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Summary :

Dispossession of the operator Saint Jean de Monts (Madame Vacances/Eurogroup) : The landlords, exasperated by the bad faith of the operator of the Madame Vacances brand ofEurogroup, changed the locks of their villa. This led to significant convictions.

Cancellation of the clause waiving the eviction indemnity

Summary of the ruling of the Poitiers Court of Appeal of 25 February 2025

The dispute in question is between the limited liability company (SARL) [Location 14] and Mr and Mrs [S], concerning a commercial lease for an Emerald-type villa in a holiday residence. Mr and Mrs [S] acquired this villa in 2002 and leased it to the company [Location 14] for a period of nine years, with a clause waiving the eviction compensation in the event of non-renewal of the commercial lease. In 2013, Mr and Mrs [S] notified their intention to terminate the lease without offering to renew it or pay compensation, which led to legal proceedings.

A subsidiary of EUROGROUP trading under the name MADAME VACANCES

SARL SAINT JEAN DE MONTS is a subsidiary of the company EUROGROUP, a tour operator which, for more than 25 years, has been marketing holidays in seaside or mountain residences and hotels, in particular under the name ‘Madame Vacances’.

Court proceedings

The Sables d’Olonne court initially ruled that the waiver clause was valid, dismissing the [Locality 14] company’s claim for eviction compensation. The Poitiers court of appeal then overturned this decision, declaring the clause unwritten and ordering an expert assessment to evaluate the eviction compensation. The Court of Cassation partially overturned this judgement, referring the case back to the Poitiers Court of Appeal.

Analysis of the waiver clause

The court of appeal examined the validity of the clause waiving the eviction indemnity. Although the 2014 Pinel law rendered this type of clause unwritten, the company [Location 14] argued that the nullity of the clause could still be invoked. The court concluded that the clause was null and void, allowing the company to claim an eviction indemnity.

Assessment of the eviction indemnity

The expert assessment valued the eviction indemnity at 54,400 euros, based on the market value and the losses incurred by the company [Location 14]. The court approved this assessment, ordering Mr and Mrs [S] to pay this sum, as well as an additional indemnity for the period of dispossession of the premises.

Landlords pay dearly for changing the locks

Dispossession of the operator of the tourist residence, the company SAINT JEAN DE MONTS

The company [Locality 14] continued to operate the villa until 2016, when Mr and Mrs [S] repossessed the premises. The court ruled that this repossession was illegal and ordered Mr and Mrs [S] to pay compensation of 77,000 euros for the period of dispossession, as well as monthly compensation of 770 euros until the actual payment of the eviction compensation.

Requests from the lessors Mr and Mrs S

Mr and Mrs [S] requested the reimbursement of various sums, in particular repair and maintenance costs. The court declared several of these requests inadmissible, due to their statute-barred nature or their rejection by previous decisions.

Irrecoverable Expenses and Costs

The court ordered Mr and Mrs [S] to pay 10,000 euros to the company [Location 14] for unrecoverable costs at first instance and on appeal, as well as the costs of the proceedings.

Conclusion

The Poitiers Court of Appeal ruled in favour of the company [Locality 14], confirming the invalidity of the clause waiving the eviction compensation and, above all, compensation for dispossession, ordering Mr and Mrs [S] to pay substantial compensation.

In few words:

The Lyon Court’s judgment on November 14, 2024, resolved a dispute between Mr. [R] and ISIS GESTION regarding eviction and occupancy compensation following the termination of a lease. The court upheld a judicial expert’s assessment, awarding ISIS GESTION €11,850 in eviction compensation while setting an occupancy indemnity of €490 per month, totaling €12,740 for 26 months, with payments continuing until the premises were vacated. Additionally, ISIS GESTION was ordered to vacate the property within one month, pay legal costs, and offset its owed occupancy fees against the eviction compensation.

Judgment of the Lyon Court – November 14, 2024: Analysis of the Dispute Between Mr. [Aa] [R] and the Companies ISIS GESTION and VICTORY GESTION

On November 14, 2024, the Lyon Court issued a judgment resolving a legal dispute between Mr. [Aa] [R] and the companies ISIS GESTION and VICTORY GESTION. The dispute primarily revolved around compensation for eviction and occupancy following the termination of a lease. The case presented key legal questions regarding commercial leases, the calculation of indemnities, and the obligations of both landlords and tenants in such circumstances.

This ruling sheds light on how eviction compensation is determined under French commercial law, particularly under Article L.145-14 of the Commercial Code. Additionally, it clarifies the methodology courts use to assess occupancy compensation when a tenant remains in a property beyond the lease term. By examining this case in detail, we can better understand the legal reasoning behind the judgment and its potential impact on future landlord-tenant disputes.

Background of the Dispute

The dispute began when Mr. [R], acting as the landlord, issued a formal notice of termination to ISIS GESTION. This termination was communicated through a bailiff’s writ dated September 7, 2020, with an effective termination date of March 31, 2021. Following the termination, a judicial appraisal was conducted to assess the appropriate amounts for both eviction compensation and occupancy indemnity.

Mr. [R] sought court approval for an eviction indemnity of €11,850 and an occupancy indemnity of €490 per month. However, ISIS GESTION contested the latter amount, arguing that it was excessive and should be reduced. This disagreement led to the case being brought before the Lyon Court, where both parties presented their arguments.

Legal Principles Governing Eviction and Occupancy Compensation

Two key legal concepts played a central role in this case: eviction compensation and occupancy indemnity.

1. Eviction Compensation: Under French law, specifically Article L.145-14 of the Commercial Code, a tenant who is evicted due to a lease termination is entitled to compensation. This indemnity is intended to cover the financial losses suffered by the tenant as a result of the eviction. It includes:

The market value of the business (fonds de commerce)

Relocation and reinstallation costs

Expenses related to the transfer of business operations

Any other damages directly resulting from the loss of the lease

2. Occupancy Indemnity: If a tenant remains in the premises beyond the lease termination date, they are required to pay compensation for their continued use of the property. This indemnity is calculated based on several factors, including:

The fair market rental value of similar properties

Adjustments for the precarious nature of the tenant’s continued occupation

The duration of unauthorized occupancy

Court’s Determination of Eviction Compensation

The legal expert appointed in the case conducted a detailed assessment to determine the appropriate amount of eviction compensation. After considering the business value and the costs associated with relocation, the expert arrived at a figure of €11,850. The court accepted this valuation and ruled that Mr. [R] was obligated to pay this amount to ISIS GESTION as eviction compensation.

This ruling aligns with established legal principles, ensuring that the tenant is adequately compensated for the financial disruption caused by the lease termination. Notably, the court did not find grounds to increase the compensation beyond the expert’s assessment, suggesting that the valuation was deemed reasonable and well-supported by the evidence.

Calculation of Occupancy Indemnity

The second major issue in the case was the calculation of the occupancy indemnity. Since ISIS GESTION remained in the premises beyond the lease termination date, it was required to pay compensation for its continued occupation. The legal expert evaluated the fair rental value of comparable properties in the area to determine an appropriate rate.

Key aspects of the expert’s methodology included:

Market Comparison: The expert analyzed rental rates for T1 and studio apartments in both student residences and standard housing units in nearby localities. This comparison helped establish a baseline for the appropriate rental value.

Adjustment for Precarious Occupation: Recognizing that ISIS GESTION was occupying the premises without a valid lease, the expert applied a 15% reduction to the average market rent. This reduction accounted for the uncertainty and legal risks associated with continued occupation.

Final Calculation: Based on these factors, the expert determined a monthly occupancy indemnity of €488.75, which was rounded to €490 for simplicity.

Court’s Ruling on Occupancy Indemnity

The Lyon Court reviewed the expert’s methodology and concluded that the assessment was fair and consistent with legal standards. As a result, the court set the occupancy indemnity at €490 per month, effective from April 1, 2021.

For the period from April 1, 2021, to June 30, 2023 (a total of 26 months), ISIS GESTION was ordered to pay €12,740 (€490 × 26 months). Furthermore, the company was required to continue paying €490 per month until it vacated the premises.

Order for Eviction and Compensation Offsetting

Beyond setting the indemnities, the court also issued an order requiring ISIS GESTION and all occupants to vacate the premises within one month of the judgment’s notification. If the company failed to comply, law enforcement could be used to carry out the eviction.

Additionally, the court ruled that the financial obligations of both parties should be offset against each other. This means that the eviction compensation owed by Mr. [R] (€11,850) would be deducted from the total amount owed by ISIS GESTION in occupancy indemnities.

Costs and Legal Fees

As the unsuccessful party in the dispute, ISIS GESTION was ordered to pay the legal costs, including the fees associated with the judicial appraisal. Additionally, the company was required to pay €2,500 to Mr. [R] under Article 700 of the Code of Civil Procedure, which allows courts to award legal fees to the prevailing party.

However, the court denied Mr. [R]’s request for immediate enforcement of the judgment. This decision suggests that the court did not find any exceptional circumstances warranting immediate execution, meaning that standard enforcement procedures would apply.

Implications of the Judgment

This ruling provides important clarifications on how eviction and occupancy indemnities are calculated under French commercial lease law. Several key takeaways emerge from the case:

1. Judicial Experts Play a Critical Role: The court heavily relied on the judicial appraisal to determine both the eviction and occupancy indemnities. This highlights the importance of expert assessments in landlord-tenant disputes.

2. Occupancy Indemnity Must Reflect Market Conditions: The court’s acceptance of the expert’s 15% reduction for precarious occupation demonstrates that adjustments can be made to account for the legal and practical circumstances of the tenant’s continued stay.

3. Strict Enforcement of Lease Termination Rights: The ruling reaffirms that tenants cannot remain in a property indefinitely without financial consequences. By requiring ISIS GESTION to pay occupancy compensation and eventually vacate the premises, the court reinforced the principle that lease terms must be respected.

4. Offsetting of Indemnities Provides Fairness: The decision to offset the financial obligations of both parties ensures that neither side is unfairly burdened. This approach is consistent with legal principles aimed at balancing the rights and duties of landlords and tenants.

Conclusion

The Lyon Court’s judgment of November 14, 2024, effectively resolves the dispute between Mr. [R] and ISIS GESTION by setting clear compensation amounts for both eviction and occupancy. By relying on expert assessments and established legal principles, the court ensured a fair outcome that respects the rights of both parties.

The case serves as a useful reference for future landlord-tenant disputes, reinforcing key principles of French commercial lease law while demonstrating the courts’ careful approach to evaluating compensation claims.

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Summary of the Judgment of the Judicial Court of Créteil

The court recognized the acquisition of the resolutory clause for non-payment of rent but suspended its effects, granting the company PV-CP CITY a retroactive period of time to pay the sums due. The company was ordered to pay €2,500 in damages to Ms. [X] [O] for the harm suffered, as well as €3,000 pursuant to Article 700 of the Code of Civil Procedure. The requests to terminate the lease and evict the tenant were rejected.

Background to the Dispute

The judgment handed down on February 11, 2025, by the Créteil Court of Justice concerns a dispute between Ms. [X] [O] and the company PV-CP CITY. The dispute concerns the non-payment of rent on a commercial lease during the Covid-19 health crisis. However, the Court of Cassation has confirmed that this rent is payable, which does not prevent the companies of the PIERRE ET VACANCES GROUP from clogging up the courts. However, a press release from the Court of Cassation in June 2023 attempted to avoid this type of behavior.

Statement of the Dispute

Ms. [X] [O] rented a property from the company PV-CP CITY in 1999, intended for a tourist residence. In 2020 and 2021, the tenant company stopped paying its rent regularly, citing the financial difficulties linked to the pandemic. Ms. [X] [O] then initiated proceedings to have the acquisition of the resolutory clause recognized and to obtain the eviction of the tenant.

Arguments of the Plaintiff

Ms. [X] [O] maintains that the company PV-CP CITY failed to fulfill its contractual obligations by not paying the rent. She is seeking termination of the lease and eviction of the tenant, as well as compensation for occupation and damages for the harm suffered.

Defendant’s arguments

The company PV-CP CITY argues that the administrative closure measures related to the pandemic justified the suspension of rent payments. It invokes force majeure and the impossibility of using the premises in accordance with their contractual purpose.

Decision of the Court

The court noted the acquisition of the termination clause but granted PV-CP CITY retroactive time to pay the sums due. The effects of the termination clause were suspended, and the company was declared to have cleared the causes of the order to pay.

Compensation and costs

The court ordered the company PV-CP CITY to pay €2,500 to Ms. [X] [O] as compensation for the damage suffered. The company was also ordered to pay all costs and €3,000 pursuant to Article 700 of the Code of Civil Procedure.

Suspension of the Effects of the Resolutory Clause

The court suspended the effects of the resolutory clause, considering that the company PV-CP CITY could have benefited from payment deadlines if it had requested them before settling its rental debt.

Conclusion

The court rejected the requests for termination of the lease and eviction made by Ms. [X] [O]. The termination clause is deemed not to have been invoked, and the company PV-CP CITY was ordered to pay compensation and bear the costs.

Full text of the decision:

Dismissed

Judicial Court, Créteil, 3rd chamber, February 11, 2025 – No. 23/08105

Judicial Court

Créteil

3rd chamber

February 11, 2025

General Index: 23/08105

Judicial Litigation

FRENCH REPUBLIC

ON BEHALF OF THE FRENCH PEOPLE

MINUTE NO.:

JUDGMENT OF: February 11, 2025

FILE NO.: RG NO. 23/08105 – Portalis NO. DB3T-W-B7H-UZIB

CASE: [X] [O] V. S.A.S. PV-CP CITY

CRETEIL COURT OF JUSTICE

3rd Chamber

COMPOSITION OF THE COURT

PRESIDENT: Ms. LAMBERT, Vice-President

Ruling pursuant to articles 812 to 816 of the Code of Civil Procedure, prior notice given to the Lawyers.

CLERK OF THE COURT: Ms. REA

PARTIES:

PLAINTIFF

Ms. [X] [O], residing at [Address 1]

represented by Mr. Bertrand DE CAMPREDON, lawyer at the PARIS bar, locker: B0097

DEFENDANT

S.A.S. PV-CP CITY, with its registered office at [Address 2]

represented by Mr. Jérémy GOLDBLUM, attorney at the PARIS bar, locker: P0008

Closure pronounced on: June 20, 2024

Hearings held on: December 2, 2024

Date of deliberation indicated by the President: February 11, 2025

Judgment handed down by provision to the clerk’s office on February 11, 2025.

STATEMENT OF THE DISPUTE

By private deed dated June 10, 1999, Ms. [X] [O] leased a lot that she owns in a building complex located in the

municipality of [Locality 3] to the company SGRS, to which the company PV-CP CITY succeeded, for an annual rent of €4369.68 including VAT, payable per

quarter. The lease was granted to operate a tourist residence and was the subject of an amendment on December 8, 2008.

In 2020 and 2021, PV-CP CITY stopped paying its rent on a regular basis. By order of February 2, 2021, the president of the commercial court of

Paris ordered the opening of a conciliation procedure for the benefit of the Pierre & Vacances – Center Parks group, including PVCP

CITY, in order to negotiate with its individual lessors arrangements for the payment of rent corresponding to the periods during which the

measures to combat the Covid health crisis were implemented.

On August 4, 2022, Ms. [X] [O] had PV-CP CITY issue a payment order for the termination clause giving formal notice to the tenant to

pay the sum of €3825.39 for unpaid rent and charges within one month.

Following a summons issued on January 16, 2023, Ms. [X] [O] brought the company PV-CP CITY before the Créteil court for the termination of the lease and

eviction.

STATEMENT OF CLAIMS AND PLEAS

In her final submissions, notified on April 2, 2024, Ms. [X] [O] asks the court, pursuant to articles 1108, 1116, former article 1134, 1228, 1231-1, 1709

and 1728 of the Civil Code, Articles L.145-4, L.145-14, L.145-15 and L.145-41 of the Commercial Code, Article L.321-3 of the Tourism Code, and Articles L.131-

1 and R.131-1 of the Code of Civil Enforcement Procedures:

“TO DECLARE that Ms. [X] [O] is admissible and that her requests, purposes and conclusions are well-founded,

AS A MAIN POINT:

TO RECOGNIZE AND DECLARE the acquisition of the resolutory clause of the commercial lease signed on June 10, 1999, and of its amendment taking effect as of October 1,

October 2006 between Ms. [X] [O] and the company SGRS and taken over by the company PV-CP CITY one month after the order to pay due to the

breaches of contract committed by the company PV-CP CITY, with subsequent forfeiture of their right to remain in the premises and to eviction compensation

.

Consequently, CONDEMN the company PV-CP CITY to the payment of an occupancy indemnity equal to the amount of the rent and charges, as it would be established

if the lease had continued, from the termination of the lease and until the complete and effective release of the premises,

IN THE ALTERNATIVE:

DECLARE the judicial termination of the commercial lease signed on June 10, 1999, and its addendum taking effect as of October 1, 2006, between Ms. [X]

[O] and the company PV-CP CITY as of the summons initiating the present proceedings against the lessee due to the contractual breaches committed

by the company PV-CP CITY, with subsequent forfeiture of its right to remain in the premises and to eviction compensation,

Consequently, ORDER the company PV-CP CITY to pay an occupancy indemnity equal to the amount of the rent and charges, as it would be established

if the lease had continued, from the termination of the lease and until the premises are completely and effectively vacated,

IN ANY CASE: DISMISS the company PV-CP CITY from all its claims, ends and pretensions developed in the case,

ORDER the eviction of the company PV-CP CITY and that of all occupants on its behalf from the lots belonging to Mrs. [X] [O],

This under penalty of 500 € including VAT per day of delay,

SAY that the Court hereby reserves the right to settle the penalty upon simple request,

CONDEMN the company PV-CP CITY to pay the sum of 3,825.39 euros, to be finalized, for unpaid rent and charges, as well as those that

would be due on the day of the judgment, this condemnation being accompanied by interest at the legal rate from the date of this summons,

ORDER the company PV-CP CITY to pay the sum of 5,000.00 euros to Ms. [X] [O] for the damage suffered as a result of the violence and the

economic dependence exercised by the lessee,

ORDER the company PV-CP CITY to pay Mrs. [X] [O] the sum of 3,000.00 euros on the basis of Article 700 of the Code of Civil Procedure,

ORDER the company PV-CP CITY to pay all costs,

SAY that there is no need to rule out the provisional enforcement of the judgment to be handed down.

Ms. [X] [O] maintains that:

Article 12 of the lease agreement includes a termination clause allowing for the automatic termination of the contract in the event of non-payment and within one

month after an unsuccessful payment order. The company PV-CP CITY has breached its contractual obligations in that the tenant has

not paid his rent between March 15 and June 2, 2020, then for the rest of 2020 and in 2021 paid his rent late or did not pay the full amount of the

rent. In August 2022, the company PV-CP CITY had accumulated a rental debt of €3825.39, which is why Ms. [X] [O] issued a payment order to

her tenant on August 4, 2022. As the company PV-CP CITY did not settle its debt or contest the causes of the order, the resolutive clause has been acquired

since September 3, 2022. Furthermore, Ms. [X] [O] did not act in bad faith in that the conciliation procedure did not suspend the obligation to

pay rent, that PV-CP CITY did not refer the matter to the judge to request a staggering of its debt, that the lessor waited until August 4, 2022 to

issue the payment order and on January 16, 2023 to summon the tenant, and that the Pierre & Vacances group has been back in business for several months.

Consequently, the rent due since September 3, 2022 must be classified as occupancy compensation and Ms. [X] [O] is justified in requesting the eviction

the company PV-CP CITY from the premises. The lessor is also justified in requesting that the convictions be accompanied by a penalty of €500 per day; in the

alternative, the company PV-CP CITY has failed to fulfill its contractual obligations by not honoring the payment of rent as stipulated in the

lease, which is the main obligation of the tenant. The irregular payments by the tenant caused damage to the landlord. Thus, the tenant

accumulated, in four years, €3825.39 in rental debt, equivalent to two years of unpaid rent. In addition, the company PV-CP CITY failed in its

obligation to perform the contract in good faith and contractual loyalty by unilaterally suspending the payment of rent from March 2020 until the second

quarter of 2021 by stating, in the letters it sent to the lessors, that it was experiencing serious financial difficulties, without providing supporting documents, and that the

obligation to pay rent was suspended during the periods of administrative closure declared in 2020 and 2021. Consequently, due to these

serious breaches by PV-CP CITY, Ms. [X] [O] is justified in seeking the judicial termination of the lease as of January 16, 2023, the date

of the summons, and to request the eviction of the tenant from the premises, under penalty of a fine; in response to the conclusions of the company PV-CP CITY, the plaintiff maintains

that since the tourist residences were not affected by the administrative closure measures adopted in the context of the fight against the health crisis, the

tenant cannot claim that he was forced to close from March 15, 2020, to justify that he was authorized to no longer pay his rent; the company PVCP

CITY cannot justify the non-payment of rent during the health crisis based on the destruction or partial loss of the rented premises (article

1722 of the Civil Code) in that the loss of the leased property due to measures to combat the epidemic was partial, with only public access being prohibited,

so that the lessee retained other uses for the leased premises, and temporary, for a period of a few weeks; the company PV-CP CITY cannot justify the non-payment

of rent during the health crisis on the basis of a breach of the obligation to deliver in that the ban on welcoming the public related

to the nature of the activity operated by the establishment, deemed non-essential to the life of the nation, such that the measures taken did not target the destination of the

property leased and no breach of the obligation to deliver can be attributed to the lessors since the measure came from the government; the

company PV-CP CITY cannot claim that the non-payment of rent is not a serious breach of its contractual obligations since the

conciliation procedure ordered did not have the effect of suspending the obligation to pay rent, nor of retroactively justifying their non-payment.

Furthermore, the tenant did not submit any evidence to justify the financial difficulties it claims to be experiencing. PV-CP CITY imposed the

suspension of rents, without seeking arrangements from the lessors, and went so far as to issue rent invoices in the name and on behalf of

the lessors, but without their authorization, showing credits in its favor. Finally, PV-CP CITY did not pay the rents after the end of the health crisis

crisis, even though the Pierre & Vacances group’s business has boomed since the 2021/2022 financial year. Consequently, PVCP

CITY’s breaches of its contractual obligations are sufficiently serious to justify termination of the lease agreement; PV-CP

CITY to its contractual obligations caused Ms. [X] [O] damage in the form of anxiety due to the non-payment of rent, placing her in a

difficult and uncertain financial situation, causing her non-material damage.

In its final submissions, notified on May 6, 2024, the company PV-CP CITY asks the court, pursuant to articles 1218, 1219, 1345-5, 1719, 1722 and

1195 of the Civil Code:

“As a primary matter,

JUDGE that the obligation to pay rent under the lease binding PV-CP CITY to the plaintiff was interrupted from March 15 to June 22, 2020 and then from

November 1, 2020 to June 9, 2021 due to the possibility for the lessee to invoke:

the exception of non-performance given the impossibility of using the rented premises in accordance with their contractual purpose, the partial loss of the

rented property temporarily releasing the lessee from his obligation to pay rent, the existence of a situation of force majeure making it impossible to execute the

lease and therefore the reciprocal obligations of the parties; TO RULING that the company PV-CP CITY has paid all the rent.

Consequently,

TO DISMISS the plaintiff’s claims for rent relating to the periods impacted by the administrative measures that made

it impossible to use the rented premises,

TO DISMISS the plaintiff’s requests to acquire a resolution clause for the disputed lease and all of his subsequent requests for eviction and

for the payment of an occupancy fee,

Alternatively, if by some extraordinary chance the Court considers that the rent for the period of the administrative ban on receiving the public is due,

DECIDE that the company PV-CP CITY has paid the full amount of the rent,

NOTING the good faith of the company PV-CP CITY,

DISMISS the plaintiff’s claims for judicial termination of the disputed lease and all of his subsequent claims for eviction and

order to pay an occupancy indemnity,

TO DISMISS the plaintiff’s claims for compensation for alleged damages,

In the very alternative, if by some extraordinary chance the Court were to terminate the lease,

TO SUSPEND the provisional execution of the decision to be handed down and the termination of the lease, insofar as it could have manifestly

excessive consequences for both the company PV CP CITY and the plaintiff in the proceedings,

In any case,

JUDGE that the company PV-CP CITY has paid all the rent,

GRANT the company PV-CP CITY retroactive payment terms, given the serious financial difficulties it has encountered due to the

health crisis.

ORDER Ms. [O] to pay the company PV-CP CITY the sum of €3,000 pursuant to Article 700 of the Code of Procedure

ORDER Ms. [O] to pay all costs.”

The company PV-CP CITY maintains that:

it has been affected by the measures prohibiting the reception of the public taken to combat the Covid-19 epidemic in that it has not been able to operate its business.

Firstly, the residence operated by PV-CP CITY was affected by the order of March 15, 2020 and the decree of May 20, 2020 prohibiting the reception of the

public, a ban that was lifted on June 22, 2020, and then a new ban was adopted by the decree of October 29, 2020. Secondly, the common areas,

which are an integral part of the operation of the tourist residence, were also affected by the measures to combat the epidemic. As a result, the company PV-CP

CITY was unable to accommodate its usual clientele, which justifies the suspension of rent payments; the suspension of the obligation to pay rent is justified

by the partial loss of the leased property in that PV-CP CITY temporarily lost the use of the leased premises during the periods in which the

government measures to combat the epidemic; the suspension of the obligation to pay rent is also justified by the lessor’s failure to perform

its obligation to deliver the leased property in that the tenant was deprived, during the periods of application of the government measures, of the

use of the leased premises in accordance with the intended purpose of the contract; Ms. [X] [O] is acting in bad faith by requesting the acquisition of the

resolutory clause even though the company PV-CP CITY has justified the non-payment of the rent due. Thus, the lessor issued a payment order on March 26, 2021,

despite the ongoing judicial conciliation procedure, during which the payment of rent was suspended due to the financial difficulties

encountered by the lessee. Consequently, the non-payment of rent due during the judicial conciliation procedure does not constitute a

sufficiently serious breach by the company PV-CP CITY of its contractual obligations that could justify the acquisition of the termination clause and the eviction of the

lessee from the leased premises; the request for judicial termination of the lease agreement is not justified in that the tenant did not fail to fulfill its obligations in a

seriously enough. The non-payment of rent was justified by the financial difficulties resulting from the health crisis and the measures taken to combat

the spread of the epidemic and the opening of judicial conciliation proceedings, as evidenced by the substantial drop in its turnover

between 2019 and 2021 and the occupancy rate of the residence between mid-March 2020 and mid-June 2021, so that the lessee;the claim for compensation by

Ms. [X] [O] is not justified in that she has not demonstrated that she has suffered any damage since the non-payment of rent during periods of administrative closure

was justified by force majeure.

For a fuller statement of the parties’ pleas and claims, reference is made to the pleadings filed, pursuant to Article 455 of the Code of Civil Procedure

.

The order closing the case was issued on December 30, 1899, the case was set for the hearing of December 2, 2024, and put under advisement until February 14, 2025.

REASONS FOR THE DECISION

As a preliminary matter, on the determination of the parties’ claims

The court recalls that, pursuant to the provisions of Article 768 of the Code of Civil Procedure, “the court shall rule only on the claims set out in the

operative part” and that “to rule and judge” and “to declare” are not claims in that these requests do not confer any rights on the party making them

requires them – except in the cases provided for by law. Consequently, the court will not rule on these, which are in reality only a reminder of the pleas relied upon.

On the main claims

On the acquisition of the resolutory clause

According to Article 1134 of the Civil Code in the version applicable to this contract and Article 1728 of the Civil Code, legally formed agreements are binding

to those who made them and the lessee is bound by two main obligations, namely to use the leased property reasonably and in accordance with the purpose

assigned to it by the lease and to pay the lease price under the agreed terms.

Article 1225 of the Civil Code stipulates that the resolutory clause specifies the commitments whose non-fulfilment will result in the termination of the contract, that the termination is

subject to an unsuccessful formal notice and that the formal notice is only effective if it expressly mentions the termination clause.

Under the terms of Article L. l45-41 of the Commercial Code, any clause inserted in the lease providing for automatic termination is only effective one month after an

unsuccessful formal notice. The formal notice must mention this period, under penalty of nullity.

In addition, the formal notice must clearly inform the tenant of the amount claimed from him and be sufficiently precise to enable the lessee to identify

the reasons for the sums claimed.

In the present case, Article 12 of the lease agreement of June 10, 1999, provides for the possibility for the lessor to use a termination clause in the event of non-performance by the

lessee of any of his commitments, in particular in the event of non-payment of rent when due.

It is common ground that the rent was not paid by the lessee when due between March 14, 2020 and August 31, 2021.

– On the plea of bad faith on the part of the lessor in the implementation of the termination clause

According to the provisions of Article 1104 of the Civil Code, the requirement of good faith must govern the negotiation, formation and execution of the contract and therefore applies

to the implementation of the termination clause following non-payment of the contractually agreed rent, the bad faith of the creditor being able to lead to the

neutralization of the termination clause, the bad faith of the lessor being conventionally assessed on the day the order to pay was issued.

In the present case, even if the police measures in connection with the Covid-19 pandemic have had major economic consequences, particularly in the

tourism sector, the lessor cannot be asked to waive the rent regularly due during the health crisis period,

by virtue of the binding force of contracts, a principle established by Article 1103 of the Civil Code, such that the lessor cannot be criticized for not having accepted

a suspension of rent payments decided unilaterally by the lessee, the lessor cannot be considered to be in bad faith

for these reasons.

If the lessee invokes the opening of a conciliation procedure before the Paris Commercial Court on February 2, 2021, to justify the bad faith of the

lessor who issued its order to pay served on August 4, 2022, it should be noted that the purpose of this conciliation procedure was to

appoint conciliators with the task of “assisting in the continuation of its negotiations [PV CP CITY] in the continuation of its negotiations with its

financial partners with a view to resolving its cash flow difficulties”, in particular by negotiating any amendments to the contract. Support for the negotiations

measures aimed at improving the financial situation of the lessee, even if decided financially, cannot justify the bad faith of the lessor or even the

suspension of the payment of the rents decided unilaterally by the lessee.

– On the plea alleging the lessor’s failure to perform the obligation to deliver

Under the terms of Article 1719 of the Civil Code, the lessor is, in particular, bound by an obligation to deliver and to allow peaceful enjoyment of the property.

Article 1219 provides that a “party may refuse to perform its obligation, even if it is due, if the other party does not perform its obligation and if this

failure to perform is sufficiently serious.”

Article 1220 states that “A party may suspend the performance of its obligation as soon as it is clear that its co-contractor will not perform by the

deadline and that the consequences of this failure to perform are sufficiently serious for it.”

In the present case, it is indisputable that the public authority measures referred to above have restricted the lessee’s freedom to dispose of the leased premises,

by restricting their use in terms of time and location. However, the lessor cannot be held responsible for this, in that these measures

result neither from her actions nor her will but were imposed on her and she could not by any positive act put an end to them or limit their effects.

Therefore, Mrs. [O] cannot be accused of having failed in her obligation to deliver and the plea will be dismissed.

– On the plea of loss of the item

Article 1722 of the Civil Code states that “If, during the term of the lease, the leased item is destroyed in its entirety by unforeseeable circumstances, the lease is terminated automatically; if it

is only partially destroyed, the lessee may, depending on the circumstances, request either a reduction in the price or the termination of the lease. In either case,

there is no entitlement to compensation.”

It is accepted that the destruction of the rented item may be material or legal, in which case the lessee can no longer use the property for its intended purpose

permanently. Similarly, the loss may be total or partial, in the case of any circumstances that may significantly reduce its use or limit

enjoyment. However, contrary to what the lessee claims, in the latter case, although partial, the loss suffered is irreversible.

However, this is not the case with the consequences of the aforementioned administrative measures, which were limited in time, as ruled by the Court of Cassation

in three judgments handed down on June 30, 2022.

Thus, contrary to what PV CP CITY maintains, it is not justified in seeking the suspension of its payment obligation on this ground.

Therefore, the rental debt is, in principle, payable for all the periods covered by administrative restriction measures, since Mrs. [O] cannot

be accused of any breach of her obligation to deliver.

– On the plea of force majeure

Article 1218 of the Civil Code states that “There is force majeure in contractual matters when an event beyond the control of the debtor, which could not be

reasonably foreseen at the time of the conclusion of the contract and whose effects cannot be avoided by appropriate measures, prevents the performance of his

obligation by the debtor.

If the impediment is temporary, the performance of the obligation is suspended unless the resulting delay justifies the termination of the contract.”

In the present case, the occurrence of the health crisis during the execution of the contract was, by hypothesis, not foreseeable either by the lessor, debtor of the obligation to

deliver, or by the lessee, debtor of the obligation to pay, and its effects were limited in time for the lessee concerning the period of

administrative closure.

This plea will therefore be dismissed.

The sums referred to in the order to pay issued to the company PV-CP City on August 4, 2022, relating to rents and charges for 2020 and 2021 for an

amount of €3,825.39, were therefore payable.

As the company PV-CP City did not pay the sums due within one month of the delivery of the payment order, it should be

noted that the termination clause was applied on September 4, 2022.

On the suspension of the effects of the termination clause

Under the terms of the provisions of Article L. 145-41 of the Commercial Code: “Any clause inserted in the lease providing for termination as of right shall take effect

one month after a formal notice has remained unheeded. The formal notice must mention this period, on pain of nullity. Judges hearing a claim

presented in the forms and conditions provided for in Article 1343-5 of the Civil Code may, by granting deadlines, suspend the implementation and effects of the

termination clauses, when the termination is not established or pronounced by a court decision that has acquired the force of res judicata. The

resolutive clause does not apply if the tenant vacates under the conditions set by the judge. Under the terms of Article 1343-5 of the Civil Code, the judge may, taking into account the

situation of the debtor and in consideration of the needs of the creditor, postpone or stagger, within the limit of two years, the payment of the sums due.

In the present case, it should be noted that the lessee’s activity did fall within the scope of the decree of March 15, 2020, which then prompted him to stop receiving the

public during the first lockdown in the rented premises. In addition, tourist activity was also impacted by the new measures taken at the end of

summer 2020, which caused the closure of spaces dedicated to catering and drinking establishments, as well as sports facilities, these

police measures being well beyond the control of PV-CP City, and having had a significant impact on the profits made by it, as

demonstrated by the fall in the occupancy rate of the residence and the evolution of the Group’s results included in the file.

Furthermore, the opening of a conciliation procedure before the Paris Commercial Court shows the lessee’s determination to find

amicable solutions to fulfill its obligations, as the lessee is unable to pay these rents if no arrangement is made at the

time of the delivery of the payment order,

Although the group’s financial situation has since improved, the fact remains that due to the Covid-19 health crisis and the impact it

had on the commercial activity operated by the company PV-CP City, the latter was unable to pay the rents referred to in the order on the

day they were due.

Consequently, even though the sum of €3825.39 referred to in the order to pay has been paid since May 3, 2024

(payments of 2,004.68 euros on May 3, 2024, and 1,820.71 euros on September 20, 2023), the company PV-CP City could have benefited from payment terms

if it had requested them before repaying its rental debt, thus leading to the suspension of the resolutory clause.

Consequently, it is appropriate to grant this request and to find that the company PV CP CITY has cleared the causes of the order to pay.

Ms. [O] will be dismissed from her subsequent requests for the termination of the lease, the eviction of the company PV-CP City and all

occupants on her behalf, and her sentencing to a monthly occupancy fee.

On the request for compensation for damages by Ms. [O]

Article 1231-1 of the Civil Code stipulates that the debtor is ordered, if necessary, to pay damages either due to non-fulfillment of

the obligation or due to delay in fulfillment, if he or she does not prove that the fulfillment was prevented by force majeure.

In the present case, Ms. [O] claims damages for anxiety arising from the non-payment of rent, which has caused her financial difficulties. It is undisputed that the

amounts due were paid more than 4 years late, which undoubtedly caused financial difficulties for the plaintiff. The occurrence of

the health crisis during the execution of the contract was, by hypothesis, not foreseeable either by the lessor or by the lessee, debtor of the payment obligation, and

its effects were limited in time for the lessee concerning the period of administrative closure. Therefore, Mrs. [O] should be awarded the sum

of 2500 euros as compensation for the damage suffered.

On the other measures

Pursuant to Article 696 of the Code of Civil Procedure, the company PV CP CITY should be ordered to pay all costs.

The company PV CP CITY should also be ordered to pay Ms. [X] [O] the sum of €3,000.00 pursuant to Article 700 of the Code of Civil Procedure

.

Finally, it should be recalled that provisional enforcement is automatic, in accordance with Article 514 of the Code of Civil Procedure.

FOR THESE REASONS

The Court, ruling by contradictory decision made available to the parties by the registry and in first instance,

NOTES the acquisition of the termination clause of the commercial lease signed between June 10, 1999 and its amendment taking effect as of October 1, 2006

between Ms. [X] [O] and the company SGRS and taken over by the company PV CP CITY as of one month after the order to pay, i.e. September 4, 2022,

RETROACTIVELY GRANTS PV CP CITY a period up to and including May 4, 2024 to pay the sums claimed in the order,

SUSPENDS the effects of the termination clause during this period,

NOTES that PV CP CITY has cleared the causes of the order of August 4, 2022 within the period thus granted,

DECLARES that the termination clause is deemed not to have been invoked,

ORDERS the company PV CP CITY to pay Ms. [X] [O] the sum of €2,500 in compensation for the damage suffered;

ORDERS the company PV CP CITY to pay all costs;

ORDERS the company PV CP CITY to pay Ms. [X] [O] the sum of €3,000.00 pursuant to Article 700 of the Code of Civil Procedure;

REJECTS all other claims,

RECALLS that the provisional enforcement of this decision is a matter of law.

Done at CRETEIL, IN THE YEAR TWO THOUSAND AND TWENTY-FIVE AND ON FEBRUARY ELEVENTH

THE CLERK THE PRESIDENT

How much total eviction compensation is required to recover the apartment?

Adagio Eiffel Tower (formerly Paris Côté Seine)

The eviction compensation for the landlords/lessors represented in the context of the legal appraisal is:

(sources : trois expertises judiciaires de 2024)

(sources: three legal appraisals from 2024)

The legal expert used a coefficient of 1.75 for the operator’s average annual turnover for the main eviction indemnity and not 3 like P and V was asking for.

1. General context and presentation of the residence

The Adagio Paris Tour Eiffel residence is located in the 15th arrondissement of Paris, in the immediate vicinity of the Seine and a few minutes from the Eiffel Tower. It is a tourist residence operated under the Adagio brand (Accor group), offering apartments with hotel services (concierge, cleaning, etc.).

Apartment types: studios, two-room apartments, or even larger areas (depending on the configuration), generally intended for mixed use – short stays, medium stays (business or leisure tourism).

Positioning: mid-range/high-end segment for business or leisure tourism, with a central geographical location, close to transport (metro, bus) and major tourist attractions.

Thanks to its strategic location and the strength of the Adagio brand, this residence attracts an international clientele and enjoys good visibility on booking platforms.

2. Context of the Parisian property market

a) Dynamics of the property market in the 15th arrondissement

Stable demand: the 15th arrondissement, due to its proximity to the centre of Paris and its business areas (Montparnasse district, nearby Issy-les-Moulineaux), has a sustained demand for accommodation, whether as a main residence or a furnished rental for tourists.

Price level: the 15ᵗʰ remains one of the relatively popular arrondissements, with high prices per square metre, even if they can be slightly lower than those of certain more central districts (6ᵗʰ, 7ᵗʰ, 8ᵗʰ). The transaction values for a luxury apartment can be, at the time of this study, in an indicative range of around €11,000 to €14,000/m² (or even more depending on the view, the floor or the services).

b) Market for tourist residences in Paris

Tourist attraction

Paris remains one of the world’s top destinations in the world, for both leisure and business tourism.

This is reflected in a generally high occupancy rate in hotels and para-hotel residences, even if the health crisis may have temporarily impacted this segment.

Increased competition

In the 15th arrondissement of Paris and the surrounding area, there are several other hotel residences, apart hotels and tourist accommodation (including Airbnb). The Adagio brand being well known, this nevertheless confers a solidity of operation and an  occupancy rate that is often above average.

Please feel free to ask us any questions at the bottom of the page.

Collective of lessors of the Prince des Cimes tourist residence

In the context of the dispute concerning the waiver of the eviction compensation for the operation of the apartments within the Prince des Cimes leaseback residence, many lessors have chosen to unite and entrust the defence of their interests to our law firm. We invite you to join this initiative for the following reasons:

A stronger collective defence for the Prince des Cimes tourist residence

United to defend its interests against the operator

By bringing the lessors together, we strengthen the coherence and relevance of the legal arguments. Collective action makes it easier for the court to understand the economic and legal situation of the tourist residence.

A database of means of evidence and judicial expert reports

The defence of the interests of each lessor is strengthened by the evidence shared with the entire group of lessors of the tourist residence.

Cost compression (lawyer’s fees) and sharing of bailiff’s fees

Pooling of lawyer’s fees

By joining the group, you benefit from collective participation in the costs of proceedings and lawyers. This means that the individual financial burden is better controlled.

Optimisation of due diligence

The procedural documents, legal consultations and exchanges necessary for the proper conduct of the proceedings are centralised, thus avoiding duplication of costs.

A common legal strategy, tailored to each lessor

Enhanced expertise in tourist residence law

After ten years of litigation practice in the tourist accommodation sector, we have developed an in-depth knowledge of the specific features of commercial leases concluded in this sector, such as the Prince des Cimes tourist accommodation. This mastery of tourist accommodation cases enables us to deploy a solid strategy tailored to the interests of the owners.

450 Pierre et Vacances lessor clients

The law firm represents 450 lessor clients in disputes involving Pierre et Vacances. These lessors have joined forces to collectively defend their interests against the operator. Their objective is to strengthen their legal position and to mutualise the costs of proceedings. By uniting, the lessors are working to enhance the value of their real estate assets. This experience makes it possible to better defend lessors in tourist residences.

More balanced negotiation

A group of lessors structured and represented by the same lawyer has more leverage in negotiations in the event of a transaction or the search for a new operator.

Monitoring of the case

The group’s lawyer is in charge of communications with the registry of the court of Albertville and regularly informs the lessors of the progress of the pre-trial procedure, prior to setting a date for the hearing.

Conclusion

Joining the class action brought by the lessors of the Prince des Cimes leaseback residence and our law firm means benefiting from increased negotiating power, cost sharing, shared expertise and a coherent strategy. This is the most effective way to assert your rights, ensure the sustainability of your investment and defend your assets in a secure and controlled environment.

We remain at your entire disposal to answer your questions and assist you in your efforts to join this collective action. Please do not hesitate to contact us for any further information via the contact form at the bottom of the page.

In few words:

Refuge du Montagnard tourist residence owners want to terminate the lease and enforce the waiver of the right to renew the lease and the right to eviction damages.

Joining the collective action initiated by the lessors of the Refuge du Montagnard tourist residence in the French ski station of Les Arcs, in partnership with our law firm, offers increased negotiating power, shared costs, collective expertise, and a coherent strategy. This approach is the most effective way to assert your rights, ensure the sustainability of your investment, and defend your assets in a secure and controlled manner.

Refuge du Montagnard Leaseback Property

In the context of a dispute concerning the use of their plots in the Refuge du Montagnard, a number of landlords have decided to join forces and entrust the defence of their interests to our law firm. We invite you to join them for the following reasons.

A stronger collective defence for Refuge du Montagnard Owners

A united front against the operator:

By bringing the landlords together, we strengthen the coherence and relevance of the legal arguments. A collective action gives the court a better understanding of the economic and legal situation of the residence.

Gathering evidence and expert reports:

The evidence (letters, expert reports, testimonies) and the analyses carried out are shared between all the grouped landlords. This exchange of information strengthens everyone’s defence.

Cost reduction and cost sharing

Pooling of legal fees:

By joining the group, you benefit from collective sharing of legal costs. This means that the individual financial burden is better controlled.

Optimisation of proceedings:

The procedural documents, legal consultations and exchanges necessary for the smooth running of the proceedings are centralised, thus avoiding duplication of costs.

A common legal strategy tailored to each landlord

Enhanced expertise:

We have developed an in-depth knowledge of the specific characteristics of the Refuge du Montagnard and its leases. This mastery of the case allows us to implement a solid strategy tailored to your interests.

Respect for individuality:

Even in the context of a class action, the specific interests of each landlord are respected. Our role is to propose a common defence, taking into account the specific issues of each lease.

Better protection against operator default

Foresight and security:

By uniting with other lessors, you can better anticipate and mitigate risks associated with potential financial, legal, or commercial failures of the operator.

This collaboration offers several advantages:

Enhanced Negotiation Power

A well-organised group of lessors, represented by the same legal counsel, holds greater influence in negotiations, whether during transactions or when seeking a new operator.

Securing Rents and Increasing Asset Value

Objective: Continuity of Rents

Controlled Litigation

Effective legal action aims to preserve or recover rent payments, which are crucial for maintaining the profitability of your investment.

Maintaining Attractiveness

Demonstrating unity among lessors reassures other stakeholders (suppliers, future operators, managers) and helps sustain the long-term value of your property.

Efficient Procedural Management

Better Coordination

Unified Claims

By consolidating all claims into a single action, we reduce the risk of procedural delays that can occur with isolated claims.

Detailed Case Tracking

Our firm has a dedicated team that closely monitors the progress of proceedings, coordinates with the courts, and keeps lessors regularly informed.

Free question

Please feel free to ask any questions you may have via the contact form at the bottom of the page.

Below is an overview of how French leaseback (often called “Résidences de tourisme” or “Résidences gérées” under the French model) disputes tend to play out in French courts, with a particular focus on commercial lease (“bail commercial”) issues. This summary addresses the principal causes of litigation, the procedural framework, and key jurisprudential trends.

1. Background: The “Leaseback” Concept in France

1. Nature of the Arrangement

A developer sells fully furnished units (apartments, studios, etc.) to individual investors, who immediately lease them back to a single operator under a long-term commercial lease.

The investor/owner receives rents (often “guaranteed” in promotional materials) while benefiting from favourable tax or VAT rebates.

These leases typically qualify as commercial leases if the operator carries out an activity (e.g., hotel-like tourism residence management) that meets the legal requirements set out in articles L. 145-1 and following of the Code de commerce.

2. Common Marketed Advantages

Reduced VAT or the possibility to recover VAT on the purchase price, provided the residence continues operating under specific tourism or para-hotel conditions for a set period (often 20 years).

A “guaranteed” rent from the operator, insulating (in theory) individual investors from occupancy risk.

3. French Leaseback Why Litigation Arises

Operator insolvency or severe financial difficulties:

Rents go unpaid, or the operator attempts to renegotiate terms downward.

Renegotiation / Non-Renewal:

At the end of a term (often 9 or 11 years, depending on the lease), the operator seeks to reduce rent, modifies services, or walks away from renewal.

Validity of Clauses:

Certain clauses in the lease (indexation, guaranteed rent, exit clauses, etc.) may be challenged as abusive or contrary to public policy.

Tax Recapture:

If the operator or investor fails to maintain the commercial lease under required conditions, or if the operator ceases activity prematurely, owners face potential VAT clawback.

2. Typical Legal Issues Before French Courts

A. Characterization of the Lease as Commercial

Legal Requirement: For a lease to fall under the “bail commercial” regime, the occupant (here, the residence management company) must run a genuine commercial activity in the premises. Generally, tourism or para-hotel management (services similar to hotels) qualifies as a commercial activity.

Outcome: Most courts uphold the commercial nature of these leases if the operator offers daily or weekly rentals, reception services, housekeeping, etc. If the operator provides limited or no hospitality services, disputes may arise about whether the operator is truly “exploiting a fonds de commerce,” thus challenging the lease’s classification.

B. Rent Payment Defaults and Termination

Rent Arrears:

A frequent dispute is the operator’s partial or complete non-payment of rents. Owners can pursue (i) summary proceedings (référé) for unpaid rent, or (ii) action for lease termination if a “clause résolutoire” applies.

Court Trends:

1. Where arrears are clearly established, courts commonly order payment plus interest, and allow termination if the contractual clause résolutoire was properly triggered (subject to statutory grace periods).

2. Some operators invoke financial difficulties and request “judicial deadlines” (délais de paiement) under Article 1343-5 of the Civil Code, to stave off immediate termination.

C. Rent Renegotiation and Revision

Mid-term Rent Revision: The operator may argue changed market conditions, or that the initial “guaranteed rent” was artificially high to attract investors.

Upon Renewal: Article L. 145-33 of the Code de commerce provides for a rent cap (generally pegged to the variation of certain indices) unless there has been a “notable change in local commercial factors.” The operator may seek a downward revision at renewal, citing decreased tourism or over-supply.

Court Approach: Courts scrutinize lease clauses carefully and apply the statutory indexation or capping rules. Where the original rent was inflated but contractually agreed, judges are typically reluctant to re-fix the rent mid-term. However, on renewal, they can set a new rent that better reflects market value, provided the legal conditions for déplafonnement (removal of the cap) are not met.

D. Non-Renewal and Indemnities

Non-Renewal by the Operator:

The operator can choose not to renew at lease expiry. Depending on the circumstances, owners (as landlords) might claim compensation for lost rent or attempt to assert a “protection” akin to the indemnité d’éviction (eviction indemnity). However, eviction indemnities normally protect the tenant running the commercial operation. The roles here are reversed, so typically the operator (the “tenant”) can claim indemnity if the owner refuses renewal.

Insolvency of the Operator:

If the operator is under judicial reorganization (redressement judiciaire) or liquidation (liquidation judiciaire), special rules apply. The court-appointed administrator or liquidator can either continue the lease (subject to paying ongoing rent) or terminate it. Owners must file claims for unpaid rent with the judicial administrator.

E. Tax Consequences (VAT & LMNP Status)

VAT (TVA): Many leaseback schemes rely on partial or total VAT recovery on the sale price, conditioned upon offering short-term lodging and hotel-like services for 20 years. If the commercial lease ends prematurely or the operator materially changes the nature of the operation, individual owners risk a VAT clawback (prorated for the remaining period).

LMNP or Censi-Bouvard: Investors who elect “Loueur en meublé non professionnel” or use the Censi-Bouvard scheme can see their tax advantages compromised if the lease is terminated or if the operator fails to maintain mandatory service levels.

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3. Litigation Procedure and Court Competence

1. Competent Courts

Traditionally, commercial lease disputes fall under the jurisdiction of the Tribunal judiciaire (formerly the TGI) since the parties are landlords who are often private individuals and tenants who are commercial operators.

If the tenant operator is in insolvency proceedings, the commercial court may also be involved, particularly when dealing with aspects of the reorganisation or liquidation.

2. Proceedings

Summary Proceedings (Référé) for urgent measures (e.g., to obtain rent or appoint an expert to assess property condition).

On the Merits (Au fond): Full litigation to determine the validity of clauses, rent level at renewal, or existence of a valid termination.

Appeals: Decisions can be appealed before the Cour d’appel. In important or precedent-setting cases, the Cour de cassation may issue rulings clarifying points of commercial lease law in the leaseback context.

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4. Key Points from Recent Jurisprudence

1. Court Recognition of the “Commercial” Character

Most French courts uphold the classification of these tourism residence leases as commercial leases, provided the operator offers substantial hospitality services.

A few older cases questioned that classification where the operator provided minimal services. However, these are increasingly rare; the trend is to recognize the commercial nature as soon as hotel-like services are offered.

2. Strict Enforcement of Lease Clauses

When an operator is behind on rent, courts tend to apply the clause résolutoire strictly, unless there is a credible financial rescue plan.

Judges frequently reject arguments that “guaranteed” rents were inflated to attract investors; they see it as part of the negotiated lease, especially if the operator voluntarily signed.

3. Rent Revisions

On renewal, courts apply statutory rules on cap and indexation carefully. Where no basis for déplafonnement arises, rent changes track the IRL (Indice de Référence des Loyers) or ICC (Indice du Coût de la Construction), depending on the lease’s stipulations.

Some newer judgments have adjusted rents downward due to major shifts in the local tourism market—this can qualify as a “notable change in local commercial factors.”

4. Operator Insolvencies

A significant wave of litigation arose post-2008 and again during/after COVID-19, with operators facing liquidity issues. Courts remain consistent that, absent an agreement, non-payment can lead to termination. The operator’s insolvency does not, in itself, allow for rent to be reduced unless renegotiated or imposed by the commercial court under insolvency proceedings.

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5. Practical Tips for Owners (Investors) and Operators

1. Pre-Litigation

Attempt mediation or negotiated solutions, especially in large residences with multiple owners. A global agreement on new rent levels or repayment schedules may be faster and less costly than piecemeal lawsuits.

2. Documentation

Ensure the original lease is signed properly, that “acte authentique” or “acte sous seing privé” formalities are fulfilled, and that all annexes (inventory of furnishings, service descriptions) are well documented.

3. Renewal Preparation

Monitor deadlines for renewal notices (six months before term, typically) to avoid automatic renewal or missing the chance to request rent revision.

4. Tax Compliance

Keep track of service requirements that justify VAT rebates. If the operator reduces or discontinues hospitality services, owners may need to proactively address the VAT risk to avoid a clawback.

5. Insolvency Awareness

If the operator enters redressement judiciaire or liquidation judiciaire, monitor the proceedings carefully, file timely claims for unpaid rent, and watch for the administrator’s decisions on lease continuation or termination.

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Conclusion

Leaseback litigation in France largely revolves around the rules for commercial leases (baux commerciaux) in articles L. 145-1 and following of the Code de commerce. The main pressure points are (i) rent defaults and renegotiations, (ii) proper classification of the lease as commercial, (iii) renewal and rent capping/uncapping, and (iv) potential operator insolvencies. French courts generally uphold lease terms if they conform to statutory requirements, placing the onus on the operator to justify rent adjustments or request judicial grace periods for arrears.

Given the complexity of these disputes, owners must approach litigation with thorough preparation, careful contract drafting, and a readiness to engage in settlement or mediation where possible.

Please feel free to ask us any question with the formular.