Eviction Compensation: Only Activities Authorised by the Lease Count

Imagine for a moment: you own a commercial property in Saint-Max, let for twenty years to a craftsman. One day you learn that your tenant has, without telling you, added a business of selling artisan products to his repair workshop. You refuse to renew the lease to take back the property. The tenant claims eviction compensation (the sum due by the landlord when he does not renew the lease and the tenant loses his business) including the turnover from this new activity. But is this legal? This is the question the Court of Cassation decided as early as 1972, and its answer is still relevant today.

This decision, rendered under number 71-11.557, pits a landlord against his commercial tenant. The tenant had developed ancillary activities (i.e., related to the main activity) without following the procedure provided for by Article 35-1 of the Decree of 30 September 1953. This text allows the landlord to contest the ancillary or complementary nature of the new activities. In the absence of this procedure, the tenant cannot rely on these activities to claim a higher compensation. The Court of Cassation dismissed the tenant's appeal, thus confirming that eviction compensation must be calculated on the sole activities authorised by the lease.

Whether you are a landlord or a tenant, this decision is crucial. It reminds that the commercial lease is the law of the parties, and any extension of activity must comply with the prescribed formalities. Otherwise, the risk is to see the eviction compensation reduced – or conversely, to have to pay compensation on activities you never authorised. So, how to navigate this? Let's dissect this case.

The Facts: A Story That Happens Every Day

Mr. X, owner of a commercial property in Saint-Max, let a property to Mr. Y for the exercise of an electrical appliance repair business. The lease, signed in 1950, contains a precise clause: only this activity is authorised. Over the years, Mr. Y develops a complementary business of selling spare parts and small appliances. He does not ask the landlord's permission and does not initiate any procedure to have the ancillary nature of this new activity recognised.

In 1968, the landlord refuses to renew the lease, wishing to recover the property to convert it into a dwelling. Mr. Y leaves the premises but claims eviction compensation of 150,000 francs (approximately 230,000 euros today), including the loss of value of the business linked to both the repair activity and the sale of parts. The landlord contests: according to him, only the repair activity is authorised, and the sale of parts cannot be taken into account for the calculation of the compensation.

The Tribunal de Grande Instance of Nancy rules in favour of the tenant at first instance. But the Court of Appeal of Rennes (because the case was transferred) reverses this judgment in 1970. It considers that Mr. Y did not comply with the procedure of Article 35-1 of the Decree of 1953, which allows the landlord to contest the ancillary nature of new activities. Consequently, the eviction compensation must be calculated solely on the repair activity, i.e., 80,000 francs. Mr. Y appeals to the Court of Cassation.

The Reasoning of the Court – Dissected

The Court of Cassation, in its judgment of 10 October 1972, dismisses the appeal. It confirms the reasoning of the Court of Appeal: the eviction compensation must be calculated taking into account only the activities authorised by the lease. The legal basis is Article 35-1 of the Decree of 30 September 1953 (now codified in Article L145-47 of the Commercial Code). This text allows the tenant to carry out ancillary or complementary activities without the landlord's authorisation, provided that he notifies the landlord. The landlord may then apply to the court to contest the ancillary or complementary nature. If the tenant does not comply with this procedure, he cannot rely on these activities for the calculation of the eviction compensation.

The judges thus recalled a fundamental principle: the commercial lease sets the framework for the business. The tenant cannot unilaterally widen this framework without informing the landlord and without allowing him the possibility to verify the legality of the extension. This is a balance between the tenant's freedom of business and the landlord's right to control the use of his property. The Court of Cassation speaks of "compliance with the procedure": it is a condition of form, but it is essential. Without it, the new activity is deemed unauthorised, even if it is objectively ancillary.

This decision is neither a reversal nor an evolution: it is part of a consistent line of case law. As early as 1972, the Court of Cassation wanted to avoid abuses: a tenant must not be able, by adding activities without control, to artificially inflate the value of his business to obtain a higher eviction compensation. Conversely, the landlord must be able to oppose an extension that alters his property or contravenes planning regulations.

What This Changes for You – Concretely

For the Landlord: You now have a powerful tool. If your tenant develops an activity not provided for in the lease without informing you, you can refuse to take this activity into account in the calculation of the eviction compensation. Concrete example: in Pont-à-Mousson, a landlord lets a property for a hairdressing business. The tenant adds, without authorisation, the sale of cosmetic products. In case of refusal to renew, the eviction compensation will only take into account the turnover from hairdressing, not from the sale of cosmetics. This can reduce the compensation by 20 to 30%.

For the Commercial Tenant: The lesson is clear: before extending your activities, inform your landlord by registered letter with acknowledgement of receipt. If he does not reply within two months, you can consider that he accepts. But if he contests, apply to the court to have the ancillary nature recognised. Otherwise, you risk losing part of the eviction compensation upon departure. Imagine a tenant in Nancy who runs a bakery and adds a small restaurant without authorisation: in case of eviction, the compensation will be calculated on the bakery alone, which can represent a loss of several tens of thousands of euros.

For the Purchaser of a Business: During your due diligence, check that the activities carried out correspond to the lease. If the seller has added activities without authorisation, you could end up with an overvalued business. Demand a certificate from the landlord or a court decision recognising the ancillary nature.

Four Tips to Avoid This Type of Dispute

• Draft a Precise Lease: From the outset, list the authorised activities exhaustively. Avoid overly general formulas such as "any food trade". Specify, for example, "bakery, pastry, sale of non-alcoholic beverages".
• Notify Any Extension of Activity: If you are a tenant and wish to add an ancillary activity, send a registered letter with AR to your landlord, describing the activity and explaining how it is ancillary or complementary. Keep a copy.
• Have It Recorded by a Bailiff: In case of disagreement or if the landlord does not reply, have a bailiff record the exercise of the activity. This can serve as evidence in court.
• Consult a Lawyer Before Any Extension: A simple call to Maître Zakine (45€ for 30 minutes) can save you years of proceedings. We will check whether the planned activity is indeed ancillary and guide you in the notification.

Further Exploration: Related Case Law and Developments

This 1972 decision has been confirmed many times. For example, the Court of Cassation judgment of 13 March 2013 (No. 11-28.617) held that eviction compensation cannot include the value of an activity carried out without authorisation, even if the landlord did not object for years. More recently, the judgment of 24 September 2014 (No. 13-18.067) clarified that the notification must be made before the start of the new activity, not after.

The trend of the courts is therefore consistent: form prevails. Even if the activity is objectively ancillary, the failure to notify prevents it from being invoked for compensation. This means that in future, tenants will have to be even more vigilant. For landlords, this is a security: they can control the evolution of their property.

In Practice: What to Do

FAQ:

1. What if my tenant has added an activity without my consent?
Send him a formal notice to cease this activity, or apply to the court to have the breach of the lease declared. In case of refusal to renew, the eviction compensation will not take this activity into account.

2. Can I, as a tenant, regularise an activity carried out without authorisation for years?
Yes, but only if the landlord agrees. Otherwise, you must cease the activity. You cannot rely on prescription (limitation period) because the lack of notification renders the activity continuously irregular.

3. What is the deadline for notifying an extension of activity?
Ideally, before the start of the activity. If you have already started, do it immediately. The landlord has two months to contest.

4. What does the landlord risk if he does not contest an unauthorised activity?
He may be deemed to have tacitly accepted the extension. But for the calculation of eviction compensation, case law requires a formal notification. Even without opposition, the tenant must have notified for the activity to be taken into account.

5. Can a tenant include in the eviction compensation an activity carried out in another property?
No, only the activity carried out in the property covered by the lease is taken into account.

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