The ruling handed down by the Versailles Court of Appeal on March 2, 2023 concerns a dispute between Nexity Studea and Mrs [R], relating to a commercial lease for a studio flat in a student residence.
I. A studio apartment in a student residence
The ruling handed down by the Versailles Court of Appeal on March 2, 2023 is part of a classic dispute in commercial lease law, concerning the setting of eviction compensation. It pits Nexity Studea, the lessee, against Mrs. R., the lessor of a studio apartment in a student residence. This judgment is interesting in that it addresses technical issues concerning the valuation of eviction compensation, the application of calculation methods, and the qualification of the business being operated.
II. Facts and procedure
In 1999, Mrs R. entered into a commercial lease with SGRS, which subsequently became Nexity Studea, for a studio apartment in a student residence. The lease expired in 2008, and Mrs. R. gave notice of termination without compensation. Nexity Studea then contested the notice and applied to the Nanterre court for payment of an eviction indemnity. In a ruling dated May 10, 2021, the court partially upheld Nexity Studea‘s claim, setting the eviction indemnity at €14,912.57.
Unsatisfied, Nexity Studea appealed, requesting a reassessment of the compensation to €31,344.75, arguing that the legal expert and the court had incorrectly applied the calculation methods.
III. Legal issues
The central issue in this judgment is the method used to value the eviction indemnity, and in particular the classification of Nexity Studea‘s business activity. Should this activity be considered to be similar to that of a property manager or hotel operator? A multiplier coefficient must be applied to determine the value of the business and, consequently, the amount of the eviction indemnity.
IV. The Court’s solution
Qualification of the business :
The Court of Appeal confirms that Nexity Studea’s business activity borrows from both that of a property manager and that of a hotel operator, falling somewhere between these two activities. The Court therefore refused to support Nexity Studea’s claim that its business was essentially hotel-related, which would have justified a higher multiplier.
Setting the eviction compensation :
The Court updated the basis for calculating the eviction indemnity by taking an average of sales from 2016 to 2018. It applied a coefficient of 2 to sales excluding VAT, resulting in an eviction indemnity of €13,677, slightly higher than that set by the court of first instance.
Compensation for replacement :
The Court rejected Nexity Studea‘s claim for compensation for reinstatement, ruling that this compensation was not due in the absence of proof that the company planned to relocate its business.
V. Critical analysis
This decision illustrates the complexity of qualifying activities carried out under commercial leases for the purposes of determining eviction compensation. By refusing to follow Nexity Studea‘s logic, the Court of Appeal’s decision demonstrates a certain rigor in applying the principles for assessing eviction compensation. The Court insists on the need not to confuse para-hotel activities with those of a traditional hotel, which has important consequences for the calculation of compensation.
However, it is regrettable that the Court did not go further into the precise criteria for deciding between the different valuation methods, leaving the door open to uncertainty in similar cases in the future.
VI. Conclusion
The Versailles Court of Appeal’s ruling confirms a cautious and balanced approach to determining eviction compensation, respecting the specific features of the rental market and the activities carried out by lessees. Although technically complex, this decision is a reminder of the importance of a detailed analysis of factual situations when applying the principles of commercial lease law.
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