Renewed Commercial Lease: Which Reference Rent for Revision?

Picture the scene: in Aubagne, a shopkeeper has been renting a premises for twenty years. His lease expires, he renews it with the same rent. Six months later, he notices that rents in the area have soared, and his rent has become much lower than the market rental value. He wants to request a revision. But which rent should be taken as a reference? The one he was paying before the renewal, or the one set at renewal? The question is crucial, because if it is the old rent, the increase required to trigger the revision action may be easier to achieve. The Court of Cassation ruled in a decision of 15 December 2016: it is the rent of the renewed lease that serves as a reference. A decision that changes the game for thousands of leases.

This decision answers a question that every owner or tenant of commercial premises asks themselves one day: when can I request a revision of my rent after a renewal? Article L. 145-39 of the Commercial Code allows this revision if the rent has varied by more than one quarter compared to the market rental value. But case law had left a doubt about the starting point. Now it is clear: the reference rent is that of the new lease, even if it is identical to the old one.

In this article, we will break down this decision, see what it changes for you, and give you practical tips to avoid pitfalls. Whether you are a landlord or a tenant in Salon-de-Provence, Aubagne or elsewhere, these rules concern you.

The Facts: A Story Like Any Other

Mr. X, owner of commercial premises in Aubagne, had leased his premises to the company Latin Franchise. The lease, for a term of 9 years, was expiring. In accordance with the law, a new lease was concluded by renewal. The rent for the new lease was set at the same amount as that of the expired lease, which had undergone several successive increases (indexation, works, etc.).

A few months later, the company Latin Franchise considers that the current rent is more than a quarter lower than the actual market rental value of the premises. It brings an action for revision on the basis of Article L. 145-39 of the Commercial Code, which allows the tenant to request a revision of the rent when, due to economic variations, the current rent has become manifestly lower or higher than the market rental value.

The Tribunal de grande instance of Marseille, then the Cour d'appel of Aix-en-Provence, are seised. The owner contests the admissibility of the action: according to him, the reference rent for assessing the one-quarter variation should be the rent of the expired lease, because the new lease merely continued the same rent. However, the Cour d'appel rules in favour of the tenant: it retains as the reference rent the rent of the renewed lease, i.e. the new rent, even if it is equal to the old one. The owner appeals to the Court of Cassation.

The Court of Cassation dismisses the appeal and upholds the appellate decision. It states that "after the renewal of a commercial lease, the rent allowing the assessment of the existence of a one-quarter variation opening the action for revision under Article L. 145-39 of the Commercial Code is the rent as fixed at the renewal which created a new lease". In other words, it does not matter whether the rent is identical to the old one: it is the new rent that counts.

The Reasoning of the Court — Explained

The legal question was: which rent should be taken into account to determine whether the one-quarter variation is reached? Article L. 145-39 of the Commercial Code provides that "the rents of renewed leases may be revised at the request of either party, provided that the initial rent or the revised rent has varied by more than one quarter compared to the market rental value". The text refers to "initial rent" and "revised rent". But in the case of a renewal, is it the rent of the renewed lease (the "new rent", even if equal to the old one) or that of the expired lease?

The Court of Cassation opted for a literal and logical interpretation. The renewal creates a new lease, legally distinct from the previous one. The rent fixed on that occasion is the initial rent of this new lease. It is therefore this rent that serves as a reference for assessing the one-quarter variation. It does not matter that its amount is identical to that of the old lease. What few people know is that this solution was already outlined in earlier decisions, but it is here affirmed with force.

The judges dismissed the owner's argument that the rent of the expired lease, subject to successive increases, was the "new rent". The Court recalls that the only rent to be taken into consideration is that of the renewed lease, because it constitutes the starting point of the new contract. In short, one cannot refer to a rent that is no longer in force.

This decision is a confirmation of the constant case law of the Court of Cassation. It is not a reversal, but it clarifies a point that could have been confusing, especially when the parties simply continue the previous rent. Now, landlords and tenants know that the counter is reset at each renewal.

What This Changes for You — Practically

For the landlord, this decision means that you cannot rely on previous rents to justify an increase or decrease. If you granted a low rent at renewal, you will be judged on that rent. Concrete example: in Aubagne, commercial premises were rented for €1,000/month under the old lease. At renewal, the landlord accepts €1,200 (moderate increase). Six months later, the market rises, the market rental value reaches €1,800. The tenant can request a revision if the difference exceeds 25%. Here, (1,800 - 1,200) / 1,200 = 50%: the action is open. But if the landlord had set the rent at €1,500, the difference is only 20%: no revision possible. The choice of the renewal rent is therefore strategic.

For the tenant, this decision is rather favourable: it makes it easier to trigger a revision action if the renewal rent is low. But beware: if the renewal rent is high, the 25% threshold will be harder to reach. undefined, I have come across cases where tenants accepted a high rent at renewal, thinking they could challenge it later. However, they face this threshold.

For the purchaser of commercial premises, caution is needed when taking over a lease. Check the date of the last renewal and the rent then fixed. If you buy a property with a recently renewed lease at a low rent, be aware that the tenant may request an upward revision if the market has risen. Conversely, a high rent may protect the landlord.

Finally, for co-owners of commercial premises, this decision also applies. If a co-ownership grants a commercial lease for a common area, the reference rent is that of the last renewal. Therefore, care must be taken during negotiations.

Four Tips to Avoid This Type of Dispute

• Negotiate the renewal rent with full knowledge of the facts. Before signing, have the market rental value estimated by an expert. A rent that is too low or too high may expose you to a revision action or loss of income.
• Keep all documents. The renewed lease, amendments, indexations. In case of dispute, you will need to prove the amount of the rent at the date of renewal.
• Anticipate market variations. If you are a landlord and the market is rising, set a rent close to the market rental value to avoid a revision request from the tenant. If you are a tenant, negotiate a low rent if you anticipate a market rise.
• Consult a lawyer lawyer before any revision action. The limitation period is 5 years from renewal, but it is preferable to act quickly. A lawyer will check whether the 25% threshold is reached and whether the action is admissible.

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Further: Related Case Law and Developments

This decision is part of a line of decisions of the Court of Cassation. For example, in a decision of 9 July 2008 (No. 07-16.094), the Court had already held that the reference rent for the revision action is that of the renewed lease. The 2016 decision only confirms this position.

On the other hand, another question remains pending: what happens if the renewed lease did not set a rent (for example, in case of tacit renewal)? Previous case law considers that the rent remains that of the initial lease, but the question is not fully settled. The commercial courts of Marseille and Aix-en-Provence have dealt with similar cases, and the trend is to consider that the original rent continues to apply.

For the future, we can expect the Court of Cassation to further clarify the methods of calculating the one-quarter variation, particularly in case of works or change of use. Stay informed.

In Practice: What to Do

If you are considering a revision action, here is a checklist:

1. Check the date of the last renewal of the lease.
2. Identify the exact rent fixed at that date (amount excluding charges and taxes).
3. Have the current market rental value estimated by a property expert.
4. Calculate the difference: (market rental value - reference rent) / reference rent × 100. If this difference exceeds 25%, the action is possible.
5. Consult a lawyer to initiate the procedure within 5 years of renewal.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →