Eviction Compensation: Starting Point of Limitation Period Set by the Court of Cassation

Imagine: you are the owner of commercial premises in Pont-à-Mousson, and you give notice to your tenant, offering eviction compensation (the amount due to compensate them for losing their business). The tenant remains on the premises without paying occupation compensation (compensation for use of the premises after the lease ends). Years pass, and you suddenly claim arrears. But until when can you do so? This is the very question raised by this decision of the Court of Cassation of 10 December 1997.

In clear terms, the judges ruled: the starting point of the limitation period (the time after which legal action can no longer be brought) for an action for payment of occupation compensation is fixed at the effective date of the notice to quit, where the landlord has offered eviction compensation and has never disputed the tenant's right to benefit from it. In other words, if you acknowledge that your tenant is entitled to eviction compensation, you cannot wait years to claim occupation compensation. This decision, though technical, has immense practical consequences for commercial landlords and tenants.

But what exactly does it change for you, whether you are in Toul or elsewhere? Let us delve into the details.

The facts: a story like many others

Mr X, owner of commercial premises in Pont-à-Mousson, gives notice to his tenant, Mr Y, offering eviction compensation (the statutory compensation due to the evicted tenant for the loss of their business). The notice takes effect on a certain date, but Mr Y remains on the premises without paying occupation compensation (the amount due for use of the premises after the lease ends). For several years, Mr X claims nothing. Then, suddenly, he sues Mr Y for payment of occupation compensation for the entire period. Mr Y raises the limitation defence: according to him, the action is late because the period started running from the notice.

The tribunal, and then the court of appeal, rule in favour of Mr Y: they fix the starting point of the limitation period at the effective date of the notice, considering that Mr X, by offering eviction compensation, acknowledged Mr Y's right to such compensation and cannot now go back on it. Mr X appeals to the Court of Cassation, arguing that the offer of eviction compensation in the notice is only provisional (it can be revised) and that the limitation period cannot run until the right to compensation is definitively established.

The Court of Cassation dismisses his appeal. It holds that the court of appeal justified its decision by noting that Mr X had offered eviction compensation and had never subsequently disputed the tenant's right to benefit from it. Consequently, the starting point of the limitation period for the action for payment of occupation compensation is indeed the effective date of the notice. What few people know is that this decision rests on a simple logic: if the landlord acknowledges the right to eviction compensation, he cannot drag things out to claim occupation compensation several years later.

The reasoning of the court — explained

To understand, we must return to the legal framework. Articles 20 and 33 of the Decree of 30 September 1953 (now codified in the Commercial Code, notably Article L.145-28) govern the commercial tenant's right to eviction compensation. When the landlord gives notice without serious grounds, the tenant is entitled to eviction compensation, subject to exceptions. The landlord may offer this compensation in the notice, but such offer is provisional: it can be revised by the court.

In this case, the Court of Cassation (the highest French court) upheld the reasoning of the Nancy Court of Appeal. The trial judges had noted that Mr X (the landlord) had offered eviction compensation in the notice and had at no time subsequently disputed the tenant's right to such compensation. Consequently, the starting point of the limitation period for the action for payment of occupation compensation (which is due from the end of the lease) had to be fixed at the effective date of the notice.

This reasoning relies on Article 1240 of the Civil Code (extra-contractual liability) for occupation compensation, but also on the principle of estoppel (one cannot contradict oneself to the detriment of another) implicit in French law. In clear terms, if you acknowledge that your tenant is entitled to eviction compensation, you cannot wait years to claim occupation compensation without the limitation period running.

However, note: this decision does not mean that the limitation period systematically runs from the notice. It clarifies that this is the case when the landlord has offered eviction compensation and has not disputed the tenant's right. If the landlord disputes this right (for example, by refusing compensation), the starting point might be different. undefined, I have encountered cases where limitation was a real headache because the parties did not know when the period had started.

What this means for you — practically

For landlord owners: if you give notice to your commercial tenant offering eviction compensation, you must be vigilant. From the effective date of the notice, the limitation period for claiming occupation compensation begins to run. Generally, this period is 5 years (ordinary limitation period, Article 2224 of the Civil Code). If you wait too long, you risk losing your right to claim sometimes considerable sums. For example, in Toul, a 100 m² commercial premises can generate occupation compensation of €1,500 per month. Waiting 6 years potentially means €90,000 lost.

For tenants: if your landlord has offered you eviction compensation and you remain on the premises, know that the landlord cannot claim occupation compensation beyond 5 years after the effective date of the notice. This is an important protection. However, if the landlord disputes your right to compensation, the limitation period may be suspended or postponed. In this case, you should consult a lawyer promptly.

For buyers of commercial premises: if you buy a property with a sitting tenant, check whether notice has been given and whether eviction compensation has been offered. Limitation periods can affect the value of the property. A concrete example: in Pont-à-Mousson, a property with a limitation dispute may lose 20% of its value.

If you are in this situation, you must act quickly. Do not let years pass without claiming what is owed to you, or without asserting your rights. A simple registered letter can interrupt the limitation period (Article 2244 of the Civil Code). But be careful: a simple letter is not always enough; it requires legal action or a bailiff's act.

Four tips to avoid this type of dispute

• Tip 1: Act from the notice. As soon as you give notice to your tenant, clearly set the effective date and, if you offer eviction compensation, state that it is provisional. But above all, do not wait to claim occupation compensation. Send a formal notice by registered letter within weeks of the tenant's departure.
• Tip 2: Record the absence of dispute. If you acknowledge the tenant's right to eviction compensation, formalise it in writing. This will avoid any ambiguity as to the starting point of the limitation period. Conversely, if you dispute that right, make it known immediately.
• Tip 3: Monitor limitation periods. Note the effective date of the notice in your calendar and schedule legal action before the expiry of the 5-year period (or 2 years for certain leases). A simple oversight can be costly.
• Tip 4: Consult a lawyer lawyer. Each case is unique. A lawyer will help you determine the exact starting point of the limitation period and the actions to take. In Nancy, for example, local case law must be known.

Further reading: related case law and developments

This 1997 decision is part of a consistent line of Court of Cassation decisions. We can cite the judgment of 3 April 1996 (No. 94-16.782) which had already fixed the starting point of the limitation period for occupation compensation at the date of the summons to determine eviction compensation, where the landlord disputes the right to compensation. The 1997 decision goes further in the absence of dispute.

More recently, the Court of Cassation has clarified that the limitation period for occupation compensation runs from each due date (for periodic payments) or from the event giving rise to the claim (for the global compensation). See for example the judgment of 15 September 2010 (No. 09-12.007). The trend is therefore towards protecting the tenant against late claims by the landlord.

For the future, case law may evolve towards a shorter limitation period (2 years) for occupation compensation, as is already the case for rent. But for now, the 5-year period remains the rule.

Key points to remember

• When does the limitation period run? From the effective date of the notice, if the landlord offered eviction compensation and did not dispute it.
• What is the time limit? 5 years (Article 2224 of the Civil Code) from that date.
• What if the landlord disputes? The limitation period may be postponed to the date of the court decision fixing the eviction compensation.
• How to interrupt the limitation period? By issuing a writ, a demand for payment, or an acknowledgment of debt.
• Why is this important? To avoid losing significant sums (for example, €60,000 in unpaid occupation compensation in Toul).

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