Local commercial factors

Case law on the removal of the cap on commercial rents

Legal context

The commented judgment deals with the removal of the cap on commercial rents, a mechanism allowing the lessor to increase the rent beyond the variation of the reference index when renewing the commercial lease. This removal of the cap is possible if significant changes in the local commercial factors are proven.

Local commercial factors

Local commercial factors include elements such as population growth, public transport use and the presence of commercial brands in the catchment area. These factors must have a positive impact on the business in order to justify the removal of the cap.

Court of Appeal decision

The court of appeal ruled that the evidence of a significant change in the local commercial factors had not been provided. It therefore rejected the request to remove the rent cap, thus maintaining the rent at its initial rental value.

Proof of Significant Change

The lessor must demonstrate that the changes in the local commercial factors have a positive impact on the tenant’s business. A simple evolution of the income or the stability of the brands is not enough to prove a significant improvement.

Case of the Luxury Jewelry Store

In this case, the lessor did not succeed in proving that the modifications of the local commercial factors had a favorable impact on the luxury jewelry business. The evolution of the income and the stability of the brands were not sufficiently significant.

International Tourist Zone

The lessor attempted to use the integration of the street into an international tourist zone to justify the removal of the ceiling. However, the court ruled that this integration did not objectively benefit a jewelry store, which is not a night-time activity.

Application of the index-linked rent

In the absence of sufficient evidence, the court applied the index-linked rent, i.e. 100,158 euros per year. This amount is based on the reference index for commercial rents, without lifting the cap.

Case law and Right to renewal

Case law reiterates that the lessor must prove an objective and lasting deterioration in the tenant’s activity in order to invoke a notable change in local commercial factors. The loss of customers due to poor management is not enough.

Conclusion

The significant change in local commercial factors must be assessed objectively and sustainably. In the absence of sufficient evidence, the rent remains capped at its index value, thus protecting the interests of the tenant.

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