Who pays for refurbishment ?

In brief: Compensation for restoration of the premises by the lessee

It follows from the combination of articles 1147, 1149 and 1732 of the Civil Code, in their versions prior to order no. 2016-131 of February 10, 2016, and the principle of full compensation for loss, that when a lessee returns premises in a condition that does not comply with his legal or contractual obligations, he is in breach of contract. As a result, the lessee is obliged to compensate the lessor for any loss suffered as a result. This loss includes the cost of restoring the premises to their original condition, irrespective of whether the work has actually been carried out or the expenses incurred.

The judge, responsible for assessing this loss at the time of ruling, must take into account, where relevant, circumstances arising after the premises have been vacated, such as re-letting, sale or demolition. Consequently, the decision to reject the lessor’s claim for damages, based on the return of the premises in a poor state of repair, is justified insofar as the lessor does not demonstrate the existence of any prejudice, in particular where he sold the premises three months after their return without having carried out any work, and where he does not prove a reduction in the sale price directly linked to the breaches imputed to the lessee.

The tenant’s obligations to return the premises in good condition at the end of the lease

The June 27, 2024 ruling by the French Supreme Court (no. 22-10.298) deals with the tenant ‘s obligations regarding the return of premises in good condition at the end of the lease. The Pergopark company, owner of the premises, had sued the tenant Mr. [H] for damages, alleging that the latter had failed to meet his rental repair obligations. On appeal, the court rejected the landlord’s claim, ruling that the latter had not proved the existence of any prejudice.

The French Supreme Court upheld this rejection. Under articles 1732, 1147 and 1149 of the French Civil Code, the tenant is liable for any damage caused during his or her enjoyment of the property, unless he or she can prove that he or she was not at fault. However, the damage for which the lessor is liable must be proven, and may include the cost of restoring the premises. The Court specifies that compensation is not conditional on the actual carrying out of repairs or the disbursement of costs.

In this case, Pergopark had sold the building three months after it had been returned, without carrying out any repair work. It did not demonstrate that the tenant’s breaches had affected the sale price of the premises, which led the Court to conclude that there was no evidence of prejudice.

This ruling highlights the importance of proving prejudice for the lessor. Even if the lessee commits a breach of contract by failing to return the premises in good condition, the lessor must provide concrete evidence that this breach has caused damage. Simply selling the property after it has been returned without work, or demonstrating that the sale price has been devalued as a result of the alleged deterioration, is not sufficient to establish compensable damage.

Compensation for rental damage requires proof of loss suffered by the lessor

As a result, the Cour de cassation rejected the appeal, confirming that compensation for rental damage requires tangible proof of the loss suffered by the lessor. This decision reminds real estate professionals and practitioners of commercial lease law of the importance of properly documenting and proving the economic impact of deterioration in order to obtain compensation.

Full text of the decision

RULING BY THE COURT OF CASSATION, THIRD CIVIL DIVISION, JUNE 27, 2024

The company Pergopark, with registered office at [Address 2], represented by Mr [G] [V], domiciled at [Address 1], acting in his capacity as ad hoc representative, lodged the

appeal no. Y 22-10.298 against the decision of the Paris Court of Appeal (Pole 5, Chamber 3) of November 10, 2021, in the dispute with Mr. [T] [H], domiciled at Mr. [X], [Paris].

with Mr [X], [Address 3], defendant to the cassation.

In support of her appeal, the plaintiff puts forward a single ground of cassation.

The file has been communicated to the public prosecutor.

On the report of Mrs Aldigé, Conseiller référendaire, the observations and pleadings of SCP Marc Lévis, counsel for the company Pergopark, the observations and pleadings of

and pleadings of SARL Boré, Salve de Bruneton et Mégret, counsel for Mr [H], and the opinion of Ms Morel-Coujard, avocat général, to which SCP Marc Lévis replied.

reply, after debates at a public hearing on May 14, 2024 attended by Mrs Teiller, President, Mrs Aldigé, Conseiller référendaire rapporteur, Mr.

Echappé, Conseiller doyen, Mr. David, Mrs. Grandjean, Mrs. Grall, Mr. Bosse-Platière, Mrs. Proust, conseillers, Mrs. Schmitt, Mr. Baraké, Mrs. Gallet, Mrs. Davoine, Messrs.

Pons, Choquet, Conseiller référendaires, Mme Morel-Coujard, avocat général, and Mme Maréville, greffier de chambre,

the Third Civil Chamber of the Cour de Cassation, composed of, pursuant to article R. 431-5 of the Code de l’Organisation Judiciaire

468FB043BD1AD57CEFAD757B2215C201 , composed of the above-mentioned president and councillors, having deliberated in accordance with the law, has delivered this judgment.

Facts and proceedings

1. According to the judgment under appeal (Paris, November 10, 2021), the company Pergopark (the lessor), owner of commercial premises leased to Mr. [H] (the lessee),

after having deposited a certain sum in execution of an order to pay an eviction indemnity, objected to the payment of part of the funds

on the grounds that the premises had not been returned by the tenant in a good state of repair.

2. The tenant summoned the landlady to release the opposition and demand the return of the security deposit.

3. An order dated March 14, 2019 appointed Mr. [V] as ad hoc judicial representative of Pergopark, which was struck off the register of commerce and companies

The company was struck off the register of commerce and companies on November 28, 2017 following the conclusion of amicable liquidation proceedings.

4. Claiming that the fact of having sold the building without carrying out any repair work did not deprive it of its right to compensation, and alleging a loss of value at the time of the sale of the building, Pergopark was not entitled to any compensation on resale, the lessor counterclaimed for damages to compensate for tenant deterioration in the amount of the cost of the repairs corresponding to the cost of restoring the premises.

Examination of the plea

Second part of the plea

5. Pursuant to article 1014, paragraph 2, of the French Code of Civil Procedure, there is no need to issue a specially reasoned decision on this grievance, which is clearly not of such a nature as to give rise to a claim for damages.

clearly not of such a nature as to entail cassation.

And on the first part of the plea

Statement of the plea

6. The landlady complains that the judgment dismissed her claim for damages, ordered her to pay a certain amount in reimbursement of the security deposit

and order the release of the opposition on the sequestered sums, whereas “the lessee is liable for any damage or loss that may occur

during his enjoyment, unless he can prove that they occurred through no fault of his own; that the mere fact of damage or loss occurring during the tenant’s

enjoyment of the leased property entitles the lessee to compensation, without the lessee being able to claim that the lessor did not suffer any prejudice as a result of such

damage or loss; however, by ruling in this case that the lessor did not prove any loss, after having noted that Mr. [H]’s

H]’s breach of his obligation to return the premises in a good state of repair, the Court of Appeal violated article 1732 of the French Civil Code.

The Court’s response

7. According to article 1732 of the French Civil Code, the tenant is liable for any damage or loss that occurs during his or her enjoyment of the premises, unless he or she can prove that such damage or loss occurred without his or her fault.

without his fault.

8. Under the terms of article 1147 of the same code, in its wording prior to that resulting from order no. 2016-131 of February 10, 2016, the debtor is

ordered, where applicable, to pay damages, either for non-performance of the obligation, or for delay in performance, whenever

the debtor does not prove that the non-performance is due to a cause beyond his control, even if there is no bad faith on his part.

9. According to article 1149 of the French Civil Code, as it stood prior to the enactment of the aforementioned ordinance, and the principle of full reparation for loss, the damages

damages due to the creditor are the loss he has made and the gain he has been deprived of, without resulting in either loss or profit for him.

10. It follows from the combination of these texts and principles that a tenant who returns the premises in a condition that does not comply with his obligations under the law or the contract is in breach of contract.

contract commits a breach of contract and must compensate the lessor for any loss suffered as a result.

11. This loss may include the cost of restoring the premises to their original condition, without compensation being conditional on repairs being carried out or expenses actually being incurred.

actual expenditure.

12. In assessing the loss at the date of the decision, the judge must take into account any circumstances arising after the premises have been vacated.

such as re-rental, sale or demolition.

13. After having, on the one hand, rightly recalled that it was up to the lessor to prove a prejudice, and on the other hand, noted that it had sold the leased premises three months after they had been returned to the lessee.

without carrying out any work, and that it did not prove any depreciation in the resale price of the premises linked to the tenant’s

that the lessor had not proved the alleged loss, so that her claim had to be rejected.

claim had to be rejected.

14. The claim is therefore unfounded.

FOR THESE REASONS, the Court :

Dismisses the appeal;

Order Mr. [V], in his capacity as ad hoc judicial representative of Pergopark, to pay the costs;

Pursuant to article 700 of the French Code of Civil Procedure, rejects the claims;

Thus made and judged by the Cour de cassation, third civil division, and delivered on June twenty-seventh, two thousand and twenty-four, by way of availability of the judgment at the court registry.

parties having been previously notified 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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