Eviction compensation: when judges can set an amount lower than the market value of the business

In Riom, Puy-de-Dôme, a trader in clothing and footwear operated several points of sale. When his landlord refused to renew the lease, a question arose: what is the true value of eviction compensation? The landlord, who wanted to recover the premises, expected to pay the market value of the business, i.e., several hundred thousand euros. But the tenant had already acquired another premises right opposite. Result: the loss was not total, and the judges reduced the compensation.

Are you a landlord of commercial premises wanting to recover the walls? Or are you a tenant fearing eviction? This 1970 decision, still relevant today, concerns you. It reminds us that eviction compensation is not automatically equal to the value of the business. It is calculated according to the actual loss suffered.

What do the judges say? That the sovereign assessment of the trial judges may lead to compensation lower than the market value, provided the trader can continue their activity without significant loss. A principle with major consequences, particularly for local shops in Beaumont or elsewhere.

The facts: a story like many that happen every day

Mr X, a landlord in Riom, leases commercial premises to a trader specialising in the sale of clothing and footwear. This tenant is not a novice: he already operates at least five points of sale of American stock in Strasbourg, including the disputed shop. One day, the landlord decides not to renew the lease, invoking a legitimate reason. The evicted tenant then claims eviction compensation, as provided for by Article L. 145-14 of the Commercial Code.

But here's the thing: in the meantime, the tenant acquired the lease of another shop, located right opposite the former premises. He therefore did not cease his activity. The landlord considers the loss to be less and contests the amount claimed. The dispute goes to the Strasbourg Tribunal de Grande Instance, then to the Court of Appeal.

The Court of Appeal sets the eviction compensation at an amount lower than the market value of the business. The tenant appeals to the Court of Cassation, arguing that the compensation must correspond to the value of the business, regardless of the possibility of relocating. The Court of Cassation dismisses the appeal and upholds the judgment: the trial judges had sovereignly assessed the loss. The tenant suffered no loss of custom, as the sale was not essentially dependent on the location. The eviction did not put an end to his business.

The reasoning of the court — dissected

The Court of Cassation relies on Article 1240 of the Civil Code (formerly 1382), which provides that "any act of man which causes damage to another obliges the person by whose fault it occurred to repair it." In commercial lease law, eviction compensation is intended to repair the loss resulting from the loss of the business. But this loss is not always equal to the market value of the business.

The judges here examined three key elements: first, the tenant had preserved his business by finding a near-identical premises in immediate proximity. Second, the nature of the activity (sale of clothing and footwear) was not dependent on a single location — unlike a café or bakery, for example. Finally, the eviction had not caused the disappearance of the business, since the trader operated several points of sale.

This reasoning is an application of the principle of full compensation for loss: one cannot compensate beyond the actual damage. The trial judges have sovereign power to assess the amount, provided they give reasons for their decision. Here, the Court of Appeal had noted that the tenant had lost neither custom nor turnover. The decision is not a reversal but a confirmation of constant case law: eviction compensation is not an automatic entitlement equal to the value of the business.

What this changes for you — concretely

If you are a landlord: you can negotiate a lower compensation if you prove that the tenant can relocate without loss. For example, if you own a 50 m² premises in Beaumont and your tenant (a hairdresser) finds an identical salon on the same street, the compensation could be reduced by 30 to 50%. Caution: this reduction is not automatic; you must demonstrate the lesser loss.

If you are an evicted tenant: do not count on compensation equal to the value of your business if you already have a Plan B. If you operate several businesses or find an equivalent premises before eviction, the judges will take this into account. In a recent case, a client saw his compensation reduced from €200,000 to €80,000 because he had bought the lease of a neighbouring shop.

For buyers of businesses: check whether the seller is in an eviction situation. If so, the compensation received may be lower than the value of the business, which affects the sale price. A chartered accountant can help you assess the risk.

Four tips to avoid this type of dispute

• Have the loss assessed by an expert as soon as the refusal of renewal is notified. A statutory auditor or an expert in business valuation can estimate the actual loss, taking into account the possibility of relocation. Do not rely solely on market value.
• Negotiate a relocation clause in the lease. Provide that if the landlord refuses renewal, he must offer an equivalent premises within a defined radius (e.g., 500 metres). This limits the loss and the compensation.
• Keep all evidence of your activity after eviction. If you relocate, keep accounts, turnover figures, customer testimonials. Judges will use them to measure the actual impact.
• Anticipate in case of multi-exploitation. If you own several points of sale, mention this in the lease. In case of eviction from a single premises, the impact is limited, which may reduce the compensation. Conversely, if you are a landlord, this argument works in your favour.

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Further reading: related case law and developments

This 1970 decision is part of a line of judgments. Already in 1968, the Court of Cassation had ruled that eviction compensation could be lower than the value of the business if the tenant retained part of their custom (Civ. 3e, 12 June 1968). More recently, in 2015, the Court clarified that the loss must be assessed on the date of eviction, not on the date of the claim (Civ. 3e, 4 November 2015, No. 14-18.237).

The trend is clear: judges are increasingly checking the reality of the loss, particularly in commercial areas where custom is volatile. In the future, it is likely that courts will require concrete evidence of loss of turnover rather than relying on a theoretical value. For landlords, this is an opportunity to reduce costs; for tenants, an incentive to secure their relocation.

Frequently asked questions

Can eviction compensation be nil? Yes, if the tenant suffers no loss (e.g., if they voluntarily cease their activity or relocate without loss). But this is rare, as eviction always entails removal or relocation costs.

What are the criteria for reducing compensation? The possibility of relocating nearby, the nature of the activity (little dependent on location), the holding of multiple businesses, the absence of loss of custom. Each case is unique.

Can I contest compensation set by the judge? Yes, on appeal, but the Court of Cassation does not re-examine the facts. It only checks whether the judges properly reasoned their decision. An appeal is only possible for a procedural defect or an error of law.

What is the time limit to act after a refusal of renewal? The tenant has two years from the notification of the refusal to claim eviction compensation. After this period, they lose their rights.

Can the landlord avoid paying compensation? Yes, if they justify a serious and legitimate reason (rent arrears, lack of maintenance) or if they take back the premises for their own occupation. But in that case, they must pay eviction compensation, unless the tenant abandons the premises without claim.

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