The Valuation Procedure
The eviction indemnity is fixed by the court, with sovereign discretion, following an expert assessment. The tenant applies to the tribunal judiciaire within the two-year limitation period under Article L. 145-60. The court appoints a judicial expert whose report provides the evidential basis for the final determination. There is no competence in the commercial rent judge (juge des loyers commerciaux) for this matter.
The two-year limitation period is interrupted by service of the summons (assignation), not by its filing with the court (Cass. 3e civ., 22 June 2022). A pre-trial expert appointment by the referral judge suspends the limitation period under Article 2239 of the Civil Code.
Structure of the Principal Indemnity: Replacement or Transfer
The first question in every eviction indemnity assessment is: can the fonds de commerce be transferred to equivalent premises, or will the eviction destroy it? The burden of proving that the business is transferable lies with the landlord (Cass. 3e civ., 24 September 2002).
Most common for proximity retail. Where the value of the droit au bail exceeds the other elements of the fonds de commerce (a long-established lease at very low rent), the replacement indemnity may in practice equal the lease right value (Cass. 3e civ., 13 October 1993).
The indemnity is inversely proportional to the rent paid: a very low contractual rent produces a very large droit au bail value and therefore a large indemnity.
Scope and Assessment Dates
Which Activities Count
Only activities authorised under the lease are included in the assessment — not activities operated in breach of the permitted use clause (Cass. 3e civ., 4 May 2006; Cass. 3e civ., 9 April 2013). Activities found to be impliedly included in the permitted use (déspécialisation incluse) are taken into account. Where the tenant operates from multiple locations, only the activities carried out at the evicted premises are included, unless those activities are indissociable from other sites.
Assessment Dates
The composition of the fonds de commerce is fixed as at the date of the refusal of renewal. The value of the indemnity is assessed at the date of actual vacation (if the tenant has already left) or at the date the court gives judgment (if the tenant is exercising the right to remain). Covid-19 years (2020 and 2021) were treated by several appeal courts as exceptional periods whose trading figures were too distorted to be meaningful (CA Paris, 30 March 2022; CA Paris, 21 June 2023).
Calculating the Replacement Indemnity: Fonds de Commerce Value
Two principal methods are used, often in combination. Courts use the turnover method as primary and the EBITDA method for cross-checking.
| Method | How it works | Key rules and ranges |
|---|---|---|
| Turnover method (chiffre d'affaires) | Percentage of average net revenue over the last 3 financial years | Percentage varies by sector: bakery 80–110%; white-goods 35–45%. Revenue assessed net of VAT in most sectors (Cass. 3e civ., 17 Dec. 2003). Pharmacies and restaurants: gross revenue by professional custom. Professional usage is the primary guide (Cass. 3e civ., 5 Feb. 2014) |
| EBITDA method | 3-year average EBITDA × multiple, adjusted for abnormalities (executive salaries, head office charges, restatement of rent at market) | Multiples: 3–5 for small traders; 8–10 for exceptional earning capacity. Used as cross-check, not primary. Large divergence between methods → courts prefer primary method |
The lease can specify the method for calculating the eviction indemnity. The Court of Cassation confirmed in January 2023 that a contractual calculation methodology is valid, provided it does not have the effect of excluding or capping the indemnity in advance. A clause defining the method (e.g. number of years of revenue, or which version of EBITDA) is enforceable. A clause fixing a lump sum or setting an absolute ceiling is unwritten as contrary to mandatory public order (Cass. 3e civ., 18 January 2023, n° 21-22.209).
Calculating the Transfer Indemnity: Value of the Droit au Bail
Where the business can be transferred, the indemnity compensates the loss of the lease right — the economic advantage of paying below-market rent. The standard method has three steps.
Step 2 — Location coefficient: the annual differential is capitalised by a coefficient reflecting commercial quality of the location. Prime locations (emplacement n° 1): 8–10; exceptional sites: up to 12. Secondary locations: 0–5.5. Depots/workshops: 0–3. Shopping centres: 6–10 depending on draw area.
Step 3 (where applicable) — Pinel smoothing adjustment: where the rental gap at renewal would have been phased in under the 10% annual cap (Art. L. 145-34, Pinel 2014), the tenant would have had an additional financial benefit during the transition period. This benefit must be factored into the indemnity calculation (CA Paris, 30 November 2022).
For offices and premises not subject to the rent cap, the differential method may produce a zero or near-zero indemnity. In those cases, the tenant can argue for an indemnity based on the market value of the lease right that could have been assigned — but specific evidence of assignability and market comparables is required.
The Landlord's Right to Prove Lesser Loss
Article L. 145-14 expressly reserves the landlord's right to prove that the actual prejudice is less than the indemnity calculated by reference to the business value. This can arise where: the landlord offers equivalent replacement premises without loss of clientele and on equivalent terms; the tenant voluntarily ceases activity; or the tenant consolidates in another location they already hold. Once the indemnity has been fixed by a final judgment, the landlord cannot subsequently claim reduction based on what the tenant actually spent on relocation (CA Paris, 29 September 2010). Where post-judgment events show the tenant did not in fact relocate, the landlord may reclaim accessory indemnities paid for expenses not actually incurred (Cass. 3e civ., 28 March 2019).
- Expert assessment always required: indemnity = actual prejudice; no lump-sum alternative; court has sovereign discretion. Two-year limitation (Art. L. 145-60) — interrupted by service of summons. Pre-trial expert appointment under Art. 2239 C. civ. suspends the period.
- Replacement vs transfer: burden on landlord to prove business is transferable (Cass. 3e civ., 24 Sept. 2002). Replacement = fonds value (location-bound clientele). Transfer = droit au bail value (portable clientele). Where droit au bail > other fonds elements, replacement may equal the lease right value (Cass. 3e civ., 13 Oct. 1993).
- Replacement calculation: turnover method (sector percentage × 3-year average net revenue) is primary; EBITDA method (adjusted earnings × multiple) is cross-check. Professional usage is determinative (Cass. 3e civ., 5 Feb. 2014). Only lease-authorised activities counted; Covid 2020–2021 figures generally excluded.
- Transfer calculation — 3 steps: (1) annual rent differential (market value − contractual renewal rent); (2) × location coefficient (0–12 depending on grade); (3) ± Pinel smoothing adjustment where applicable. A low contractual rent = large differential = large indemnity. Inversely proportional relationship between rent paid and indemnity owed.
- Contractual calculation method (Cass. 3e civ., 18 Jan. 2023, n° 21-22.209): valid if it defines the method without excluding or capping the indemnity. A lump-sum cap or absolute ceiling is unwritten as contrary to mandatory public order — no limitation period for challenge.
- Landlord's right to prove lesser loss: equivalent replacement premises without loss of clientele; voluntary cessation; consolidation in own existing premises. Once fixed by final judgment, no reduction based on actual relocation spend. Accessories recoverable if tenant does not relocate (Cass. 3e civ., 28 March 2019).
Whether you are a tenant whose eviction indemnity needs to be assessed and defended, or a landlord considering a refusal of renewal and its financial consequences, we advise on the structure and quantum of the principal indemnity, the appropriate methodology, and the procedural steps from expert appointment to final judgment.
Book a ConsultationThis article is for general information and educational purposes only. It does not constitute legal advice and does not create a lawyer-client relationship. Laws and regulations may have changed since publication. Always seek qualified French legal advice on eviction indemnity calculation in a French commercial lease.
Key Legal References
Eviction indemnity: actual prejudice; court with sovereign discretion; expert assessment required
Two-year limitation period for eviction indemnity claims
Burden of proving the business is transferable lies with the landlord
Where droit au bail value exceeds other fonds elements, replacement indemnity may equal the lease right value
Turnover assessed net of VAT in most sectors for replacement indemnity calculation
Professional sector usage is the primary determinative guide for replacement indemnity methodology
Contractual calculation methodology is valid; lump-sum or advance cap clause is unwritten as contrary to mandatory public order
Pinel smoothing adjustment (10% annual rent gap cap) must be factored into the transfer indemnity calculation
