Eviction compensation in student residences from the landlord’s perspective

Student residences, like tourist residences, are subject to specific rules regarding commercial leases. When a landlord wishes to resume management of their property or terminate the lease with the operator, they often face significant financial obligations, including the payment of eviction compensation.

Understanding the context of student residences

Student residences are structures where investors purchase accommodation and entrust it to a single operator via a commercial lease. This model offers attractive tax advantages, but it also carries risks, particularly at the end of the lease. Operators of student residences generally offer hotel-like services, such as reception, cleaning and the provision of linen.

The landlord’s obligations at the end of the lease

When the commercial lease expires, the landlord may decide not to renew it. However, this decision generally entails the payment of eviction compensation to the operator. This compensation is intended to compensate the operator for the loss of their business. The amount of this compensation is often equivalent to one or two years’ turnover for the property in question. This calculation takes into account several factors, including the turnover generated by the property and any losses suffered by the operator.

The financial consequences for the landlord

The payment of eviction compensation can represent a considerable financial burden for the landlord. In addition to this compensation, the landlord must also be aware of the tax risks. For example, if the property is no longer operated in accordance with the initial conditions (such as the provision of hotel-related services), the landlord may be required to repay part of the VAT initially recovered.

Steps to be taken

To terminate the lease, the landlord must give notice to the operator by bailiff’s writ at least six months before the expiry of the lease. If the operator disputes the amount of the eviction compensation, an expert assessment may be ordered by the court to assess the loss. During this period, the operator may continue to occupy the premises in return for payment of an occupancy allowance.

Possible alternatives

There are alternatives to direct management by the landlord. For example, co-owners can organise themselves to find a new manager or opt for self-management by setting up a simplified joint-stock company (SAS). This solution allows them to retain the tax benefits while regaining control of the residence.

Conclusion

Eviction compensation is a major financial issue for landlords of student residences. It is crucial to fully understand the legal obligations and financial consequences before making a decision. Consulting a solicitor specialising in commercial tenancy law can help navigate this complex process and minimise risks.