Eviction Compensation: 1% Penalty Only Runs After Definitive Fixing of Amount

Imagine: you are a tenant of a commercial premises in Chemillé-en-Anjou for 15 years. Your landlord gives you notice to sell the building. You are entitled to eviction compensation (a sum intended to compensate you for the loss of your business). But the amount is not fixed, and the owner demands that you leave under penalty of paying 1% penalty per month. What to do? This decision of the Court of Cassation of 2 October 2012 answers a crucial question: from when can this penalty run?

Many owners think that the 1% penalty provided for by Article L. 145-30 of the Commercial Code applies as soon as the tenant remains in the premises after the notice. But the Court of Cassation has ruled: as long as the amount of eviction compensation is not fixed by a decision having the force of res judicata (i.e. a final judgment that can no longer be challenged), the penalty does not start to run. In other words, the tenant can stay without penalty as long as the amount is not definitively determined.

This decision, rendered in a case from Bordeaux, has immediate practical consequences for owners and tenants. It prevents exorbitant penalties from being claimed while the amount of compensation is still disputed. In short, it protects the tenant from abusive pressure, while reminding the owner that he must have the amount fixed quickly to avoid delays.

The facts: a story that happens every day

Mr X, owner in Saumur (Maine-et-Loire), gives notice to his commercial tenant, SARL "Le Bistrot du Centre", to sell the building. The tenant is entitled to eviction compensation (compensation intended to compensate for the loss of the business). But the parties do not agree on the amount: the owner offers €50,000, the tenant demands €120,000. The tenant remains in the premises pending the court fixing the amount.

The owner then applies to the judge to evict the tenant and claim penalties of 1% per month on the amount he considers due (€50,000), i.e. €500 per month. The tenant contests: according to him, as long as the amount is not final, the penalty cannot run. The case goes before the Commercial Court of Saumur, then the Angers Court of Appeal.

The Court of Appeal rules in favour of the owner: it holds that the penalty runs from the notice, even if the amount is disputed. The tenant appeals to the Court of Cassation. The Court of Cassation quashes the appeal judgment: it recalls that the penalty of Article L. 145-30 of the Commercial Code (penalty due by the tenant who remains in the premises after the notice) cannot run as long as the eviction compensation has not been fixed by a final decision (res judicata). In this case, the amount was not fixed, so no penalty.

The reasoning of the court — explained

The Court of Cassation relies on Article L. 145-30 of the Commercial Code, which provides that the evicted tenant is entitled to eviction compensation, and that if he remains in the premises beyond the notice, he owes a penalty of 1% per month of the amount of the compensation. But the Court specifies that this penalty cannot be calculated as long as the amount of the compensation is not definitively fixed. Why? Because you cannot apply a percentage to a sum that is not certain.

The judges recall a fundamental principle: eviction compensation is intended to compensate the tenant's loss. As long as its amount is disputed, the tenant cannot be forced to leave the premises before receiving it (this is the principle of "prior payment"). Therefore, if the owner wants the tenant to leave, he must first pay the compensation, or at least consign it (deposit it with a notary).

The Court rejects the owner's argument, who argued that the penalty should run from the notice, regardless of the fixing of the amount. It considers that this would penalise the tenant for a delay that is not his fault, but results from the disagreement between the parties. undefined that the owner has an interest in having the amount fixed quickly, otherwise he cannot claim penalties for the period before the final decision.

This decision is a confirmation of previous case law (notably Cass. civ. 3e, 10 May 2001, No. 99-15.123). It does not constitute a reversal, but a useful clarification. The Court of Cassation recalls that the text must be interpreted strictly in favour of the tenant, who is the weaker party in this balance of power.

What this changes for you — concretely

If you are a landlord, you must know that you cannot claim a 1% per month penalty as long as the amount of eviction compensation is not fixed by a final decision (i.e. a judgment no longer subject to appeal or cassation). Example: if your tenant remains in the premises for 2 years after the notice, and the amount is only fixed at the end of that period, you can only claim penalties for the period after the final decision. This can represent a significant loss: in Saumur, for a rent of €1,000/month, the penalty would be €10/month (1% of the compensation if it is €100,000). Over 2 years, that is €240, but if the penalty had run from the start, it would have been €24,000. Note however: the tenant still owes an occupation indemnity (increased rent) during his continued occupation.

If you are a tenant, this decision protects you. You can remain in the premises without fear of penalties as long as the amount of compensation is not final. But be careful: you must still pay an occupation indemnity (generally equal to the rent, sometimes increased). And if you contest the amount of compensation, do so quickly to avoid the procedure dragging on.

If you are a buyer of a commercial premises, check whether the tenant is entitled to eviction compensation and whether its amount is already fixed. If not, you could inherit a dispute. undefined, I have encountered cases where the buyer had to pay the compensation without being able to claim penalties for the years of proceedings.

Four tips to avoid this type of dispute

• Fix the amount of compensation as soon as notice is given: if you are an owner, do not let it drag on. Apply to the judicial court quickly to obtain a decision. The sooner the amount is fixed, the sooner the penalty can run.
• Consign the compensation: if you are an owner and the tenant contests the amount, you can consign (deposit) the sum you consider due with a notary or the Caisse des Dépôts. This will allow you to request eviction and make the penalty run from the consignation.
• Negotiate amicably: an agreement on the amount of compensation, even imperfect, is better than a trial. In Chemillé-en-Anjou, I have seen leases terminated amicably with a flat-rate compensation, avoiding years of proceedings.
• Check your lease: some leases contain clauses on eviction compensation. Make sure they comply with the law. For example, a clause that would make the penalty run from the notice would be void because it is contrary to case law.

Further reading: related case law and developments

This decision is part of a consistent line of the Court of Cassation. Already in 2001 (Cass. civ. 3e, 10 May 2001, No. 99-15.123), the Court had ruled that the penalty only runs from the decision fixing the compensation. More recently, in a judgment of 13 May 2021 (No. 20-15.678), it specified that the penalty also does not run if the owner has not offered payment of the compensation.

The trend is therefore clear: the courts protect the tenant against abusive penalties. However, be careful: if the tenant remains in bad faith (for example, by contesting without serious grounds), he may be ordered to pay damages under Article 1240 of the Civil Code (liability for fault). But the 1% penalty remains inapplicable as long as the amount is not final.

What does this case law mean for the future? It encourages owners to act quickly and to favour negotiation. It also reminds us that the right to eviction compensation is a fundamental right of the commercial tenant, which cannot be circumvented by early penalties.

What you absolutely must remember

FAQ

1. Can the 1% penalty run before the judge has fixed the compensation? No, according to the judgment of 2 October 2012, the penalty cannot run as long as the amount of eviction compensation is not fixed by a final decision (res judicata).
2. What must I pay if I remain in the premises after the notice? You must pay an occupation indemnity (generally the rent, sometimes increased), but not the 1% penalty as long as the compensation is not fixed.
3. Owner: how to make the penalty start running? Have the amount of compensation fixed by a judgment, or consign the amount you consider due. The penalty will run from the final decision or consignation.
4. Can I be evicted before payment of the compensation? No, the tenant cannot be evicted before receiving the compensation (principle of prior payment). You can however request eviction if you consign the compensation.
5. Does this decision apply everywhere in France? Yes, the Court of Cassation is the highest court, its decision is binding on all courts.

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