Occupancy allowance: a criticizable automatic deduction for precariousness

In brief:

Theoccupancy indemnity may be reduced for precariousness if the tenant suffers prejudice due to legal uncertainty, but this abatement is refused without concrete proof of prejudice or economic impact. Exceptions include the non-indispensability of the premises to the tenant’s main business, growth in sales, or work carried out by the tenant that is not precarious.

Occupancy indemnity: definition of precariousness in case law

The occupancy indemnity may be subject to a reduction for precariousness, due to the legal uncertainty that has prevented the lessee from making the necessary investments or amortizing those already made (Cass. civ. 3e, March 20, 2007, no. 06-10.476, unpublished).

Exception 1 for a reduction in occupancy indemnity: premises not essential to business activity

However, this reduction in occupancy indemnity for precariousness is not justified when the premises in question, although used as a storeroom, is not essential to the tenant’s main business activity (CA Paris, 16th ch., November 23, 2005, no. 04/13690).

Lack of proof of prejudice

Theallowance for precariousness is rejected if the tenant does not prove the reality of a prejudice. (Cass. Civ 6 novembre 1970, JCP 1971, III, p. 229)

Exception 2: Failure to prove the economic impact of non-renewal

The lessee must establish the economic impact of non-renewal of the commercial lease on his business. (CA Toulouse, December 15, 2009, n°09/02230)

Exception 3: Growth in sales since notice was given

Growth in sales since the notice of termination demonstrates the absence of prejudice (CA Versailles, October 6, 2015, n°14/07907), which would justify a reduction in the occupancy indemnity (replacing the rent after termination).

Exception 4: Work carried out by the lessee

This will be particularly the case where work has been carried out by the operator of a tourist residence that is not precarious, as noted by the legal expert in hislegal expert’s report.

In the absence of justification by the legal expert of this unjustified reduction in “rent” (occupancy indemnity) and of unjustified enrichment of the operator of the tourist residence, the court will have to set aside the reduction inoccupancy indemnity proposed by the legal expert.

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