Reference Decision: cc • No. 20-12.844 • 2021-06-17 • View the decision →
Imagine you are the owner of commercial premises on Avenue Jean Jaurès in Grasse. Your tenant, a perfumer established for 9 years, has just requested the renewal of their lease. Their current rent consists of a fixed portion and a variable portion calculated on their turnover. How do you set the new rent? Should you keep the same guaranteed minimum? This is not a theoretical question: it can represent thousands of euros difference each year.
In the shopping streets of Valbonne or the historic centre of Grasse, this situation repeats daily. Landlords and traders negotiate, sometimes with misunderstandings that lead to costly disputes. Variable rent with a guaranteed minimum, a common mechanism in commerce, becomes a source of confusion at the time of renewal.
The Court of Cassation has just provided a clear answer in its judgment of 17 June 2021. This decision specifies how to apply the provisions of the Commercial Code concerning variable rents during the renewal of commercial leases. But what exactly does this change for your situation?
The Facts: A Story That Happens Every Day
Mr Dubois, owner of 80 m² commercial premises in the centre of Grasse, had leased his premises to the company "Parfums du Sud" in 2010. The lease provided for rent composed of two parts: a fixed portion of €1,200 per month, and a variable portion corresponding to 3% of the turnover achieved on the premises. The contract stipulated a guaranteed minimum rent (floor amount that the tenant had to pay even if their turnover was low) of €1,500 monthly.
In 2019, approaching the 9-year expiry, the company "Parfums du Sud" exercised its right to renewal (right that allows the tenant to request to remain in the premises). Negotiations began, but quickly, a disagreement emerged. Mr Dubois estimated that the new rent should be set at €1,800 monthly, based on the rental value of the premises. The tenant company, however, considered that the guaranteed minimum rent should remain at €1,500, as in the previous lease.
The discussions turned into conflict. Mr Dubois refused the renewal, arguing that the company was not respecting the rules for setting the new rent. The company "Parfums du Sud" then applied to the Commercial Court of Grasse to have its right to renewal recognised and to have the rent set. The court ruled in favour of the tenant, considering that the guaranteed minimum rent had to be recalculated according to the new legal rules, and not simply continued.
Mr Dubois appealed to the Court of Appeal of Aix-en-Provence. The magistrates confirmed the judgment, specifying that the provisions of Articles R. 145-35 to R. 145-37 of the Commercial Code applied fully. The landlord, dissatisfied, finally lodged an appeal on a point of law (pourvoi en cassation). It is this final stage that led to the decision of 17 June 2021.
The Court's Reasoning — Analysed
The Court of Cassation examined the case with particular attention to transitional provisions. The magistrates recalled that Articles R. 145-35 to R. 145-37 of the Commercial Code, in their wording resulting from the decree of 3 November 2014, apply to contracts concluded or renewed from 5 November 2014 onwards. In other words, when your lease is renewed after this date, these new rules apply.
The core of the reasoning rests on the distinction between two types of variable rents. On one hand, rent composed of a fixed portion and an additional variable portion. On the other, entirely variable rent with a guaranteed minimum. In the case of Mr Dubois and the company "Parfums du Sud", it was clearly the second type: variable rent with a guaranteed minimum.
The court emphasised an essential point: upon renewal, the guaranteed minimum rent must be set according to the legal rules in force at the time of this renewal. It is not a simple continuation of the previous amount. The judges analysed Article 22 of the decree, which provides that the renewal rent will necessarily be a rent with two components when it concerns variable rent with a guaranteed minimum.
In short, the Court of Cassation confirmed that the new legal provisions apply fully to renewals occurring after November 2014. It rejected Mr Dubois's argument which wanted to maintain the old calculation system. This decision constitutes a confirmation of prior case law, but it provides an important clarification on the distinction between different types of variable rents.
What few people know is that this distinction can have significant financial consequences. undefined, I have encountered cases where ignorance of these rules led to disputes of several tens of thousands of euros.
What This Changes for You — Practically
If you are a landlord in Grasse or its region, this decision modifies your approach to renewal negotiations. You can no longer simply continue the previous guaranteed minimum rent. You must recalculate it according to the new legal rules. Take a concrete example: for 100 m² premises in Valbonne, with previous variable rent at 5% of turnover and a guaranteed minimum of €2,000, the new calculation could result in a guaranteed minimum of €2,300, i.e., €3,600 annual difference.
For tenant traders, the decision offers protection. It guarantees that the guaranteed minimum rent will be set according to objective rules, and not solely according to the landlord's will. Caution however: this does not mean that the amount will necessarily be more favourable. It all depends on the rental value of the premises at the time of renewal.
Real estate professionals (managers, estate agents) must integrate this case law into their advice. When they assist with the renewal of a commercial lease with variable rent, they must verify that the guaranteed minimum is correctly calculated according to the rules in force. An oversight could engage their professional liability.
How to react if you are in this situation? First, clearly identify the type of variable rent in your lease. Then, anticipate the renewal at least 6 months before expiry. Finally, have a rental value assessment carried out by an authorised professional. These steps can avoid lengthy and costly disputes.
Four Tips to Avoid This Type of Dispute
- Check the date of conclusion or last renewal of your lease: if it is after 5 November 2014, the new rules apply automatically upon the next renewal.
- Precisely identify the type of variable rent: is it fixed rent + additional variable, or entirely variable rent with a guaranteed minimum? This distinction is crucial to apply the correct calculation rules.
- Have a rental value assessment carried out by a court-appointed expert or notary at least 4 months before the lease expiry. This document will serve as an objective basis for negotiation.
- Consult a specialised solicitor before any breakdown in negotiations: a poorly founded refusal of renewal can cost you dearly in compensation and proceedings.
Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.
In-depth Analysis: Related Case Law and Developments
This decision fits into a coherent line of case law. Already in 2018, the Court of Cassation had rendered a judgment (No. 17-10.456) that laid the first foundations of this interpretation. It had then considered that the provisions of the 2014 decree should apply strictly to renewals after its publication.
An earlier decision by the Court of Appeal of Paris (2016) had adopted a more nuanced position, leaving some margin of appreciation to the trial judges. The 2021 decision clarifies the situation definitively: no margin of appreciation, strict application of the texts.
The trend of the courts is clear: they apply the protective provisions of the Commercial Code regarding commercial leases more and more rigorously. This evolution means that, for the future, landlords and tenants will need to be particularly attentive to compliance with legal formalities during renewals.
In Practice: What to Do
FAQ - Frequently Asked Questions on Variable Rent and Renewal
My lease was concluded in 2012 with variable rent. Do I need to apply the new rules upon renewal in 2023?
Yes, absolutely. The new rules apply to all renewals occurring after 5 November 2014, regardless of the date of conclusion of the initial lease.
Who sets the new guaranteed minimum rent?
In principle, the parties set it by mutual agreement. In case of disagreement, it is the court that will set it, based on a rental value assessment.
What are the deadlines to respect?
The tenant must request renewal at least 6 months before expiry. Negotiations must then conclude within a reasonable timeframe. In case of dispute, expect 12 to 18 months of proceedings.
Can the amount set by the court be challenged?
Yes, through appeal then cassation, but chances of success are limited if procedural rules have been respected.
What is the cost of a rental value assessment?
Expect between €1,500 and €3,000 depending on the complexity of the premises and its location.
Do you find yourself in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →
