How is compensation for eviction from a commercial lease assessed?

Verified 16 April 2025 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice

Where the lessor (landlord) refuses to renew the commercial lease, the lessor (landlord) must, in principle, pay the lessee an eviction allowance. This allows financial compensation for the damage caused to the tenant by the refusal to renew.

The eviction allowance is a financial compensation paid by the lessor (landlord) who refuses the renewal of the commercial lease.

This compensation must cover all the damage caused to the lessee by the non-renewal of the lease. This includes the market value of the goodwill, moving expenses, relocation expenses, transfer duty to be paid for a fund of the same value.

The lessor and the lessee may fix amicable the eviction allowance. If they cannot reach an agreement, the court determines the amount. In practice, the court often uses an expert to assess the award.

Warning  

When the tenant or lessor is in collective proceedingsNo, it's the Economic Activities Tribunal (EAT) which is competent in the following 12 cities: Avignon, Auxerre, Le Havre, Le Mans, Limoges, Lyon, Marseille, Nancy, Nanterre, Paris, Saint-Brieuc and Versailles.

The allowance shall be assessed at the date of injury incurred by the tenant:

  • When the tenant has already vacated the premises , the damage shall be assessed at effective date of departure from the tenant.
  • When the tenant remains in the premises after the expiry of the lease, the allowance shall be assessed at the date of the judge's decision which sets the eviction allowance. The tenant has the right to remain in the premises until the eviction allowance is actually paid. It can continue its activity for a period that can be quite long. In this case, the turnover after the expiry of the lease is taken into account for the evaluation of the eviction allowance.

The elimination allowance includes a principal and ancillary allowance.

Principal compensation

The eviction allowance shall consist of a principal allowance. It is either a replacement allowance when the goodwill is lost, or a travel allowance when the goodwill can be moved.

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Replacement (or loss of funds) compensation

If the lessee loses its clientele as a result of the refusal to renew the lease, the principal indemnity is qualified asreplacement allowance or loss of funds.

The tenant is compensated on the basis of the market value of the goodwill fixed according to the customs of the profession.

The following elements are then taken into account:

  • Loss of customers. It can lead to the total disappearance of the goodwill. This is the case for local businesses, since customers are attached to the location of the business.
  • Operating results, often based on the turnover of the last 3 years.
  • Right to lease rented premises by the tenant. This is one of the components of the goodwill that disappears as a result of the non-renewal of the lease. It may happen that the value of the right to lease is greater than the value of the land, for example because of the exceptional location of the premises. The eviction allowance must then be equal to the value of the right to the lease.

Travel (or transfer) allowance

Where the activity carried out in the premises can be moved, a travel allowance (or transfer) must be paid. In assessing the possibility of relocation of the tenant, account must be taken of the nature of the activity and the rental status of the market in the neighborhood.

The assessment of the travel allowance is based on the difference between the amount of rent the tenant would have paid on renewal and the amount payable for the new space. A coefficient is applied to this difference which takes into account the quality of the location of the premises and the nature of the activity.

The cash displacement eviction allowance shall take into account the following:

  • Transfer of the fund, as a result of the tenant's move to new premises, without loss (or partial loss) of customers
  • Value of right to lease of the former premises
  • Possibly, cost of a new door-step

If the cost of the trip is greater than the actual value of the fund, the compensation is limited to the replacement value. It is up to the lessor to prove that the fund does not disappear.

FYI  

One so-called employment allowance is paid by the lessor to cover the costs and transfer duties when acquiring a new business. However, it is not paid if the lessor provides evidence that the lessee has not in fact relocated to a new premises.

Incidental allowances

The principal allowance may be increased by incidental allowances following:

  • Removal costs
  • Cost of relocation of goodwill
  • Costs and transfer duty related to the purchase of the new fund
  • Possible redundancy payments due to employees, if the eviction leads to their dismissal
  • Compensation for loss of accommodation, where the lease includes accommodation
  • Expenses related to the payment of termination benefits
  • Ancillary costs (e.g. loss of license)
  • Trade disorder to compensate for discomfort due to avoidance
  • Double rent (during the relocation period, the lessee may have to pay both the rent of the old and the new premises)

FYI  

One so-called employment allowance is paid by the lessor to cover the costs and transfer duties when acquiring a new business. However, it is not paid if the lessor provides evidence that the lessee has not in fact relocated to a new premises.

The lessor has the option of paying the eviction allowance directly to the tenant or the log to a sequester . In return for payment of the eviction allowance, the tenant must return the premises.

Direct payment to tenant

The tenant has a three-month period following the date of payment of the eviction allowance to vacate the premises. It is the full payment of the eviction allowance (principal and ancillary) that is the starting point for the time allowed to the tenant to vacate the premises.

The tenant is not obliged to leave the premises until he has received the full payment of the compensation. Thus, if the landlord continues to occupy the premises pending payment of the eviction allowance, the landlord must pay a occupancy allowancewhich replaces the rent. They must also comply with the terms of the lease (e.g., perform the activity specified in the lease) as must the lessor (e.g., perform some maintenance).

Please note

The lessor has 15 days from the decision setting the amount of the eviction compensation to reconsider its decision and thus accept the renewal of the lease. It's the “ right to repent ”. This right is only possible when the tenant is still occupying the premises or has not already rented or purchased another premises for resettlement.

Payment to a receiver

Appointment of a receiver is not mandatory. It usually occurs when difficulties are foreseeable.

The receiver may be appointed by mutual agreement of the parties or by the court which determines the eviction allowance.

It is up to the lessor to inform the lessee of the return of the funds to the receiver. The tenant then has a three-month period following the date of payment of the indemnity to the receiver to return the premises.

The receiver therefore has the following tasks:

  • Receive funds from the lessor
  • Check that the premises are empty and that the tenant has paid all taxes and rents due
  • Then pay the compensation to the tenant.