Short answer. On expiry of a French commercial lease the tenant has a right to renewal for nine years, and the rent of the renewed lease is in principle capped: it cannot rise beyond the variation of the commercial rents index or the index of rents for tertiary activities since the previous lease (article L. 145-34 of the Commercial Code). The landlord can escape that cap, and have the rent set at rental value, in four cases: a notable change in the characteristics of the premises, in their permitted use, in the obligations of the parties or in local commercial factors; a lease concluded for more than nine years; a lease tacitly extended beyond twelve years; single purpose premises or premises used exclusively as offices. In the first two cases the increase is spread at 10 per cent a year; it is not spread where decapping results from tacit extension or from the nature of the premises. If he prefers to take the premises back, the landlord must pay an eviction indemnity equal to the tenant loss, generally the value of the business or of the leasehold interest, plus costs (article L. 145-14), unless there is serious and legitimate cause (article L. 145-17), and the tenant stays in occupation until he is paid (article L. 145-28). All these actions are time barred after two years.
Renewal is the moment when the value of a commercial lease is decided, for both sides. A landlord who obtains decapping can double the rent in a district that has been transformed; a tenant who successfully resists it keeps for nine years a rent far below the market, and the leasehold interest that results becomes the main asset of his business. Conversely, a landlord who wants his premises back discovers that the price of that freedom is the eviction indemnity, often more than the value of the premises themselves. This article explains the rules, the procedure and the strategies, from notice to expert report, for landlord and tenant alike. The commercial lease page describes the cases the firm handles.
1. The timetable: notice, request to renew, reply
A commercial lease does not end by itself. Article L. 145-9 of the Commercial Code provides that it ends only by a notice given six months in advance, or by a request to renew; failing that, a written lease is tacitly extended beyond its term, and notice must then be given for the last day of a calendar quarter. Notice is served by a judicial officer. A landlord who wants to renew at a new rent gives notice with an offer to renew; one who wants the premises back gives notice refusing renewal, stating whether or not he offers an eviction indemnity. The tenant, for his part, may take the initiative by a request to renew in the six months before expiry, or at any time during the extension, by extrajudicial act or registered letter (article L. 145-10); the landlord then has three months to state his reasoned refusal by extrajudicial act, failing which he is deemed to have accepted the renewal.
That timetable drives the strategy. A tenant who lets the lease be tacitly extended keeps his rent, but exposes himself, once the total duration passes twelve years, to decapping. A landlord who lets the lease be extended loses control of the renewal date and sees the capped rent continue to run. The renewed lease takes effect on expiry of the previous lease or of its extension, or on the first day of the calendar quarter following the request to renew (article L. 145-12), and runs for nine years unless a longer term is agreed.
2. The rent of the renewed lease: the capping rule
Article L. 145-33 lays down the principle: the rent of the renewed lease must correspond to the rental value, determined from the characteristics of the premises, their permitted use, the respective obligations of the parties, local commercial factors and the prices commonly charged in the neighbourhood. But article L. 145-34 adds a decisive qualification: for a lease whose term is not longer than nine years, the variation of the rent on renewal cannot exceed the variation of the quarterly commercial rents index (ILC) or of the index of rents for tertiary activities (ILAT) since the rent of the expired lease was first fixed. That is capping: whatever the market, the renewed rent cannot exceed the initial rent as indexed.
In practice capping works for the tenant in districts where rents have risen faster than the index, which is the case of most Paris retail locations over nine years. The capped rent then falls below the rental value, sometimes by half; the capitalised difference is the leasehold interest, which the tenant can sell with his business. A landlord who wants to recover the rental value must therefore show that he falls within one of the decapping cases.
3. The four decapping cases
The first case is a notable change, during the lease, in one of the elements mentioned in paragraphs 1 to 4 of article L. 145-33: the characteristics of the premises (enlargement works, a change of layout, heavy compliance works funded by the landlord), the permitted use (an extension of the authorised activity, a change of trade), the respective obligations of the parties (a transfer of charges or works, for instance), and local commercial factors. That last ground is the most invoked and the most disputed: it requires a change in the commercial environment, the opening of a transport station, pedestrianisation, the arrival of an anchor attraction, population growth, which was of interest to the particular business and had a favourable effect on the activity carried on. A general change in the district is not enough; it must benefit the tenant business, which the landlord has to prove, generally by an expert report.
The second case is a lease concluded for a contractual term longer than nine years: a ten or twelve year lease escapes capping from its first renewal, something tenants who accept long terms in exchange for works or a rent free period often overlook. The third case is tacit extension: where, through tacit extension, the duration of the lease exceeds twelve years, capping ceases to apply. A nine year lease not renewed at its term and extended by three years and one day is decapped; the vigilant tenant asks for renewal before that date, the patient landlord waits for it. The fourth case concerns premises built for a single use, known as single purpose premises (hotels, cinemas, clinics), and premises used exclusively as offices, whose rent is fixed under rules of their own, laid down by decree under article L. 145-36, without capping.
4. Spreading the increase: 10 per cent a year
Since the Act of 18 June 2014, decapping is no longer an abrupt switch. Article L. 145-34 provides that, where there is a notable change in the elements of paragraphs 1 to 4 of article L. 145-33, or where capping is disapplied by reason of a contractual clause on the term of the lease, the resulting variation of rent cannot lead to increases greater, for any one year, than 10 per cent of the rent paid in the preceding year. The spreading therefore does not apply to decapping resulting from tacit extension beyond twelve years, as the Court of Cassation expressly held in a reported decision (Cass. 3e civ., 16 October 2025, no. 23-23.834): decapping founded exclusively on the expired lease exceeding twelve years through tacit extension does not give rise to the increase being staged. Nor does it apply to single purpose premises or premises used exclusively as offices, whose rent is not capped. A tenant who lets his lease run beyond twelve years therefore exposes himself to an immediate rise to rental value, with no spreading. A rent of 50,000 euros decapped to a rental value of 100,000 euros thus goes to 55,000 in the first year, 60,500 in the second, and reaches the rental value only after several years, sometimes beyond the renewed lease. The spreading, mandatory in principle, is sometimes disapplied by a clause in the lease that the courts accept subject to conditions; its drafting and its validity are a systematic checkpoint. For the landlord, spreading considerably reduces the economic interest of decapping; for the tenant, it turns an imposed increase into a negotiable trajectory.
5. The procedure for fixing the rent
Failing agreement on the renewed rent, either party applies to the commercial rents judge, who is the president of the judicial court of the place where the building is, after a mandatory preliminary exchange of memoranda. The judge, almost always, orders a court appointed expert report: the expert visits the premises, analyses the lease, researches comparable rents in the neighbourhood and gives an opinion on whether there has been a notable change and on the rental value, allowing for discounts for excessive charges, works placed on the tenant or precariousness. The report then sets the ground for the judgment. The procedure takes eighteen months to three years; during that time the tenant pays the rent of the expired lease, and the catch up, with interest, is due retroactively to the effective date of the renewal. These cases are won on the quality of the comparable rents, on proof of the notable change and on the discounts; they are lost on time limits.
An application to fix the rent is time barred two years after the effective date of the renewed lease (article L. 145-60): a landlord who has let that period pass after a renewal with no rent fixed keeps the old rent for the whole of the renewed lease. The tenant, for his part, must make sure that the landlord reply to his request to renew does not contain an offer of a decapped rent that he would be taken to have accepted by his silence.
6. The eviction indemnity: the price of taking the premises back
The landlord may refuse renewal, but article L. 145-14 then requires him to pay the evicted tenant an indemnity equal to the loss caused by the failure to renew, comprising the market value of the business determined according to the usages of the trade, together with the normal costs of removal and reinstallation and the costs and transfer duties for a business of the same value, unless the owner proves that the loss is less. The fundamental distinction is between a replacement indemnity and a transfer indemnity. If eviction entails loss of the business, because the custom attaches to the location, the indemnity equals the value of the business, assessed by the methods of the trade (a percentage of turnover, a multiple of gross operating profit), and cannot be less than the value of the leasehold interest. If the business can be moved without loss of custom, the indemnity covers the value of the leasehold interest, that is the capitalised rent saving between the capped rent and the rental value, plus removal, reinstallation and double rent costs, losses on stock and business disturbance.
The sums are considerable. For a well placed Paris shop on a capped rent, the replacement indemnity routinely comes to several times the annual rent and can exceed the value of the premises. A landlord contemplating notice with refusal of renewal must therefore, before serving it, have the indemnity costed by an expert and check that he has the funds or the financing; one who discovers the figure after serving notice still has the right of repentance.
7. Refusal without indemnity: serious and legitimate cause
Article L. 145-17 allows the landlord to refuse renewal without indemnity if he shows serious and legitimate cause against the tenant: breach of an obligation of the lease, cessation of the business without good reason, irregular subletting or assignment, an unauthorised change of activity. But where the cause is a breach of obligation or cessation of business, it can be relied on only if the breach continued or was repeated more than a month after a formal demand by extrajudicial act, which must state the cause and reproduce the terms of the provision, on pain of nullity. That prior formal demand is where most refusals without indemnity fail: served by ordinary letter, imprecise as to the cause, or not followed by persistence of the breach, it is worth nothing. A landlord who notices a breach must therefore have it formally recorded and serve a demand in proper form, long before the notice. Refusal without indemnity is also possible in order to demolish an unfit or dangerous building, and the landlord may take back certain ancillary residential premises or rebuild, on particular conditions.
8. Staying in occupation, and the right of repentance
The evicted tenant does not leave on expiry of the lease. Article L. 145-28 provides that no tenant entitled to an eviction indemnity can be obliged to leave before receiving it, and that until payment he is entitled to stay on the terms of the expired lease, paying an occupation indemnity set at the rental value, possibly reduced by a discount for precariousness. Litigation over the eviction indemnity, expert report included, takes two to four years; the tenant stays throughout, and the landlord cannot deal with his building. That duration is the main argument in negotiation: a landlord in a hurry pays to move quickly, a tenant in no hurry trades on his time.
The landlord nonetheless keeps a way out. Article L. 145-58 allows him, until fifteen days after the decision fixing the indemnity has become final, to avoid paying it by agreeing to renew the lease, subject to bearing the costs of the proceedings; that is the right of repentance, which can be exercised only if the tenant is still in occupation and has not already rented or bought other premises. A landlord who refused renewal in order to obtain a market rent and who discovers, at the end of the expert process, an eviction indemnity beyond his means can therefore go back to renewal, at the rent fixed by the judge. The tenant, for his part, must be careful not to move elsewhere before being paid, on pain of losing the power to force repentance and, in some cases, the indemnity itself.
9. What the firm does for a landlord, and for a tenant
For a landlord, the work starts eighteen months before expiry: auditing the lease and its duration, looking for decapping grounds and assembling proof of the notable change, valuing the rental value and the eviction indemnity, choosing between notice with an offer to renew, notice with refusal and indemnity, or refusal without indemnity after a formal demand, drafting the notice, then conducting the proceedings before the rents judge or the action to fix the indemnity, with the expert. For a tenant, the work is symmetrical: timing the request to renew before the twelve year mark, contesting decapping, applying the spreading rule, valuing the leasehold interest and, where notice with refusal is served, costing the replacement indemnity, managing the stay in occupation and negotiating. In both cases negotiation succeeds more often than judgment, but it succeeds properly only when the litigation file is ready.
The five changes made to the regime by the Act of 26 May 2026, which do not touch renewal but change the life of a lease in progress, are set out in our article on what that Act changes for landlord and tenant, and the practical guide on commercial leases covers the whole.
Is your lease due to expire within two years, or have you just received a notice? Decapping is proved and the eviction indemnity is costed before any step is taken, not after. A first conversation will fix the timetable and the order of magnitude of what is at stake.
Frequently asked questions
When can the rent of a renewed commercial lease be decapped?
In four cases (article L. 145-34 of the Commercial Code): a notable change in the characteristics of the premises, in their permitted use, in the obligations of the parties or in local commercial factors; a lease concluded for more than nine years; a lease tacitly extended beyond twelve years; single purpose premises or premises used exclusively as offices. In the first two cases the increase is spread at 10 per cent a year.
How is the eviction indemnity calculated?
It equals the loss caused by the failure to renew (article L. 145-14): the value of the business if the custom is lost (replacement indemnity), or the value of the leasehold interest and the transfer costs if the business can be moved (transfer indemnity), together with removal, reinstallation and transfer duty costs.
Can the landlord refuse renewal without paying an indemnity?
Yes, for serious and legitimate cause (article L. 145-17): breach of the lease, cessation of business, irregular assignment or subletting. But the breach must have continued more than a month after a formal demand served by a judicial officer, stating the cause and reproducing the statutory text, on pain of nullity.
Must the evicted tenant leave at the end of the lease?
No. He is entitled to stay in occupation until the eviction indemnity is paid (article L. 145-28), paying an occupation indemnity set at the rental value. The landlord may, within fifteen days of the final decision fixing the indemnity, exercise his right of repentance and renew the lease (article L. 145-58).
What is the time limit for challenging the renewed rent or claiming the eviction indemnity?
Two years (article L. 145-60 of the Commercial Code), running from the effective date of the renewed lease for fixing the rent, and from the notice or the refusal of renewal for the eviction indemnity.
Article written by Herve Guyader, member of the Paris Bar, doctor of law. This content is general information and does not replace legal advice.