Eviction Indemnity: 1% per Day Late, a Final Penalty

Imagine the scene: you are the owner of a commercial property in Vitrolles, leased for years to a florist. The lease comes to an end; you want to recover the premises to set up your own business. The eviction procedure (expulsion with indemnity) is initiated, and the indemnity is set at €50,000. You pay this sum into the hands of a sequester (a trusted third party, often a notary or bank, who holds the funds until the premises are vacated). The tenant does not move out. What happens? Each day of delay costs him 1% of the indemnity, i.e., €500 per day. After two months, the indemnity has shrunk by €30,000. But is this deduction final, or can the tenant recover it later?

This question is asked by hundreds of landlords and tenants each year. The answer lies in a decision of the French Supreme Court of 4 January 1977, which remains authoritative today. In short, a tenant who lingers in the premises after payment of the eviction indemnity suffers an automatic and final penalty (financial sanction) that reduces the amount of the indemnity accordingly. In other words, each day of delay irrevocably nibbles away at the sum due to him.

But beware: this rule is not always well understood. Many tenants believe they can offset the eviction indemnity against unpaid rent or occupation rent (sum due for occupation after the end of the lease). The French Supreme Court has ruled: no offset is possible. The 1% per day deduction applies regardless. For landlords, this is a powerful weapon. For tenants, a trap to avoid at all costs. Let us decipher this decision together.

The Facts: A Story That Happens Every Day

Let us go back to 1975. A company leasing a commercial property in La Ciotat, operating a hardware store, has its lease terminated by the landlord. The landlord wishes to take back the premises to resell them. In accordance with the status of commercial leases (law of 30 September 1953), the landlord must pay an eviction indemnity (financial compensation due to the evicted tenant, corresponding to the value of the business).

The amount of the indemnity is set by the court at 120,000 francs. The landlord, to be in order, pays this sum into the hands of a sequester (a notary). But the tenant does not vacate the premises. He continues to operate the hardware store, arguing that the indemnity is insufficient and that he is entitled to an occupation rent (sum due for occupation without right or title after the end of the lease) which he could offset against the eviction indemnity.

The landlord then applies to the court to enforce the 1% per day deduction provided for by Article 20 of the Decree of 30 September 1953. The tenant contests: according to him, the deduction cannot apply as long as the indemnity has not actually been paid, and he claims the right to offset the occupation rent he owes against the eviction indemnity he believes is due. The Court of Appeal (second instance court) partially agrees with him, but the French Supreme Court (highest court) quashes this judgment in 1977.

The French Supreme Court says: as soon as the landlord has duly paid the indemnity to a sequester, the tenant is obliged to vacate the premises immediately. If he does not, the 1% per day deduction runs automatically, with no possibility of offset. This deduction is final: it reduces the amount of the eviction indemnity, full stop.

The Court's Reasoning — Explained

To understand this decision, we must look at Article 20 of the Decree of 30 September 1953 (now codified in Article L. 145-58 of the French Commercial Code). This provision states that, when the landlord has offered to pay the eviction indemnity, the tenant must vacate the premises within two months. After this period, a deduction of 1% per day is applied to the amount of the indemnity. But what does "offered to pay" mean?

The French Supreme Court answers: payment into the hands of a sequester constitutes a valid offer of payment. It matters not that the tenant contests the amount of the indemnity or claims an occupation rent. The landlord has done what he had to do: he made the funds available. The tenant must leave. If he does not, the penalty applies.

The judgment also specifies that the 1% deduction is a final penalty, not an advance or a guarantee. It cannot be offset against another claim (such as occupation rent). In other words, the tenant cannot say: "I stay, but I do not pay the occupation rent because I deduct it from the eviction indemnity." No, he must pay the occupation rent in addition to suffering the deduction.

In this decision, the French Supreme Court confirms a strict interpretation of the law, already consistent since the 1950s. It is neither a reversal nor an innovation, but a rigorous application of the text. The judges remind us that the commercial lease is a protective status for the tenant, but this protection has limits: the tenant cannot abuse his right to remain in the premises by staying without paying the price.

In practice, this decision has considerable scope. It means that a tenant who delays leaving automatically and definitively loses part of his indemnity. For the landlord, it is an effective lever: he can force the tenant to vacate the premises quickly, on pain of seeing his indemnity melt away like snow in the sun.

What This Changes for You — Practically

If you are a landlord: you have every interest in paying the eviction indemnity into the hands of a sequester as soon as its amount is fixed, even if the tenant contests. From this payment, the countdown begins. Each day of delay by the tenant reduces the indemnity to be paid. Example: in La Ciotat, for an indemnity of €80,000, a delay of 30 days costs the tenant €24,000 (1% × 30 days × €80,000). You save that much. But beware: the sequester will only release the funds to you after the premises are vacated. So you must be patient.

If you are a commercial tenant: the temptation is great to stay in the premises to negotiate a better indemnity. But this strategy is dangerous. Each day of delay costs you 1% of the indemnity. After 100 days, you have lost everything. Not to mention that you also owe an occupation rent (often equal to the last rent, or more). undefined, I have seen cases where tenants lost their entire indemnity for having lingered three months. Do not play with fire: leave as soon as the indemnity is consigned.

If you are a buyer of the premises: you can require the seller to guarantee that the eviction indemnity has been paid to a sequester before the sale. Otherwise, you could inherit a tenant who stays indefinitely. Also check that the two-month period has expired before signing the deed.

If you are a co-owner: if the co-ownership association owns a commercial property (e.g., a basement rented to a business), this decision also applies. The managing agent must ensure that the indemnity is paid to a sequester in case of eviction.

Four Tips to Avoid This Type of Dispute

• Pay the indemnity to a sequester as soon as possible: as soon as the amount of the eviction indemnity is fixed by the court or by mutual agreement, write a cheque to a notary or to the Caisse des Dépôts et Consignations. Do not wait for the end of appeals. Payment to a sequester secures the procedure and triggers the two-month period.
• Put the tenant on notice to vacate the premises: send a registered letter with acknowledgement of receipt reminding of the vacation date and the consequences of delay (1% per day). Keep a copy and proof of posting. This will prove your good faith.
• Never offset the occupation rent against the eviction indemnity: even if the tenant owes you rent or occupation rent, do not deduct these sums from the eviction indemnity. The law prohibits offset in this case. You risk losing the benefit of the 1% deduction.
• Consult a lawyer before any action: each case is unique. A lawyer specialised in property law will help you choose the right sequester, draft documents, and avoid procedural pitfalls. In Vitrolles or La Ciotat, the commercial courts or the TGI have local practices you need to know.

Further Analysis: Related Case Law and Developments

This 1977 decision is part of a consistent line of the French Supreme Court. Already in 1974, in a similar judgment (Cass. civ. 3e, 12 March 1974, No. 72-14.678), the Court had ruled that the 1% deduction applied as soon as payment was made to a sequester, without waiting for the outcome of a dispute over the amount of the indemnity. More recently, in a judgment of 10 September 2014 (No. 13-19.845), the Court specified that the deduction runs even if the tenant has appealed against the eviction order (interim decision ordering the eviction).

The tendency of the courts is therefore very protective of landlords. The tenant cannot hide behind ongoing proceedings to stay in the premises without suffering the penalty. However, note: if the landlord has not paid the indemnity to a sequester, the deduction does not apply. So the payment must be effective.

For the future, the question could arise as to whether the sequester must be a professional (notary, lawyer) or whether a simple consignment with the Caisse des Dépôts suffices. Current case law accepts both, but it is better to choose a conventional sequester to avoid any dispute.

What You Absolutely Must Remember

FAQ: Frequently Asked Questions

Q: Can I stay in the premises if I contest the amount of the eviction indemnity?
R: No. As soon as the landlord has paid the indemnity to a sequester, you must vacate the premises within two months. Contesting the amount does not suspend the period. You will suffer the 1% per day deduction.

Q: Does the 1% deduction apply even if the landlord did not inform me of the payment?
R: Yes, but the landlord must prove that he notified you of the payment (e.g., by registered letter). In practice, the court verifies this notification.

Q: Can I deduct the occupation rent I owe from the eviction indemnity?
R: No. The French Supreme Court expressly prohibits this. You must pay the occupation rent in addition to suffering the 1% deduction.

Q: What happens if the eviction indemnity is entirely absorbed by the deduction?
R: You receive nothing. The deduction can go up to 100% of the indemnity. You must then leave the premises without any compensation.

Q: Can the landlord cash the eviction indemnity before the premises are vacated?
R: No, the sequester only releases the funds to the landlord after the premises are actually vacated. This is a security for the tenant.

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