A hotel residence
The judge of commercial rents
On January 24, 2024, the Rennes Court of Appeal handed down a ruling concerning a dispute between SARL Résidence Reine Marine and the couple [N] over the renewal of a commercial lease for an apartment. Résidence Reine Marine, which operates a hotel residence, had asked for the annual rent to be reduced to 7,874 euros exclusive of tax, which the couple [N] had refused. The commercial rents judge set the rent at 13,300 euros excl. tax per year from July 1, 2016, a decision contested by Résidence Reine Marine.
Résidence Reine Marine lodged an appeal, requesting that the rent be set at 7,400 euros excluding VAT per year, or failing that, that a new expert be appointed. It put forward a number of arguments, including inconsistencies in the legal expert’s report, an occupancy rate of 58.55% instead of 60%, and a levy rate of 25% instead of 32.5%. She also pointed out the property’s geographical isolation and high operating costs.
The couple [N] asked for the initial judgment to be confirmed, arguing that the residence’s seafront location and numerous services justified the rent set. They also contested the amicable appraisal presented by Résidence Reine Marine.
60% occupancy rate
The Court of Appeal confirmed that a hotel residence is a single-use property, and that the rent must be determined in accordance with hotel industry practices. It applied an average sales figure of 1,764,424 euros and an occupancy rate of 60%.
A 32.5% revenue or effort rate
The 32.5% levy rate was deemed appropriate, taking into account the services offered and the quality of the hotel residence.
A 10% surcharge for work carried out by lessors
The Court also took into account the obligations of lessors, notably major repairs and replacement of furniture, as well as property tax and a fixed charge of 8 euros per m² for co-ownership expenses. It corrected the rent by applying a 10% mark-up for work to be carried out by the lessors.
A rent of 13,171.17 euros excluding VAT
In conclusion, the Court set the rent at 13,171.17 euros excl. VAT per annum from July 1, 2016, partially overturning the initial judgment. Résidence Reine Marine’s claims were dismissed, and the company was ordered to pay the couple [N] 3,000 euros under article 700 of the French Code of Civil Procedure, as well as the costs of the appeal. The parties will be required to draw up a new lease within one month of the judgment being served, failing which the judgment will become the lease.
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