The Versailles Court of Appeal ruling of March 2, 2023 concerns a dispute between Nexity Studéa and Mrs [R] over a commercial lease for a studio flat in a student residence. Mrs. [R], who had been renting the studio since 1999, had issued several notices of termination without eviction compensation, which Nexity Studéa challenged in court, requesting the nullity of these notices or, failing that, the payment of eviction compensation.
Eviction compensation of €14,912.57
In a ruling handed down on May 10, 2021, the Nanterre Court of Justice recognized Nexity Studéa ‘s right to an eviction indemnity of €14,912.57, including various elements such as the main indemnity, reinvestment, commercial disturbance, fixed costs and administrative expenses. He also set the annual occupancy indemnity at €4,380. Mrs. [R] was ordered to pay the costs of the proceedings, and set-offs were ordered.
Nexity Studéa demands double eviction compensation
Nexity Studéa lodged an appeal, contesting the court’s calculation of the eviction indemnity and the classification of its business. It requested an increase in this indemnity to €31,344.75, arguing that its activity was closer to a para-hotel operation than to simple property management. It also requested a revision of the occupancy indemnity based on the hotel method.
Arguments of the parties
Nexity Studéa argued that its business, which consisted of subletting furnished studios with para-hotel services, was economically similar to that of a hotel. She put forward the need to reconsider the coefficient used to evaluate the indemnity, requesting the application of a higher coefficient due to the characteristics of her residence.
Mrs [R], for her part, argued that Nexity Studéa’s business was similar to that of a property manager, with most of its sales coming from the subletting of buildings. It also asserted that the para-hotel services claimed were optional and did not alter the nature of the business. It proposed a much more modest valuation of the eviction indemnity.
Rejection of Nexity Studéa’s claim for reinvestment indemnity
The Court of Appeal partially upheld the lower court’s judgment, but adjusted the main eviction indemnity to €13,677, following a revaluation based on previous years’ sales figures.
The court rejected Nexity Studéa’s claim for replacement compensation, for lack of sufficient evidence of the possibility of replacing the premises or the intention to relocate.
Activities more akin to rental management
The Court analyzed the nature of Nexity Studéa’s business, concluding that it was somewhere between that of a property manager and that of a hotel operator. It noted that, although some para-hotel services were offered, the main characteristics of the business were more akin to rental management.
Sales method for calculating eviction compensation
The sales method was therefore adopted, but with an adjustment to the coefficients.
Refusal of Nexity’s claim for unjustified replacement compensation
The replacement indemnity is intended to cover transfer costs relating to the acquisition of a business or leasehold interest of the same value.
However, the tenant’s entitlement to compensation for reinvestment costs is subject to proof that he will relocate his business, which Nexity Studea does not allege.
Nexity Studea also makes no mention of its efforts to replace the lot, or to find a nearby residence offering available lots, which would enable a possible pooling of services to be envisaged. Consequently, the judgment will be reversed insofar as it accepted this claim for replacement costs.
With regard to the occupancy indemnity, the Court rejected the hotel method, stressing the absence of monovalence of the premises, and maintained the indemnity at €4,380, in line with the rental value calculated by comparison with local rents.
Conclusion: compensation amounts for a Nexity student residence
The Court of Appeal partially reversed the judgment, revising the amount of the main eviction indemnity to €13,677, while confirming the other points, in particular the non-monovalence of the premises and the valuation of the occupancy indemnity. This decision is based on an in-depth analysis of the characteristics of the business and commercial practices in student residence leases.
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Full text of the decision:
DISPUTE DESCRIPTION
By private deed dated August 31, 1999, Mrs. [W] [R] entered into a commercial lease with SGRS, which later became Lamy Résidences, and then Nexity Studea, covering the rental of a student residence.
company Nexity Studea, for a studio apartment constituting lot no. 205 in a ‘[Address 6]’ residence located at [Address 3] in [Location 7], for a period of nine years, from
nine years, from October 1, 1999 to September 30, 2008.
On March 31, 2008, Mrs [R] gave notice to vacate, without any eviction indemnity, with effect from September 30, 2008.
On March 30, 2009, Mrs. [R] sent a second notice to Lamy Résidences, with no renewal offer, effective September 30, 2009.
By deed dated September 29, 2010, Lamy Résidences summoned Mrs [R] to appear before the Nanterre Regional Court (Tribunal de Grande Instance de Nanterre), seeking a declaration that the two successive dismissals were null and void.
nullity of the two successive dismissals and, in the alternative, to set the amount of the eviction indemnity at €21,806.35.
In a ruling handed down on October 24, 2013, the Nanterre Regional Court recognized Nexity Studea’s right to compensation for eviction, and before ruling on the case
L] to determine the amount of the eviction compensation and the occupancy compensation.
The legal expert submitted his report on November 28, 2017.
In a judgment dated May 10, 2021, the Nanterre judicial court :
– set the eviction compensation owed by Mrs [R] to Nexity Studea at €14,912.57, broken down as follows:
– 12,350.16 € for the main eviction indemnity ;
– 1,235.02 for the replacement indemnity;
– 797.76 € for commercial disturbance;
– 179.63 € for fixed expenses;
– 300 € for moving expenses;
– 50 € for administrative expenses;
– set the annual occupancy indemnity owed by Nexity Studea to Mrs [R] at €4,380;
– ordered Nexity Studea, as successor in title to Lamy Résidences, to pay Mrs [R] the sum of €35,117.79, the amount provisionally determined as at
November 28, 2017 (date of filing of the report), after deduction of the sums paid by Nexity Studea in the same respect;
– ordered the mutual claims of the parties to be set off against each other;
– ordered Mrs [R] to pay Nexity Studea the sum of €5,000 under article 700 of the French Code of Civil Procedure;
– ordered Mrs [R] to pay the costs of the proceedings, which will include expert appraisals;
– dismissed the parties’ further or contrary claims;
– ordered provisional execution of the decision.
In a statement dated July 19, 2021, Nexity Studea lodged an appeal against the judgment.
CLAIMS OF THE PARTIES
In its final submissions, served on March 16, 2022, Nexity Studea asked the court to :
– Declare the appeal lodged by Nexity Studea admissible and well-founded,
Allow the applicant’s appeal,
– Set aside the judgment of the Nanterre District Court of May 10, 2021 insofar as it :
– Set the eviction compensation owed by Mrs [R] to Nexity Studea at €14,912.57, broken down into :
– 12,350.16 € for the main eviction indemnity,
– 1,235.02 € for the replacement indemnity,
– 797.76 € for commercial disturbance,
– 179.63 € for fixed costs,
– 300 € for moving expenses,
– 50 € for administrative expenses,
– Set the annual occupancy indemnity owed by Nexity Studea to Mrs [R] at €4,380,
– ordered Nexity Studea, as successor in title to Lamy Résidences, to pay Mrs [R] the sum of €35,117.79, the amount provisionally determined as at
November 28, 2017 (date of filing of the report), less the sums paid by Nexity Studea in the same respect,
– Ordered the set-off of the parties’ reciprocal claims,
– Confirm the remainder of the judgment under appeal,
And, ruling anew on the invalidated points,
On the eviction indemnity,
Primarily,
– Fix the eviction indemnity owed by Mrs [R] to Nexity Studea for lot no. 205 at the total sum of €31,344.75, except in full, broken down into :
– 22,682.30 €, unless otherwise agreed, as the main eviction indemnity,
– 2,268.23 €, unless otherwise agreed, in replacement costs,
– 797.76 €, in full, for commercial disturbance,
– 300 €, unless otherwise agreed, for removal costs,
– 500 € for administrative costs, unless otherwise agreed,
– 4,796.55 € in fixed costs,
In the alternative, if the Court were to consider that the activity more closely resembles that of a property administrator,
– Confirm the judgment on the amount of the eviction indemnity,
On the occupancy indemnity,
– Primarily, set the annual occupancy indemnity at €1,351.16 at 2017 value for lot no. 205, applying the hotel method,
– In the alternative, should the Court of Appeal decide to apply the comparison method, to set the amount of the annual occupancy indemnity
2017 value to the sum of €3,657,
In any event,
– Declare Mrs [R]’s cross-appeal unfounded and dismiss it,
– Dismiss Mrs [R]’s claims in their entirety,
– Order Mrs [R] to pay the sum of €8,000 under article 700 of the French Code of Civil Procedure,
– order Mrs. [R] to pay all the costs of the present proceedings, including those of the first instance and the expert’s fees.
By final submissions served on December 20, 2021, Mrs [R] asks the court to :
– Reverse the judgment handed down by the Nanterre Regional Court on May 10, 2021 (RG 18/05503) insofar as it :
– Set the eviction compensation owed by Mrs [R] to Nexity Studea at €14,912.57, broken down into :
– 12,350.16 € for the main eviction indemnity,
– 1,235.02 € for the replacement indemnity,
– 797.76 € for commercial disturbance,
– 179.63 € for fixed costs,
– 300 € for moving expenses,
– 50 € for administrative expenses,
Ruling again,
Set the eviction indemnity at €1,939.44, broken down as follows :
– 1,281.75 € for the main eviction indemnity,
– 128.06 € for commercial disturbance,
– 179.63 € for fixed costs,
– 300 € for moving expenses,
– 50 € for administrative expenses,
In the alternative, the sum of €6,934.86, broken down into :
– 6,227.17 € for the main eviction indemnity,
– 128.06 € for commercial disturbance,
– 179.63 € for fixed costs,
– 300 € for moving expenses,
– 50 € for administrative expenses,
– Confirm the remainder of the judgment,
– Order Nexity Studea to pay Mrs [R] €3,000 under article 700 of the French Code of Civil Procedure,
– And to pay all appeal costs.
The closing order was issued on October 13, 2022.
For a full account of the facts and proceedings, the Court expressly refers to the judgment referred to and to the parties’ written submissions, as prescribed in
article 455 of the French Code of Civil Procedure.
REASON
On the amount of the main eviction indemnity
The judgment noted the partial loss of the business, corresponding to the rental of the apartment, and that the activity of managing a student residence is between the activities of a business manager and the management of a student residence.
and that the student residence management business falls between the activities of property manager and hotel operator, so that the sales method could not be applied. He then
calculated the amount of eviction compensation on the basis of annual sales (average 2016-2018: €6,175.08), to which he applied a coefficient of 1.8
as proposed by the expert, to arrive at a main eviction indemnity of €12,350.16.
Noting that the court had ratified the conclusions of the expert’s report, Nexity Studea argued that the expert had misapplied the method of calculating the main eviction indemnity.
method of calculating the principal indemnity, but is seeking confirmation of the judgment which held that the eviction will result in the partial disappearance of the goodwill
corresponding to the premises rented by Mrs. [R], the appellant operating a business consisting of all the studios she makes available to her customers by providing them with para-hotel
providing them with para-hotel services.
She asked that the multiplying coefficient be reviewed, by looking at which of her activities was the closest from an economic point of view, and deduced from her analysis that it was far from being the closest from an economic point of view.
from its analysis that it is far from that of a property manager, but closer to that of a service residence operator and a para-hotel business.
In view of the residence’s good location and attractive features, it requests that a coefficient of 3.3 be applied to sales including VAT, rather than 2
on sales excluding VAT, as stipulated in the judgment.
She therefore seeks the sum of €22,682.30 in this respect, and in the alternative, confirmation of the judgment and rejection of the method proposed by Mrs [R].
Ms. [R] maintains that the expert was right to quantify the indemnities on the basis that the activity of a student residence operator is similar to that of a property manager.
property manager, Nexity Studea’s main activity being the subletting of studio flats.
These other services are optional and are designed to ensure a favorable tax environment for landlords. The company disputes the services claimed by Nexity Studea, arguing that the sales figures
reveals that it is only a building subletting business, as several court rulings have held. It asserts that the business of
of operating a student residence is similar to that of a property manager, underlines the differences between the residence in question and a hotel business
and that the administrative courts have ruled that these services cannot be assimilated to those of a tourist residence. It proposes
an annual sales figure of €2,740 and a coefficient of 1.4, i.e. a goodwill value of €3,826.
Nexity Studea, whose earning power is well above hotel industry standards. It asserts that the sales multiple method
is inappropriate, and that the appropriate method is that of a multiple of EBITDA.
*****
Article L.145-14 of the French Commercial Code provides that the lessor may refuse to renew the lease. However, subject to the exceptions provided for in articles L.145-
17 et seq., the lessor must pay the evicted lessee an eviction indemnity equal to the prejudice caused by the failure to renew the lease.
This indemnity includes the market value of the business, determined in accordance with industry practice, plus, where applicable
the normal costs of removal and relocation, as well as the costs and transfer duties payable for a business of the same value, unless the owner proves that the loss is due to a breach of contract.
the owner proves that the loss is less.
After recalling the rental situation, the legal expert Mr. [L] points out that lot n°205 is a 17.8 m² studio apartment in good condition, in a twelve-storey residence located near the [L] and the [L].
twelve-storey residence located close to [Address 6] and the ring road, with a reception area from 7.30 a.m. to 11.30 a.m. and a breakfast room in the basement.
basement with a ‘very basic’ breakfast room and laundry and sanitary facilities.
He presents the two possible hypotheses, depending on whether or not we consider that there is a business unit and that the loss of a lot corresponds to the loss of part of the business, or that the lots are independent of each other.
or that the lots are independent. In the case of an operating unit, it is appropriate to consider that the activity of managing a serviced residence is comparable to that of a property manager.
services is comparable to that of a property manager, or to that of a furnished hotel manager, but in view of the significant differences in the two cases,
the appraiser considers that the business of managing a serviced residence falls between the two, so he proposes an estimate of the value of the business based on
basis of sales, excluding or including VAT. Using this method, he estimates the indemnity at €12,220.
Assuming the absence of an operating unit, he arrived at an indemnity of €6,270, corresponding to a limited loss of rent.
The judgment found a partial loss of goodwill, corresponding to the rental of the studio in question, and Nexity Studea is asking for the judgment to be
Nexity Studea is seeking to have the judgment upheld on this point, pointing out that it operates a single business within the Studea residence [Locality 7] in which the studio is located.
While Mrs [R] contests the existence of a business unit and the effectiveness of the hotel services allegedly provided, arguing that it is a hotel activity, Mrs [R] also contests the existence of a business unit and the effectiveness of the hotel services allegedly provided, arguing that it is a hotel activity.
sub-letting of real estate, she supports her reasoning by citing case law that has held that there is a partial loss of goodwill.
partial loss of goodwill. Furthermore, while the judgment had noted that Mrs. [R] had not demonstrated the possibility of replacing these premises with
by equivalent premises in another residence operated by Nexity Studea, Mrs [R] provides no explanation on appeal of any such possibility of replacement.
on such a possibility of replacement.
Consequently, the judgment will be upheld insofar as it found a partial loss of goodwill due to the cessation of rental of the apartment.
*****
The legal expert considered that the activity of managing a serviced residence falls between that of a property manager and that of a hotel operator.
on this point.
Nexity Studea argues that its business is similar to that of a hotelier in that it rents out empty units, furnishes and equips them in order to offer them to customers, which it then sells.
It offers them para-hotel services and has staff to look after its customers. It points out that the para-hotel business
as defined administratively is very similar to that of a furnished hotel, in terms of offering breakfasts, cleaning the premises
linen and reception services. It argues that the optional nature of certain services does not alter this
this analysis, as these services require the company to have the necessary staff to provide them.
However, the court-appointed expert noted that the usual services provided by student residences are far removed from those of a conventional hotel (in terms of reception, cleaning, etc.).
services, room cleaning, breakfasts, etc.), which involve a much larger payroll, and that hotel stays are for
that hotel stays are for 2 to 3 days, whereas here the duration is several months, and that hotel and student residence rents represent a very different proportion of sales.
a very different proportion of sales.
Furthermore, Mrs. [R] is not contradicted when she states that commercial accommodation is not authorized in a residential building, when she points out that the occupants of the
that the occupants of Nexity Studea are “tenants”, which is not the case for hotel guests, and that they must insure the premises they occupy
that they must insure the premises they occupy themselves, subscribe to energy supply subscriptions, are subject to the payment of council tax
maintenance of the premises, and that the leases entitle them to a right of renewal. She also points out that linen, breakfast and cleaning
and cleaning services are not included, nor are they provided at weekends (in the case of breakfasts).
Nexity Studea’s business is far removed from that of a hotelier.
However, Nexity Studea’s business cannot be equated with property management either.
that studio rentals are for a few months, whereas standard residential leases are for 3 or 6 years, and that in this case the owner of the premises receives rent even if his or her lot is not rented.
that the owner of the premises receives rent even if his lot is not rented, and that the manager of the residence is an employee and not a director remunerated on a pro rata basis of the rents for which receipts are issued.
Nexity Studea also rightly points out that it concludes contracts with customers on its own behalf, that it leases the properties and offers them to its own customers, and that it is not a property manager.
and offers them to its own customers, that it is not paid by the landlord but, on the contrary, pays him rent, that it is the owner of the furniture
and is therefore responsible for their repair and replacement.
In view of the foregoing, and even if Nexity Studea emphasizes the economic proximity between its business and that of managing a furnished hotel, it would appear that its business borrows from both the owner’s and Studea’s activities.
its business borrows from both that of property manager and that of hotel operator, and falls between the two.
*****
The legal expert estimated the value of the business on the basis of 1.5 to 2 times sales excluding VAT, or 1.3 to 1.8 times sales including VAT. Using the
margins (i.e. 2 for sales excluding VAT and 1.8 for sales including VAT), and based on average sales from 2014 to 2016, he arrives at a figure of
12.220 €.
The judgment updated the basis of calculation, using sales excluding VAT for the years 2016 to 2018, and thus determined the amount of the main eviction indemnity at
compensation to €12,350.16.
While Nexity Studea points out the advantages of the [Address 8] residence in terms of environment, which are conducive to the students occupying the residence, these elements were known to the legal expert.
were known to the court-appointed expert, who took them into account in his report, and the fact that the residence is in both “good condition” and
cannot justify the application of a multiplier coefficient of 3.3 to sales, whereas the expert, after estimating that the basis of calculation
could be estimated at between 1.5 and 2 times sales before tax, he used a coefficient of 2, which is a high coefficient; all the more so since Mrs.
[R] argues that a property manager’s goodwill would usually be valued at 140% of sales including VAT.
The fact that Mrs [R] points out that Nexity Studea’s sales in 2020 amounted to €103,714,429 does not allow her to deduce, on the basis of the information she has provided, that the company’s sales in 2020 amounted to €103,714,429.
that the profit claimed by this company for its apartment represents 4.13% of its sales, so that its arguments to exclude the application of the
its argument that a multiple of sales should not be applied in favor of EBITDA cannot be accepted.
Nexity Studea reports sales for Mrs [R]’s studio of €20,620.28 for the period from January 1, 2018 to December 31, 2020,
based on an accounting statement produced by the appellant and not contested by the respondent. i.e. a monthly average of €6,873.42, rounded up to €6,873.
Applying a coefficient of 2 to sales excluding VAT gives a figure of €13,746, and applying a coefficient of 1.8 to sales including VAT gives a figure of
13.609 €.
The court will therefore retain the average of these two amounts, i.e. €13,677.5, rounded up to €13,677, at which the main eviction indemnity will be set, and the judgment will be reversed in this respect.
be reversed in this respect.
Ancillary indemnities due to Nexity Studea
On the replacement indemnity
The legal expert indicated that 10% of the value of the business was usually retained for this purpose, but that case law was divided on the inclusion of this indemnity in the event of eviction.
for the eviction of a studio in a serviced residence.
The judgment held that the purpose of this indemnity was to compensate the tenant for the costs he would have to bear in acquiring a new business or a new right to lease.
a new right to a lease, so that it was due, and set it at 10% of the value of the business.
Nexity Studea is requesting that this indemnity be set at 10% of the main eviction indemnity, pointing out that its purpose is to cover the costs and transfer duties
and transfer duties to be paid for the acquisition of a new business, and must be set aside if it is proven that the lessee is unable to acquire the business, or has no
intention to relocate, which Mrs [R] does not demonstrate.
Mrs [R] points out that Nexity Studea has not demonstrated that it is in a position to acquire a student residence business, and that its accounts show that it never buys a business.
that it never buys student residence businesses and lots, since it receives remuneration from the developers of student residence buildings
on the contrary, it receives remuneration from the developers of student residence buildings when it undertakes to obtain commercial leases from the individual purchasers of these lots with a view to their operation.
*****
The compensation for reinvestment is intended to cover transfer costs relating to the acquisition of a business or leasehold interest of the same value.
However, the tenant’s entitlement to compensation for reinvestment costs is subject to proof that he will be relocating his business, which Studea Nexity does not allege.
does not allege.
Nexity Studea also makes no mention of its efforts to replace the lot, or to find a nearby residence offering available lots,
which would make it possible to envisage a possible pooling of services. Consequently, the judgment will be reversed insofar as it accepted this claim for replacement costs.
costs.
Compensation for commercial disruption
The legal expert proposed to retain an indemnity corresponding to six months calculated on the basis of average operating results.
adopted this reasoning to order Mrs. [R] to pay €797.76.
Nexity Studea is seeking to have the judgment upheld on this point. Mrs [R] points out that the calculation of this sum should be based on operating or net income
or net income, i.e. 4.13% of sales for the lot in question, so that this indemnity would be €128.06.
However, as the court had previously indicated that this 4.13% rate could not be retained, Mrs [R]’s reasoning cannot be followed.
The judgment will therefore be confirmed insofar as it ordered Mrs. [R] to pay €797.76 in this respect.
Fixed costs
The expert retained 50% of the centralized operating costs, stating that while Nexity Studea argued that property tax and centralized operating costs should be taken into account, it was not.
property tax and centralized operating expenses should be taken into account, the tax should be borne by the owner, and the expenses should not all be fixed and some should be prorated.
prorated.
The court followed the expert’s analysis, ruling that not all average taxes were fixed costs, and that Nexity Studea would not have to pay them on a pro rata basis.
would not have to pay them in the future for Mrs. [R]’s studio. Using the same 6-month period as the expert, he calculated these costs at €179.63.
Nexity Studea argues that the loss of a rental unit in the residence results in a loss of sales and a reduction in the overall profitability of the
and that all expenses must be taken into account, since they do not depend on the number of rooms operated. She asks that
taxes and duties be included as fixed costs, and that the additional annual costs arising for her from the loss of the studio be assessed over 9 years, so that
that Mrs [R] be ordered to pay €4,796.55.
In the operative part of her conclusions, Mrs [R] requests confirmation of the amount of fixed costs at €179.63, and does not comment on this point in the body of her conclusions.
in the body of her conclusions.
*****
As indicated in the judgment, Nexity Studea will have to bear fixed charges that it will not be able to pass on to this lot, which is likely to
the parties. He also pointed out that taxes were not fixed costs, and that Nexity Studea would not have to pay them.
would not have to pay these charges in the future for Mrs. [R]’s studio.
While Nexity Studea maintains that it will have to pay taxes as a fixed expense, it does so by way of assertion.
The Court also notes that, under the terms of the lease, property tax is paid by the lessor. The mere fact that Nexity Studea produced operating accounts for
for the years 2018, 2019 and 2020, even if signed by its director, is not sufficient to justify its claim that Mrs [R] should bear part of the taxes, operating
taxes, operating expenses and fixed charges, as these documents have not been drawn up or even endorsed by a chartered accountant or auditor.
auditor. Taking into account a period of 9 years also appears excessive, so that Nexity’s request will not be granted.
Studea.
Consequently, the judgment will be confirmed insofar as it ordered Mrs [R] to pay €179.63 in this respect.
Moving expenses
Both parties request that the judgment setting the amount of moving expenses at €300 be confirmed, and this request will be granted.
Administrative expenses
The expert was not asked to rule on this point. The judgment held that these costs were limited to the termination of the contract
with the occupant of the premises, and retained the sum of €50 in this respect.
In the operative part of her conclusions, Mrs [R] requests confirmation of this sum.
Nexity Studea maintains that it is also responsible for carrying out other administrative formalities, in particular the modification of its website and the termination of its studio subscriptions.
These subscriptions had been negotiated on the basis of the number of studios operated in the residence.
However, the judgment had already expressly noted that Nexity Studea had not demonstrated the need to modify its website as a result of the loss of the studio, nor that the loss of the studio had induced Nexity Studea to modify its website as a result of the loss of the studio.
of the studio, nor that this would incur costs in terms of the studio’s Internet subscription or the cost of paying for the studio’s water and electricity.
The Court notes that Nexity Studea has not produced any further evidence to demonstrate the reality of these statements.
Consequently, the judgment will be confirmed insofar as it ordered Mrs [R] to pay the sum of €50 in this respect.
On the amount of the occupancy indemnity
The legal expert determined the sum of €4,380 per year on the basis of the method of comparison with prevailing prices (after deducting 20% for management costs and
and 10% for precariousness), and the sum of €3,933 per annum under the hotel method (after taking into account the occupancy rate, deducting a coefficient of
coefficient of 40% to take account of management costs, and 10% for precariousness).
The ruling rejected the monovalent nature of the premises, which could be converted without major work, and therefore did not apply the hotel method but rather the comparative method.
the comparative method. Taking into account the differences highlighted by Nexity Studea between the different types of studio apartments, it nonetheless considered that these references could be used as a basis for comparison.
nevertheless considered that these references could be used while taking into account the particularities of the studio, to which the expert applied an abatement of
20%. As a result, the judgment set the rental value at €4,380.
Nexity Studea maintains that the premises are monovalent, the monovalence being assessed in the context of a possible change of business activity
and not in the context of a change to a civil activity. It adds that, since the buildings were built for use as serviced residences, they cannot be
be converted to another commercial use without major alterations, so that the lot in question should be considered as a single-use property. The
deduces that the hotel method should be applied, and that the occupancy indemnity should be set in accordance with the practices observed in the industry in question.
Mrs [R] asks that the hotel method be rejected, and that the judgment be confirmed insofar as it set the occupancy indemnity at €4,380. She states that
the premises can be modified without major work, in particular for use as offices or workshops.
*****
Article L.145-28 of the French Commercial Code stipulates that no tenant entitled to eviction compensation may be forced to leave the premises before receiving it.
received. Until such compensation is paid, the tenant is entitled to remain in the premises under the terms and conditions of the expired lease. However, the occupancy indemnity
is determined in accordance with the provisions of sections VI and VII, taking into account all relevant factors.
Article L145-33 stipulates that rents for renewed or revised leases must correspond to the rental value. Failing agreement, this value is determined
determined on the basis of the characteristics of the premises in question, the use to which the premises are put, the respective obligations of the parties, and local market factors,
prices currently charged in the vicinity, with a decree issued by the Conseil d’Etat specifying these factors.
It follows that the lessee, who may remain in the premises until payment of the eviction indemnity, is liable for an occupancy indemnity which must be set at the rental value.
fixed at the rental value.
Lastly, article R.145-10 states that the lease price for premises built for a single use may, by derogation from articles L.145-33 and R.145-3 et seq.
Premises are monovalent when they have been built for a single use and it is not possible to assign them to another purpose without major work or costly alterations.
Although Nexity Studea maintains that the premises are monovalent, this monovalence was not retained by the legal expert or by the judgment, and Nexity Studea has not demonstrated that the serviced residences cannot be assigned to another commercial use, and that their assignment as a residential building cannot defeat the monovalence. Mrs [R] points out that the main room and bathroom can be used as an office or workshop without any particular work, and in the absence of any evidence from Nexity Studea to prove the above, the judgment will be confirmed insofar as it did not uphold the monovalence of the premises. Accordingly, the rental value should not be calculated using the hotel method.
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Nexity Studea maintains that the occupancy indemnity should be compared with studios rented by companies operating serviced residences, and disputes the fact that the appraiser took into account residential studios on the civil rental market, which are not comparable with commercial rents. It adds that the expert did not take into account part of its services, included in the rent paid by customers.
In his comparison with prevailing prices, the legal expert took into account six rentals carried out in [Locality 7] between 2011 and 2014, four rental offers presented in [Locality 7] in 2017, as well as three studio offers in student residences also located in [Locality 7].
However, as the judgment noted, while there are significant differences between studios in serviced residences and other studios, in terms of the services offered to “tenants”, the rents charged in the vicinity can usefully be taken into account, and the appraiser did take into account the specific nature of the services offered by serviced residences by applying a deduction of 20% for management and caretaking costs.
If the occupancy indemnity constitutes the consideration for the use of the premises, Nexity Studea cannot rely on the rents it pays to the owners of studios in the [Location 7] residence to deduce that this is the amount of the occupancy indemnity due to Mrs [R].
The expert’s abatement refers to “management costs that are lower than for individual rentals”, citing in particular the absence of management fees, security guard fees, etc., but this list is expressly drawn up in a non-exhaustive manner, so that Nexity Studea cannot claim that it does not take into account some of the services it offers its customers, such as the residence manager, internet or laundry.
The court agrees with the tribunal that the 20% discount applied by the legal expert is intended to take into account the cost of the specific services offered by Nexity Studea in a serviced residence, compared with a studio offered for rent on the market ‘outside serviced residences’.
The judgment will therefore be upheld insofar as, in view of the rental value of the premises of €6,087.60, it applied a deduction of 20% for costs incurred by a rental residence and 10% for precariousness, and then retained an annual occupancy indemnity amount rounded off to €4,380.
Other claims
The judgment will be confirmed insofar as it ordered the set-off of claims, and insofar as it ordered the payment of 1st instance costs and irreducible expenses.
Nexity Studea being unsuccessful in its appeal, will be ordered to pay the costs of the appeal, as well as the sum of €2,000 to Mrs [R] under article 700 of the French Code of Civil Procedure.
FOR THESE REASONS
The court, ruling by contradictory decision,
Confirms the judgment, except with regard to the amount of the main eviction indemnity and the replacement indemnity, ruling again on these points,
Fixes the amount of the main eviction indemnity at €13,677,
Dismisses Nexity Studea’s claim for reinvestment compensation,
Declares that the eviction indemnity owed by Mrs [R] to Nexity Studea amounts to €15,004.39, with the addition thereof,
Dismisses the parties’ other claims,
Order Nexity Studea to pay Mrs. [R] the sum of €2,000 under article 700 of the French Code of Civil Procedure, and to pay all costs of the appeal.
The judgment was delivered publicly and made available at the court clerk’s office, the parties having been notified in advance in accordance with the conditions set out in the second paragraph of article 450 of the French Code of Civil Procedure.
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