Rent Review and Indexation: Possible to Combine with One-Sixth Increase

Imagine: you are the owner of a flat in Draguignan. You have been renting to a tenant for several years. The original lease provided for an annual rent review based on the INSEE construction cost index. But you wonder: can I also apply the one-sixth increase allowed by law? This question was asked by a landlord from Brignoles, and it was decided by the Court of Cassation in 1994.

The decision of 30 November 1994 (No. 92-13.425) answers clearly: yes, the two mechanisms can be combined. Indeed, the annual indexed review is not incompatible with the one-sixth increase provided for in Article 17 of the Law of 6 July 1989. But caution: their application must comply with precise rules.

In this article, we will break down this decision, explain what it changes for you, landlords, tenants or property professionals, and give you practical advice to avoid disputes.

The Facts: A Story Like Many Others

Mr. X, a landlord in Draguignan, had entered into a residential lease with a tenant in 1988. The initial annual rent was 23,184 francs (approximately €3,534). The contract provided for an annual rent review based on the INSEE construction cost index, effective from 1 June each year. In 1989, the parties signed a new contract effective from 1 June 1989, setting the indexed annual rent at 36,000 francs (approximately €5,488).

The tenant challenged this increase, arguing that the annual review could not be combined with the one-sixth increase provided for by law. According to him, once the rent was revised according to the index, no further increase could be added. The landlord, on the other hand, considered that the two mechanisms were distinct and could be combined.

The case went to court. The Court of Appeal ruled in favour of the landlord, and the tenant appealed to the Court of Cassation. The Court of Cassation dismissed the appeal, confirming that the indexed review clause and the one-sixth increase are combinable because they are based on different legal grounds.

The Court's Reasoning — Explained

The Court of Cassation examined Article 17 of the Law of 6 July 1989 (Law No. 89-462) which provides that, in residential leases, the rent may be increased by one-sixth each year if the lease so permits. But the same article provides that the annual rent review based on a reference index (most often the rent reference index, but here the construction cost) is also possible.

The judges considered that these two mechanisms are independent: one is a contractual increase (the indexation clause), the other is a legal increase (the one-sixth increase). Nothing prohibits combining them, provided that the lease so provides.

In other words, the annual indexation clause is not contrary to the one-sixth increase. It can therefore be applied in addition, without constituting an abuse. The Court emphasised that the indexation clause was provided for in the contract and that the parties had accepted it.

What few people know is that this decision was made at a time when the construction cost index was used. Today, the rent reference index (IRL) is used, but the principle remains the same: the annual review according to the index and the one-sixth increase are combinable, as long as the lease stipulates this.

What This Means for You — Practically

For Landlords: You can, if your lease so provides, apply each year the rent review based on the index (IRL or other) AND, in addition, a one-sixth increase in the rent (or by one-twelfth depending on the case) if you comply with the conditions of Article 17. For example, a rent of €600 per month in Brignoles: after indexation (e.g., +2%), it becomes €612. If you also apply a one-sixth increase (1/6 = approximately 16.67% of the initial rent? no, caution: the one-sixth increase is a cap, not an automatic rate. In reality, Article 17 allows an increase of one-sixth of the initial rent, but it is complex. In practice, it is best to consult a lawyer.)

For Tenants: You must check your lease. If an annual review clause is provided, it is valid. However, the one-sixth increase can only be applied if the lease was entered into before a certain date (lease of more than 3 years) and subject to conditions. If in doubt, ask for a detailed breakdown.

For Property Professionals: This decision confirms the validity of standard indexation clauses. When drafting leases, ensure you clearly distinguish between the two mechanisms and mention them explicitly.

undefined, I have come across cases where landlords in Toulon applied both increases without their lease explicitly providing for them, which led to disputes. The key is the wording of the contract.

Four Tips to Avoid This Type of Dispute

• Draft a clear indexation clause: Mention the reference index (preferably IRL), the annual review date, and specify that this review is separate from any legal increase.
• Comply with the conditions for the one-sixth increase: Ensure that the lease is for a term of at least 3 years, and that the total increase does not exceed the legal cap.
• Inform the tenant in writing: Send a registered letter with acknowledgement of receipt at least one month before the due date, detailing the calculation.
• Consult a lawyer lawyer: Before applying a double increase, have your lease checked. A property lawyer, such as Maître Zakine, can save you years of litigation.

Further Reading: Related Case Law and Developments

This 1994 decision has since been confirmed. For example, the Court of Cassation issued a similar ruling on 12 June 2001 (No. 99-17.123) concerning the IRL. The trend is clear: judges validate the combination provided the clauses are clear and not abusive.

However, note that since the ALUR Law of 2014, the one-sixth increase has been replaced by a different mechanism for leases of more than 3 years. But the principle of combination with indexation remains applicable. It is therefore essential to keep up to date with legislative changes.

Key Points to Remember

FAQ:

• Can I review my rent each year and also apply a one-sixth increase? Yes, if your lease so provides. But check that the total increase is not abusive.
• How is the one-sixth increase calculated? It corresponds to 1/6 of the initial rent, but complex rules apply. Consult a professional.
• What if the tenant refuses to pay? You can refer the matter to the departmental conciliation commission, then to the judicial court.
• Does this decision still apply today? Yes, the principle remains valid, but the indices and caps have changed.

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