French Leaseback

Learn about eviction compensation for hotel residences and the various factors considered in determining the amount, including business value and reinvestment costs.

Eviction compensation for a hotel residence with short-term rentals

The essentials

Hotel residence with short-term rentals

Eviction compensation for the residence’s operating company: €1,113,000 and €63,807.98 for staff dismissal costs.

Commercial lease: Calculating the amount of eviction compensation

Main indemnity

Average sales over the last 3 years at the date of the expert appraisal and capitalization of average profits over the last 3 years.

Expert L. proposed an eviction indemnity of €1,136,000, the amount retained by the first judges, including the following items of loss:

• 1,000,000 € for the value of the business, calculated on the one hand on the basis of average sales over the last three years of operation at the time of the appraisal, and on the other hand on the basis of the capitalization of average profits over the last three years of operation.

Re-employment indemnity: 10% of the value of the goodwill

• 100,000 € in compensation for reinvestment based on 10% of the value of the business.

Disturbance of business: 25% of average profit over last 3 years

• 11,000 € in compensation for commercial disruption, intended to compensate for the loss suffered as a result of the cessation of business, and set at a quarter of the average profit for the last three years.

Cost of moving personal effects

• 2,000 € for removal costs for personal effects only, equipment being compensated in the value of the business.

Staff redundancy costs

63,807.98€ for staff redundancy costs

Termination of the lease for unpaid rent

Breaking a commercial lease in the event of unpaid rent

Sometimes, the tenant of a commercial lease stops paying the rent.

How should the landlord react to this situation, which can be extremely detrimental to him financially?

What is the law on which he can rely to terminate his lease with this indelicate tenant?

Automatic termination after one month’s delay?

The commercial lease sets a deadline by which payment must be made each month. But what happens in the event of non-payment? This is specified in the termination clause. Generally speaking, it stipulates that the contract is terminated after one month’s delay. As you can see, this provision seems to be to the landlord’s clear advantage, providing effective protection in the event of unpaid rent.

But it remains theoretical, and there’s a big leap from theory to practice. In reality, the courts do not terminate commercial leases after a single month’s delay.

What we’re interested in here is practice. So what can a landlord do in practice, when faced with a problem of this type, which tends to drag on and on?

Order to pay

The first unpaid bills must be dealt with quickly. The landlord should instruct a lawyer to issue the tenant with a summons to pay, in accordance with the termination clause of the commercial lease. Here you’ll find details of this document, which is the only one with any legal value in your attempts to recover what is owed to you from your tenant. Any other approach, such as a letter you might send to convince your tenant, has no legal value. We naturally advise against intimidating letters and other pressure tactics that could backfire.

Applying to the summary proceedings judge for termination of the contract

If this first step is unsuccessful, the following month you must move on to the second stage: apply to the interim relief judge for termination of the commercial lease.

You should entrust this task to a lawyer specializing in commercial law. Do not hesitate to contact us for this type of assignment.

At the end of this procedure, you will obtain termination of the commercial lease and an order that the tenant pay the arrears. The interlocutory injunction (the “judgement”) enables the decision to be enforced, i.e. seizures, etc., to be carried out.

The problem will then be resolved.

Note: the judge may also grant the commercial lessee extended payment terms.

Conclusion

As you can see, the law protects you. As a lessor, you are not helpless in the face of this type of practice, which can plunge you into financial difficulties.

With the right support, you can get out of the situation unscathed.

For many years now, we have been offering legal assistance in this type of problem. Take advantage of our know-how!

The important thing is to try to foresee this type of problem in advance, and add clauses to protect you when drafting the lease, even before a tenant signs it. This is a service offered by our specialized lawyers, and can help you avoid many problems later on.

If you have any questions, please contact us using the contact form at the bottom of the page.

A) The debtor of eviction damages

The debtor of the eviction indemnity is the party who issued the notice without an offer of renewal. Thus, in the event of sale of the building after the notice has been given, the debtor of the indemnity is the former owner (Cass. 3e civ., April 5, 2011, n° 10-18.241 : JurisData n° 2011-018848; 2011). Unless otherwise agreed in the deed of sale (Cass. 3e civ., Nov. 29, 2005, n° 04-17.723 – Cass. 3e civ., March 5, 2008, n° 06-19.237). In the event of dismemberment of ownership, the owner’s purchaser, upon renewal of the commercial lease, is not necessarily jointly and severally liable with the usufructuary skeleton of the eviction indemnity debtor (Cass. 3e civ., 16 déc. 2019, n° 18-26.182).

B The creditor of the eviction indemnity

The creditor of the eviction indemnity is the lessee or assignee who has acquired the business subsequent to the notice of termination, as the transfer of the business entails the transfer of the eviction indemnity due to the transferor and of the right of the latter to remain on the premises under article L. 145-28 of the French Commercial Code (Cass. 3e civ., April 6, 2005, no. 01-12.719).

C Payment of eviction compensation, a prerequisite for restitution of the premises

The law provides protection for the lessee right up to the last stage of the parties’ relationship. They provide for a protective chronology, authorizing the lessee to hand over the keys to the lessor after payment of the eviction indemnity.

D Payment to the lessee or an escrow

Payment may be made to the evicted lessee or to an escrow. Although payment into the hands of the lessee is the simplest option, it is rare in practice, since guarantees in the hands of the receiver will provide the lessor with guarantees when it comes to obtaining restitution of the premises, which payment into the hands of the lessee does not offer.

Appointment of an escrow account

The escrow may be appointed by mutual agreement of the parties or by a judge.

If you have any questions, please contact us using the contact form at the bottom of the page.

Court of appeal decisions dealing with waiver and eviction indemnity clauses in tourism residences can be complex, and vary according to the specific circumstances of each case. Here are a few examples of decisions dealing with these topics:

1. Waiver clause :

– Paris Court of Appeal, February 12, 2019, no. 17/12879 : This decision examined the validity of a waiver clause included in a commercial lease for a tourist residence. The court emphasized the importance of verifying that the waiver clause had been accepted in a free and informed manner by the tenant.

2. Eviction compensation :

– Lyon Court of Appeal, October 3, 2018, no. 16/05719 : In this case, the court ruled on the tenant’s entitlement to eviction compensation following the termination of a commercial lease in a tourist residence.

The court ruled that the tenant was entitled to compensation due to the non-renewal of the lease.

3. Specific contractual clauses :

– Bordeaux Court of Appeal, November 15, 2017, no. 15/03625 : The court examined a contractual clause limiting the amount of eviction compensation in a lease for a tourist residence.

The decision confirmed that such clauses must be clearly drafted to be enforceable.

These examples show that court rulings can depend on the specific terms of lease agreements and the circumstances surrounding the termination or renewal of leases in tourist residences.

Courts often assess the clarity and transparency of contractual clauses, as well as respect for the rights of the parties involved.

If you have any questions, please contact us using the contact form at the bottom of the page.

Résidence Nexity Studea Clichy:

The judgment handed down on July 1, 2024 by the Nanterre judicial court concerns a dispute between NEXITY STUDEA and a lessor.

Summary of facts and decision: eviction compensation for the Nexity Studea Clichy residence.

Background to the Nexity Studea Clichy residence

In 2008, Mr B M leased premises to LAMY RESIDENCES (now NEXITY STUDEA) for a student residence. 2010 M. A purchased the premises in 2010. In 2017, Mr. A refused to renew the lease and proposed an eviction indemnity. The parties have not reached agreement on the amount of this indemnity for the Résidence Nexity Studea Clichy apartment.

Legal proceedings: expert appraisal and main proceedings

Nexity Studea sued Mr. A for payment of the eviction indemnity. In 2021, the court confirmed that Nexity Studea was entitled to eviction compensation and ordered an expert appraisal to determine the amount. The expert, Ms. BACOT-REAUME, estimated the eviction indemnity at 15,549 euros and the annual occupancy indemnity at 5,500 euros.

Claims by the operator of the student residence and the lessor of the Nexity Studea residence

– Nexity Studea claimed 34,045.83 euros in eviction compensation.
– Mr. A requested judicial termination of the lease or eviction compensation set at 13,479.30 euros for the apartment in the student residence in Clichy.

Court ruling on eviction compensation

The court rejected the request for judicial termination of the lease on the student residence property.
– It set the eviction indemnity at 13,549 euros, including :
– 12,673 euros for the main indemnity,
– 180 euros for the commercial disturbance,
– 696 euros for unamortized work.
It rejected the claims for ancillary compensation that were not supported by sufficient evidence.
– The occupancy indemnity payable by Nexity Studea was set at 5,396 euros per year, from October 1, 2017, until the premises are vacated.
– Costs, including expert fees, will be borne equally by each party.

Please feel free to ask us any question here.

The summary order issued on July 1, 2024 by the Judicial Court of Nanterre concerns a dispute between two lessors and the company Adagio. The dispute arose from a commercial lease entered into on March 9, 2007 for a condominium lot in the Adagio Paris Montrouge tourist residence. The plaintiffs summoned the Adagio company before the interim relief judge for unpaid rent for the years 2020 and 2021, totaling 4,950.56 euros. They also claimed 6,000 euros in damages for abusive resistance, as well as 1,800 euros under article 700 of the French Code of Civil Procedure to cover legal costs.

The landlords argued that Adagio could not invoke cash flow difficulties or restrictions due to the COVID-19 pandemic as force majeure to justify the unpaid invoices. They pointed out that the general ban on receiving the public did not constitute a loss of the leased property, and did not release the operator from his obligation to pay rent.

In response, Adagio argued that the administrative measures imposed during the health crisis made it impossible to operate the premises commercially, thus justifying the exception of non-performance and the partial loss of the leased property. Adagio also contested the claim of abusive resistance. After hearing the arguments of both parties, the court ruled that the administrative measures relating to the health crisis were not attributable to the lessor and did not constitute a breach of the obligation to deliver. Consequently, it rejected Adagio’s arguments concerning the exception of non-performance and the partial loss of the leased property. The court recognized that Adagio’s obligation to pay the unpaid rent was not seriously disputable, and ordered it to pay the plaintiffs €4,950.56.

4,950 € in covid rents

On July^1, 2024, the interim relief judge of the Nanterre judicial court ordered a Pierre et Vacances group company to pay a lessor of the Adagio Montrouge tourist residence a total of €4,950 in unpaid covid rent.

1,200 in legal fees

The judges ordered PIERRE ET VACANCES to pay €1,200 in legal fees.

6,150 € total sentence

The operator must therefore make a total payment of €6,150.

Operator resists Court of Cassation ruling

PIERRE ET VACANCES group companies continue to refuse to pay their unpaid covid rents, despite the June 30, 2024 rulings of the French Supreme Court. The courts have been particularly hard hit since the covid years, lengthening the time it takes to hand down judgments.
The order is declared provisionally enforceable, allowing claimants to recover sums due immediately without waiting for a possible appeal.
This decision reflects the strict application of contractual obligations despite the exceptional circumstances linked to the pandemic, reaffirming that economic difficulties and administrative restrictions do not systematically justify the suspension and extinguishment of rental payment obligations.
If you have any questions, please contact us via the contact form here.

Adagio Marseille Saint-Charles lessors win their case

The case concerns a dispute between several owners of the Adagio Marseille Saint-Charles residence and the société par actions simplifiée PV HOLDING, now PV-CP CITY, over unpaid rents for the years 2020 and 2021, during the COVID-19 crisis.

The dispute

The plaintiffs are individual owners of the Adagio Marseille Saint-Charles residence. They claim payment of unpaid rent from PV HOLDING/PV-CP CITY, which claimed to be unable to operate the premises due to government measures related to the pandemic.

Judgment

The court ruled that PV HOLDING’s claims were unfounded, pointing out that PV-CP CITY was PV HOLDING’s successor in terms of commercial lease obligations. The court also rejected the arguments of loss of the leased property and exception of non-performance put forward by the defense.

Reasons for the decision

1 Partial loss of the leased property (article 1722 of the French Civil Code)

The court rejected the argument that the impossibility of operating the premises due to government measures constituted a partial loss of the leased property. It was specified that the loss must be definitive, which was not the case here since use of the premises was temporarily suspended but not destroyed.

2 Exception of non-performance (article 1219 of the French Civil Code)

PV-CP CITY (Adagio brand) cannot invoke the exception of non-performance, since the restrictive measures were external and independent of the lessors, and the premises were still available for use.

Lack of proof of a partial contribution to exclude PV HOLDING from liability

The court ordered PV-CP CITY to pay the rent arrears, specifying the amounts due to each plaintiff, and rejected the claims of PV HOLDING, which had not proved that it had been exonerated by a partial contribution agreement.

56,328 € in covid rents

On April 11, 2024, the Marseille Magistrates’ Court ordered a PIERRE ET VACANCES company to pay a total of €56,328 in unpaid covid rents to the lessors of the Marseille Saint-Charles tourist residence.

11,040 in legal fees

The judges ordered Adagio (Pierre et Vacances Group) to pay €11,040 in legal fees (23 lessors x €480).

67,368 in total condemnation

The operator Adagio (Pierre et vacances company) must make a total payment of €67,368.

Provisional enforcement

In accordance with article 514 of the French Code of Civil Procedure, the decision is enforceable on a provisional basis.

Abusive resistance by the operator

It is difficult to understand the obstinacy of PIERRE ET VACANCES group companies in the matter of covid rents since the Court of Cassation rulings of June 30, 2024. Court dockets have been clogged since the covid years.
If you have any questions, please contact us using the contact form here.

Managing the renewal of the lease

The lessors of the Adagio Paris Tour Eiffel tourist residence have formed a group to prepare for commercial lease renewals in 2025-2026, with the PIERRE ET VACANCES group (Pv Cp City after Pv Holding and Residences Resorts France).
At the time of the last renewal, a majority of lessors defended their interests before the Commercial Rents Judge.
Many lessors who renewed their leases directly with the operator joined our group to obtain a better commercial rent.

If you have any questions, please contact us via the contact form here.

P and V refuses to apply the case law

The dispute concerned Pierre et vacances ‘ unpaid covid rents, and the conciliation amendments n°2 rejected by the Paris court.

Pierre et Vacances’ Adagio appeals against an order to pay 848,649 euros

PV HOLDING and PV-CP CITY, which operate the Adagio Tour Eiffel residence, were ordered to pay 31 lessors 848,649 euros (845,549 euros in unpaid rent and 3100 euros in article 700 CPC) in a judgment handed down on March 22, 2023 by the Paris judicial court.

Lessors ask for Adagio Tour Eiffel’s appeal to be dropped

These GROUPE PIERRE ET VACANCES companies have lodged an appeal against this judgment. The lessors have requested that the appeal be struck out on the grounds that the lessee has partially complied with the judgment.

Amendment no. 2 annulled by the court

As a reminder, the Paris Court annulled the conciliation amendments n°2 signed by some of the lessors:
“ It is clear from these documents that the lessor grants the lessee a deductible of 5 months’ contractual rent excluding taxes and charges, including the entire period from March 15, 2020 to June 13, 2020.
Reciprocally, the lessee undertakes to pay the lessor the positive difference between the contractual rent and the above-mentioned waiver, net of rent already paid, in respect of the restrictive measures periods on December 31, 2021.
Consequently, it follows from these endorsements that the lessee’s rent payments will be deferred, and not that the lessor will remit rent for the period from March 15, 2020 to June 13, 2020.
The plea raised to dismiss the action for payment brought by Mr. and Mrs. I. and by the company I. is inoperative. ”
(Judgment of the Paris judicial court, 18th civil division, March 22, 2023)
The Court of Appeal found that there was no proof that the lessee, a member of GROUPE PIERRE ET VACANCES, had made full payment of the condemnations.
The Court struck out the appeal lodged by PV HOLDING and PV-CP CITY, as requested by the lessors:
“ In particular, in the absence of a detailed individual and complete chronological account for each of the lessors mentioning with precision the sums called in, the sums paid, the overpayments resulting from the effects of the judgments fixing the amount of rent retroactively to January ^1, 2017, in the absence of an individual file for each lessor containing the documents establishing the agreements reached during the conciliations and the reality of the payments made, the information provided does not make it possible to establish that the payment orders handed down by the judgment referred to have actually been enforced. ”
“ It has not been established that enforcement of the judgment referred to would entail manifestly excessive consequences, or that the appellants would be unable to enforce the decision.
Given that, on the basis of the evidence provided, the appellants have not proved that they have complied with the judgment, the appeal should be struck out.
PV HOLDING and PV-CP CITY will be ordered to pay the costs.
Cour d’appel de Paris, Pôle 5 – Chambre 3, N° RG 23/09184, ordonnance du conseiller à la mise en état du 4 avril 2024

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