Commercial lease: the offer of eviction compensation and the notice to quit form an indivisible whole

Imagine: you are the owner of commercial premises in Thionville, rue de la République. Your tenant, a florist who has been established for fifteen years, receives a notice to quit with a refusal of renewal. The lessor includes an offer of eviction compensation. So far, nothing unusual. But two years later, the tenant still has not left the premises, and the owner takes the matter to court to have the validity of the notice to quit declared. The tenant, for his part, finally requests his compensation. The problem? The limitation period (the maximum time to take legal action) may have expired. This is precisely the situation that the Cour de cassation decided in 1982.

The central question: can the offer of eviction compensation included in the notice to quit be dissociated from the refusal of renewal? In other words, if the lessor offers compensation but the tenant does not accept it, can the notice to quit be considered valid without the compensation? The answer of the Cour de cassation is clear: no, the two form an indivisible whole. This decision, handed down over forty years ago, remains an absolute reference in commercial lease law.

Concretely, this precedent protects the tenant by preventing the lessor from withdrawing the compensation offer afterwards. But it also has practical implications on limitation periods, as we shall see. Whether you are an owner in Maizières-lès-Metz or a tenant in Nancy, this decision directly concerns you.

The facts: a story that happens every day

Mr X, owner of commercial premises in Thionville, gives notice to his tenant, a retail trader, refusing renewal of the lease. In the notice, he includes an offer of eviction compensation (the sum due to the tenant to compensate for losing his business). The tenant remains in the premises without accepting or refusing the compensation. Less than two years after the effective date of the notice, the owner sues the tenant in court to have the validity of the notice declared and to obtain his departure. The tenant, for his part, requests payment of the eviction compensation during the proceedings.

The lessor contests: according to him, the claim for compensation is late because the limitation period (the time to act) is two years from the notice. He argues that the offer of compensation in the notice is not an acknowledgment of debt, and that the tenant should have claimed his compensation earlier. The tenant responds that the offer of compensation is an integral part of the notice and that the owner's lawsuit interrupted the limitation period.

The court of appeal rules in favour of the tenant: it holds that the refusal of renewal and the offer of compensation form a whole, and that the lessor's lawsuit interrupted the limitation period. The owner appeals to the Cour de cassation.

The reasoning of the court — dissected

The Cour de cassation dismisses the lessor's appeal. It confirms that the refusal to renew the commercial lease and the offer of eviction compensation constitute an indivisible whole. In other words, the lessor cannot refuse to renew the lease without offering compensation (except in cases such as the tenant's serious fault). And this offer cannot be unilaterally withdrawn.

The legal basis? Article L. 145-58 of the Commercial Code (formerly article 10 of the decree of 30 September 1953) provides that the lessor who refuses renewal must pay eviction compensation, unless he justifies a serious and legitimate ground. The Court deduces that the offer of compensation is a condition of validity of the notice to quit. Without a valid offer, the notice is void.

But what is innovative here is the reasoning on the limitation period. The lessor argued that the tenant's claim for compensation, made during the proceedings, was time-barred because more than two years had elapsed since the notice. The Court responds that the lawsuit filed by the lessor less than two years after the notice interrupted the limitation period. Why? Because this lawsuit aimed to have the validity of the notice declared, and the notice includes the offer of compensation. Therefore, by acting on the notice, the lessor also acted on the compensation. The limitation period was interrupted for the whole.

In short, the lessor cannot play both sides: he cannot both refuse renewal (with an offer of compensation) and then let things drag on so that the tenant loses his right to compensation. However, note: this solution assumes that the lawsuit is filed before the expiry of the two-year limitation period. After that period, the offer of compensation may lapse.

What this changes for you — concretely

For lessor owners, this decision is a warning: if you refuse renewal of the lease, you must imperatively offer eviction compensation in the notice, and you cannot go back on it. Moreover, if you sue the tenant to validate the notice, you interrupt the limitation period for the compensation. This means that the tenant can claim it even after two years, as long as the proceedings are ongoing. Concrete example: in Maizières-lès-Metz, an owner gives notice on 1 January 2023 with an offer of compensation. The tenant stays. The owner sues on 15 December 2024. The tenant can claim compensation until the end of the trial, even if the two-year limitation period has passed.

For tenants, this is essential protection. You do not have to accept or refuse the compensation immediately. The mere fact that the lessor sues you (or you sue him) within two years is enough to preserve your rights. What few people know is that if the lessor does not sue you, you must act yourself within two years to claim the compensation, otherwise you risk losing it.

For purchasers of commercial premises, check carefully whether a notice to quit has been given and whether compensation has been offered. A transaction may be compromised if the compensation has not been paid.

Four tips to avoid this type of dispute

• Tip 1: Draft the notice to quit carefully. The offer of compensation must be clear and quantified (even provisionally). Do not leave any ambiguity. A notice without an offer of compensation or with an insufficient offer can be challenged.
• Tip 2: Respect the limitation periods. If you are a lessor and you want to contest the tenant's right to compensation, act within two years of the notice. If you are a tenant, claim your compensation within two years, or ensure that the lessor sues you before then.
• Tip 3: For the tenant, do not leave the premises without having obtained payment of the compensation. You can remain in the premises until payment. If the lessor does not pay, you can obtain a penalty payment (astreinte).
• Tip 4: In case of dispute, do not neglect the amicable phase. Mediation can help set the amount of compensation without a trial. But be careful: the limitation period continues to run. Have any agreement recorded in writing.

Further reading: related case law and developments

This 1982 decision is part of a consistent line of the Cour de cassation. It has been confirmed several times, notably in a judgment of 11 January 1984 (n° 82-15.874) where the Court specified that the offer of compensation must be real and serious, i.e., correspond to a plausible estimate of the loss. Since then, case law has also specified that eviction compensation includes the value of the business, moving and relocation costs, and even possible moral damage.

A notable development: the Pinel law of 2014 strengthened the tenant's rights in case of refusal of renewal, by requiring the lessor to give reasons for his refusal and increasing the cases where compensation is due. But the principle of indivisibility remains unchanged.

As a trend, the courts are protective of the commercial tenant, considered the weaker party. undefined, I have encountered cases where lessors tried to circumvent the obligation of compensation by giving a notice without an offer, hoping that the tenant would leave without claiming. The courts have always rejected them.

Frequently asked questions

Can the lessor refuse renewal without offering compensation? Yes, but only in case of serious fault by the tenant (e.g., lack of maintenance, prohibited subletting). Otherwise, the offer of compensation is mandatory.

What is the time limit to claim eviction compensation? The tenant has two years from the notice to take legal action. But if the lessor sues before that time, the limitation period is interrupted.

What to do if the lessor does not pay the compensation? The tenant can remain in the premises until payment. He can also apply to the court for a penalty payment.

Can I assign my lease after a notice with refusal of renewal? No, because the lease ends on the effective date of the notice. However, you can assign your right to eviction compensation.

Is eviction compensation taxable? Yes, in principle, it is subject to income tax (in the category of industrial and commercial profits). Allowances exist for small businesses.