Eviction Compensation: The Limitation Period Only Begins After Recognition of the Right

Imagine: you are the owner of a commercial premises in Montauban, Place Nationale. You give notice to your tenant to take back the premises. The tenant contests it, and proceedings ensue that last for years. Eventually, the judge recognises his right to eviction compensation (the sum owed by the landlord to compensate for the loss of the business). But you also have to pay occupation compensation (the increased rent that the tenant owes you as long as he remains in the premises after the notice). From when does the limitation period to claim this occupation compensation begin?

The Court of Cassation answers this question in a judgment of 23 March 2011 (No. 10-13.898). It states that the limitation period for the action for payment of occupation compensation cannot begin to run before the day on which the tenant's right to eviction compensation is definitively recognised. In other words, as long as the landlord contests this right, the tenant is not required to claim occupation compensation on pain of forfeiture.

What few people know is that this rule protects the tenant against too rapid a limitation period, but it can also trap the landlord who neglects to have the right to eviction compensation recognised. Let us decipher this decision, its facts, its reasoning and its practical consequences.

The facts: a story like any other

Mr Dupont, owner of a commercial premises in Beaumont-de-Lomagne, gives notice to his tenant, the company Actua Immobilier, to sell the property. The tenant contests the notice and sues the landlord to have his right to eviction compensation recognised and to obtain payment. The proceedings follow their course: on 10 October 2002, the landlord files submissions by which he accepts the principle of eviction compensation. The tenant, for his part, then claims payment of occupation compensation for the period after the notice.

The Tribunal de Grande Instance of Montauban, and then the Court of Appeal of Toulouse, are seised. The central question: did the limitation period (at that time 5 years) to claim occupation compensation begin to run from the notice, or only from the day on which the landlord recognised the right to eviction compensation?

The lower courts considered that the period ran from the notice, and that the claim for occupation compensation was therefore time-barred. But the tenant appealed to the Court of Cassation. The Court of Cassation quashed the appeal judgment: it considered that the period cannot run before the definitive recognition of the right to eviction compensation. In this case, the landlord recognised this right on 10 October 2002, and the claim for occupation compensation was made within 5 years, therefore admissible.

The reasoning of the court — deciphered

The Court of Cassation relies on Article L. 145-28 of the Commercial Code (the text governing the eviction compensation of the commercial tenant) and Article 2224 of the Civil Code (which sets the limitation period at 5 years for personal or movable matters). It recalls that occupation compensation is the counterpart of the occupation of the premises after the notice, and is due as long as the tenant has not received his eviction compensation. But the starting point of the limitation period to claim this occupation compensation is not the date of the notice, because at that moment, the right to eviction compensation is not yet certain.

In short, the tenant cannot sue for payment of occupation compensation as long as he is not assured of obtaining eviction compensation. However, as long as the landlord contests this right, the tenant is uncertain. It is only when the right to eviction compensation is definitively recognised (by a final judgment, or by an agreement of the parties) that the tenant can claim occupation compensation. It is at that date that the limitation period begins.

Note however: the recognition of the right to eviction compensation may result from a simple acceptance by the landlord in his submissions, as in this case. But this recognition must be clear and unequivocal. undefined, I have come across files where the landlord accepted the principle but contested the amount, which is sufficient to start the limitation period.

This judgment confirms previous case law (Civ. 3e, 18 May 2005, No. 04-10.233) and extends it. It is a protective solution for the tenant, but imposes vigilance on the landlord: if he recognises the right to eviction compensation too early, he triggers the limitation period for occupation compensation to his detriment.

What this changes for you — practically

For the commercial tenant: You can claim occupation compensation for the entire period after the notice, even if several years have passed, as long as the right to eviction compensation has not been recognised. Example: in Beaumont-de-Lomagne, a tenant received notice in 2015, the landlord contested the right to compensation until 2020 (date of a judgment). He can claim occupation compensation from 2015 to 2020, without risk of limitation, provided he acts within 5 years of the definitive recognition.

For the landlord: Beware! If you recognise the right to eviction compensation in your submissions, you open a 5-year window for the tenant to claim occupation compensation. It is better to contest the principle to the end if you believe the tenant is not entitled to it. Otherwise, you risk having to pay occupation compensation for a long period.

For the purchaser of a premises: If you buy a premises with a sitting tenant, check whether a notice has been given and whether the right to eviction compensation has been recognised. You could inherit the obligation to pay occupation compensation.

For the co-owner: If the premises are in co-ownership, the syndic must be informed of any proceedings, as occupation compensation may affect charges.

Four tips to avoid this type of dispute

• Have your notice drafted by a solicitor specialising in commercial leases in Montauban or elsewhere. A poorly drafted notice can be contested and delay the recognition of the right to eviction compensation.
• Negotiate an amicable agreement on the principle of eviction compensation as soon as possible. This sets a clear starting point for the limitation period of occupation compensation.
• If you are a tenant, do not delay in acting: once the right to compensation is recognised, you have 5 years to claim occupation compensation. Do not let this period pass.
• Keep all documents: notice, submissions, judgments. Proof of the date of recognition of the right to compensation is crucial.

Further reading: related case law and developments

The Court of Cassation had already held, in a judgment of 18 May 2005 (No. 04-10.233), that the limitation period for the action for payment of occupation compensation runs from the final decision recognising the right to eviction compensation. The 2011 judgment confirms and clarifies this solution. Since then, the trend of the courts has been consistent: the starting point is the date of definitive recognition, whether judicial or contractual.

What the future may bring: with the reform of limitation periods (Law of 17 June 2008), the period was reduced from 30 to 5 years. It is therefore essential to act quickly. The case law is now well established, but each case is particular. If the landlord contests the right to compensation up to appeal, the period only begins after the final judgment.

In practice: what to do

Checklist for the tenant wishing to claim occupation compensation:

1. Check whether the notice has been given and whether the right to eviction compensation has been recognised (by judgment or agreement).
2. Note the date of this recognition: it is the starting point of the 5-year period.
3. Calculate the amount of occupation compensation due (usually equal to the rent, sometimes increased).
4. Send a formal notice to the landlord, then sue him if necessary.
5. Consult a lawyer solicitor to avoid any procedural errors.

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