant that bears heavy burdens will rely on them to argue for a lower figure. The landlord must re-read, clause by clause, the allocation resulting from the lease, without overlooking the impact of Article L. 145-40-2 on the allocation of charges and works.

Local commercial factors and comparables

Local commercial factors measure the commercial attractiveness of the location: footfall, the presence of anchor retailers, urban improvements, transport links and parking. A landlord that wants to exceed the cap or to support a high value will document any favourable development since the initial fixing.

The prices commonly charged in the neighbourhood are the backbone of the case. This means producing references to comparable, recent leases of premises of a similar nature and location. The quality of a statement of case is judged by the strength of its comparables: leases actually concluded, adjustment for differing parameters (surface area, frontage, floor), and exclusion of atypical transactions. A poorly chosen comparable weakens the whole argument and gives the expert and the judge a hold on it.

Capping and lifting the cap: the landlord's real lever

Fixing the rental value is not enough: the landlord must also be able to claim the benefit of it. This is where the capping rule comes in.

The principle of capping

Under Article L. 145-34 of the French Commercial Code, the rent under the renewed lease may not, in principle, exceed the change in the reference index since the initial fixing of the rent. For leases covering commercial activities, the index is the commercial rent index (indice des loyers commerciaux, ILC); for tertiary and office activities, the tertiary activities rent index (indice des loyers des activités tertiaires, ILAT). This cap protects the tenant against a sudden increase, even where the real rental value has risen sharply.

For an institutional landlord, capping is often the decisive obstacle: even if the market rental value is far above the current rent, it will be able to collect it only if it exceeds the cap. Challenging the tenant's figure therefore makes sense only when coupled with a strategy for lifting the cap, except where the current rent is already below the index-linked cap itself.

The cases in which the cap is lifted

Lifting the cap removes the index limit and allows the rent to be fixed at the real rental value. Article L. 145-34 disapplies the cap notably where there has been a notable change in the factors of Article L. 145-33 during the expired lease: a notable change in the characteristics of the premises, the intended use, the obligations of the parties or local commercial factors. The cap is also lifted where the duration of the lease, through tacit extension, has exceeded twelve years, or where the lease was concluded for a term of more than nine years. The case of a lease whose duration has exceeded twelve years is examined separately in our article on lifting the commercial rent cap after 12 years.

The institutional landlord will therefore build its statement of case around showing a notable change. Two concrete examples illustrate the logic:

• a formerly secondary street has become a major commercial thoroughfare after pedestrianisation and the arrival of national retail brands: commercial attractiveness has changed notably
• the tenant obtained during the term of the lease an extension of its use clause, moving from a single activity to a broader use: the intended use has been modified

It should be noted that the Cour de cassation assesses the "notable" nature of the change strictly and requires that it has had a real effect on the rental value. A marginal change is not enough. The statement of case must therefore not only establish the change but also quantify its impact.

Phasing in the lifting of the cap

Where the cap is lifted, Article L. 145-34 provides for a phasing mechanism: the increase resulting from fixing the rent at rental value may not, in principle, lead to annual increases above a ceiling on the change relative to the rent of the last year. The landlord must build this phasing into its calculations in order to present the judge with a realistic schedule. Claiming the full amount straight away without taking account of the phasing exposes the landlord to a claim that is partly inadmissible.

Preparing the statement of case

The statement of case is the central document of the procedure. Its quality determines the outcome of the dispute far more than the later oral submissions.

The preliminary statement of case, a condition of admissibility

The procedure before the commercial rent judge imposes a preliminary step: referral to the judge must, on pain of inadmissibility, be preceded by notification of a statement of case to the rent judge to the opposing party (Article R. 145-27 of the French Commercial Code). This statement sets out the points of disagreement, the grounds and the amount of the rent claimed. The claimant may refer the matter to the court registry only after a period of one month following that notification, unless the opposing party has itself notified a statement in reply.

This formality is not a mere precaution: its omission renders the claim inadmissible. A hurried landlord that referred the matter directly to the judge without a preliminary statement would see its claim rejected, with the risk of then running into limitation.

Mind the two-year limitation period

Actions to fix the rent are time-barred after two years (Article L. 145-60 of the French Commercial Code). The starting point and the interplay of this period with notices and renewal requests are a source of abundant litigation. For an institutional landlord managing a portfolio of several leases, keeping a rigorous schedule is indispensable: a claim to fix the rent presented late runs into limitation, however strong the case on the merits.

The argumentative content of the statement of case

An effective statement of case does not merely assert a figure. It sets out a structured demonstration:

• the precise identification of the lease, the premises, the current rent and the chronology of the renewal
• the legal basis for exceeding the cap, tied to one or more grounds for lifting it
• the assessment of the rental value, criterion by criterion under Article L. 145-33, supported by a reasoned weighted surface area and verifiable comparables
• the amount claimed, including phasing where applicable
• the supporting documents, numbered and disclosed

The tone must remain technical and demonstrative. Faced with a tenant that will have understated every parameter, the institutional landlord does well to anticipate the opposing objections and to answer them in advance, rather than leave the expert and the judge to discover the weak points in the case.

Handling the court-ordered expert appraisal

In the great majority of rental value disputes, the judge orders an expert appraisal before ruling. This phase is decisive and is played out largely outside the hearing.

The appointment and the brief of the expert

The commercial rent judge may order an expert appraisal in order to be informed on the rental value (Article R. 145-30 of the French Commercial Code). The expert, often specialised in commercial property valuation, receives a brief that defines the scope: determining the weighted surface area, assessing the statutory criteria, gathering comparables and proposing a value.

The landlord has every interest in intervening when the brief is settled. A well-drafted brief, which expressly invites the expert to rule on the grounds for lifting the cap that are relied on, usefully steers the work. Conversely, a brief that is too narrow may leave aside a central argument.

The landlord's active role during the work

The appraisal is adversarial. The landlord, assisted by its counsel and often by its own insurance expert or valuer, must take an active part in the work:

• prepare the visit to the premises and point out the features that add value
• provide its comparables and discuss those of the tenant
• send written submissions (dires) to the expert at each stage, notably after the draft report

The written submission (dire) is the key tool of this phase. An unfavourable draft report is not final: written submissions make it possible to have an erroneous weighting corrected, to have an unsuitable comparable set aside or to have a neglected change in commercial attractiveness taken into account. A passive institutional landlord that files no written submission risks seeing the report endorse the tenant's figure.

The evidential weight of the report and the power of the judge

The expert report does not bind the judge, who retains sovereign power to assess the rental value. In practice, however, the report weighs heavily on the decision. A landlord that has obtained, through its written submissions, a favourable appraised value is in a strong negotiating position, including for an amicable outcome. This is why the energy invested during the appraisal work often has more effect than the argument developed at the final hearing.

The rent during the proceedings

The procedure to fix the rent may last several years, including the expert appraisal. The question of the rent due in the meantime therefore arises immediately.

During the proceedings, the tenant remains bound to pay an interim rent. Article L. 145-57 of the French Commercial Code provides that, on renewal, the interim rent due until the decision is that of the expired lease, unless a statement of case claims a different rent. Once the final rent has been fixed, a true-up takes place, increased by interest at the statutory rate from the relevant date. For an institutional landlord, this mechanism means that the length of the procedure does not cost it the benefit of the increase: the retroactive true-up preserves its rights, provided the starting point was correctly set in the statement of case.

Conclusion

Challenging the rental value proposed by the tenant is not a matter of peremptory assertion, but of demonstration. For an institutional landlord, the key is not only to establish a high rental value: it is first to clear the obstacle of capping by documenting a notable change in the factors of Article L. 145-33. A case that quantifies an attractive rental value but fails to justify lifting the cap will yield only the index-linked change. The battle is therefore won on two simultaneous planes, the principle of lifting the cap and the amount of the value, and it is played out more in the statement of case and during the appraisal than at the hearing.

The practical recommendation can be put in one sentence: before any referral, have an independent valuer audit the strength of your comparables and of your argument for lifting the cap, and check that the preliminary statement of case has been notified within the time limits, failing which a claim that is well founded on the merits may fail on procedure.

Frequently asked questions

Which judge has jurisdiction to fix the rent of the renewed lease?

It is the commercial rent judge, that is to say the president of the judicial court of the place where the property is located or the judge to whom he or she delegates (Article R. 145-23 of the French Commercial Code). The judge rules under a special procedure, with representation by a lawyer being mandatory. Questions relating to the principle of renewal or to the eviction indemnity, by contrast, come before the judicial court sitting as a panel.

Is the preliminary statement of case mandatory before referring the matter to the judge?

Yes, and its omission renders the claim inadmissible. Article R. 145-27 of the French Commercial Code requires that referral to the judge be preceded by notification of a statement of case setting out the points of disagreement and the amount claimed. The claimant may refer the matter to the court registry only after a period of one month following that notification, unless the opposing party files a statement in reply.

How can the landlord obtain the lifting of the rent cap?

The landlord must show one of the grounds for exceeding the cap provided for by Article L. 145-34 of the French Commercial Code. The most frequent is a notable change, during the expired lease, in the characteristics of the premises, the intended use, the obligations of the parties or local commercial factors. The cap is also lifted where the actual duration of the lease, through tacit extension, exceeds twelve years. The change must be notable and have had a real effect on the rental value.

What are the criteria for fixing the rental value?

Article L. 145-33 of the French Commercial Code sets out five cumulative criteria: the characteristics of the premises, the intended use of the premises, the respective obligations of the parties, local commercial factors and the prices commonly charged in the neighbourhood. These criteria are specified by Articles R. 145-3 to R. 145-7. Practice converts the actual surface area into a weighted surface area in order to compare premises with one another.

Is the judge bound by the expert report?

No. The commercial rent judge retains sovereign power to assess the rental value and is not required to follow the expert's conclusions. In practice, however, the report weighs heavily on the decision, which makes filing written submissions during the appraisal work decisive in having any questionable weighting or comparable corrected.

What rent does the tenant pay during the proceedings?

The tenant remains bound to pay an interim rent during the proceedings, in principle that of the expired lease, unless a different amount is claimed in the statement of case (Article L. 145-57 of the French Commercial Code). Once the final rent has been fixed, a retroactive true-up takes place, together with interest at the statutory rate. The length of the procedure therefore does not cost the landlord the benefit of the increase.

Within what period is an action to fix the rent time-barred?

Actions arising from a commercial lease, including the fixing of the price, are time-barred after two years (Article L. 145-60 of the French Commercial Code). A landlord that presented its claim after that period would run into limitation, whatever the strength of its case on the merits. Keeping a precise schedule of notices, renewal requests and the starting points of time limits is therefore indispensable.