When the Eviction Indemnity Arises
The right to an eviction indemnity is one of the foundational protections of the French commercial lease statute. Under Article L 145-14 of the Code de commerce, a landlord who refuses to renew a commercial lease must pay the evicted tenant a comprehensive indemnity covering all of the prejudice caused by the non-renewal. This right attaches to the tenant who holds a valid commercial lease, operates a fonds de commerce in the leased premises, and has not forfeited its right to renewal through breach or other cause. The indemnity compensates for the total economic harm of eviction, not merely for the immediate loss of occupation. Its primary component is the value of the lost fonds de commerce — the commercial business understood as an ensemble of tangible and intangible assets including clientele, goodwill, the lease right itself, signage, and all elements that together constitute an active business.
The Autonomous Market Doctrine: Why Eviction Almost Always Means Total Loss
A shopping centre constitutes, for the purposes of commercial lease valuation, a self-contained commercial market. The clientele of a unit within a gallery is, to a significant extent, a function of the centre's collective commercial environment: its footfall, its tenant mix, its physical environment, and its collective marketing. That clientele is substantially non-transferable to a different location outside the centre. Where a tenant is evicted from a shopping centre unit and can only relocate outside the centre, the eviction is treated as a total loss of the fonds de commerce, not a mere displacement. The indemnity is therefore calculated on the basis of the full value of the fonds de commerce as a going concern, not on the basis of relocation costs.
The sole exception is where the evicted tenant can be relocated within the centre itself. In that narrow case, only a transfer indemnity is payable: the essential commercial environment and the clientele infrastructure are preserved. A bank branch evicted from its original unit and rehoused in adjacent premises within the same centre was held to be entitled only to a transfer indemnity. Where the relocation is to premises just outside the centre perimeter but in its immediate physical surroundings, courts have been willing in some cases to treat this as a transfer rather than a total loss — but this is fact-specific and not the general rule.
Total loss of the fonds de commerce. Indemnity is calculated on the full going-concern value of the business including all intangible elements. The autonomous market unit doctrine means the clientele cannot be transferred. This is the default rule for most shopping centre evictions.
Transfer indemnity only. The commercial environment and the client base are preserved. Compensation covers the cost and disruption of the internal relocation, not the loss of the business itself. The tenant must genuinely be rehoused in comparable conditions within the centre.
Components of the Full Eviction Indemnity
The eviction indemnity under Article L 145-14 is a comprehensive compensation. The main indemnity for loss of the fonds de commerce is supplemented by several accessory indemnities designed to cover the practical consequences of having to cease trading and vacate the premises.
| Component | What it covers |
|---|---|
| Indemnité principale Main indemnity | Value of the lost fonds de commerce as a going concern, assessed at the date of eviction. Calculated by reference to the capitalised differential method in the shopping centre context. |
| Troubles commerciaux Business disruption | Compensation for the period of trading disruption between eviction and the point at which the tenant could reasonably have re-established itself elsewhere (or wound down the business). |
| Frais de déménagement Moving costs | The actual cost of removing trade fixtures, equipment, and stock from the premises. |
| Frais de réinstallation Re-establishment costs | The cost of setting up equivalent trading premises elsewhere, including fitout, lease entry costs, and similar items. Not applicable where total loss is found, since the business cannot be re-established in an equivalent location. |
| Frais accessoires divers Miscellaneous accessory costs | Accounting and legal fees attributable to the eviction, staff redundancy costs where applicable, and other directly caused expenses. |
The Capitalisation Differential Method
The valuation of the main eviction indemnity in a shopping centre lease proceeds by capitalisation of a differential. The method has two inputs: the market rental value of the premises on the open market, and the theoretical renewal rent that would have been payable under the lease. The difference between these two figures represents the economic rent advantage that the tenant loses by being evicted rather than renewed. That differential is then capitalised to produce a single sum representing the present value of the perpetual loss of the rent advantage.
The market rental value used in this calculation is assessed on the autonomous internal market comparables of the centre, on GLA surface area, with account taken of the tenant's specific position, sector, and trading history — the same market rental value that would be used in a renewal rent determination under Article L 145-33 of the Code de commerce. The theoretical renewal rent is the rent that would have been payable had the lease been renewed at the date of eviction. For a lease with a fixed rent subject to the statutory cap, this is the indexed previous rent. For a binary-rent lease, the calculation is more complex.
The Binary Rent Complication
Where the evicted tenant held a binary-rent lease, the theoretical renewal rent cannot simply be the indexed guaranteed minimum, because the guaranteed minimum represents only one component of the total contractual rent. The full economic relationship includes both the fixed minimum and the variable turnover component. Ignoring the variable component would misstate the economic value of what the tenant had, and therefore what it loses.
The Rouen Court of Appeal articulated the correct approach in a 2021 ruling. Where a binary-rent lease has a variable component governed by a clause-recettes and guaranteed by a floor price, the theoretical renewal rent for the purposes of the eviction indemnity differential must be assessed solely by reference to the turnover clause — that is, by applying the contractual percentage to the tenant's actual average annual turnover over the three years preceding the eviction. This approach is applied where the trading figures show that, at the contractual turnover percentage, the variable would have exceeded the guaranteed minimum. Where the tenant's trading performance is modest and the variable would not have exceeded the minimum, the minimum continues to serve as the renewal rent reference, and the differential is wider.
The eviction indemnity and the renewal rent assessment share the same two inputs but in inverted positions. At renewal, the tenant benefits from a lower theoretical renewal rent because it produces a smaller differential for the landlord to exploit commercially. At eviction, the same lower theoretical renewal rent widens the differential that is capitalised to produce the indemnity. The binary rent structure creates asymmetry in both directions. Tenants facing eviction should take specialist advice on which approach applies to their specific trading figures before accepting any offer of settlement.
Online Sales in the Fonds Valuation: An Unresolved Debate
The growth of omnichannel retail has introduced an as yet unresolved question: whether online sales generated by a tenant whose physical presence is in the centre should be included in the fonds de commerce valuation for eviction purposes. The question has particular bite in the binary-rent context. If the tenant's lease includes online sales within the definition of turnover for the purposes of the clause-recettes — as many modern leases do — then those online sales are contractually part of the rent calculation. It is therefore arguable that they should also form part of the fonds valuation: if the landlord benefits from the online turnover when calculating rent, the tenant should be compensated for the online element of the business when calculating what the eviction destroys.
This argument has force but is not yet settled in the case law. The unresolved tension is between the physical localisation of the fonds de commerce — which traditionally derives its value from a specific premises and its attached clientele — and the growing reality that for many modern retailers the physical unit and the digital platform are commercially integrated. The Cour de cassation has not yet definitively resolved whether this integration is sufficient to bring online revenues into the eviction indemnity calculation.
The arrêt Monoprix of 30 May 2024 (Cass. 3e Civ. n° 22-16.447), primarily decided on the renewal rent question, arose from a dispute in which the integration of online sales into the commercial value of the fonds was a live issue. For large-format tenants with significant omnichannel operations, the online sales question is no longer theoretical — it is a material valuation argument that will be raised in any significant eviction indemnity negotiation or litigation.
The Landlord's Right of Recovery
A landlord who pays the indemnity may, in certain circumstances, subsequently recover it if the tenant in fact re-establishes a fonds de commerce on terms that demonstrate the eviction did not cause the full loss claimed. This right of recovery applies where the tenant, having received the indemnity on the basis of a total loss, then successfully opens an equivalent or substitute business elsewhere — demonstrating that the fonds was in fact transferable and that the total loss valuation overstated the actual damage. The right of recovery is limited in practice: the landlord must show that the tenant has genuinely re-established an equivalent commercial enterprise. In a shopping centre context, where the autonomous market unit doctrine makes genuine re-establishment unlikely, the right of recovery will rarely be invoked successfully.
Refusing Renewal Without Paying: When the Landlord Can Avoid the Indemnity
The eviction indemnity is not payable in all circumstances. The most significant grounds in a shopping centre context are: serious and legitimate grounds based on the tenant's breach of its lease obligations; demolition and reconstruction rights under Articles L 145-18 and L 145-21 of the Code de commerce; and the personal occupation right under Article L 145-22. In each case, the conditions are strictly construed and the landlord bears the burden of establishing the ground relied upon.
The demolition and reconstruction ground is of particular commercial relevance where owners seek to redevelop or significantly restructure a scheme. The conditions are demanding: the landlord must establish that the existing building is genuinely to be demolished and reconstructed (not merely substantially refurbished), and must offer the tenant a right to reoccupy the reconstructed premises on terms equivalent to the original lease. Failure to comply with the reoccupation offer conditions exposes the landlord to a claim for the eviction indemnity in full, even though the refusal of renewal was initially lawful.
The eviction indemnity is a material liability in any shopping centre asset management strategy. For a landlord managing a scheme with ageing tenants on leases with below-market guaranteed minimums, the theoretical exposure on eviction is directly proportional to the rent differential: the wider the gap between market rental value and the existing rent, the larger the indemnity. Asset managers should model this exposure when preparing repositioning or redevelopment business plans, and should factor it into acquisition pricing where target assets contain long-tenure tenants on historically low rents. The binary rent structure adds another layer of complexity: where tenants have historically been paying at or near the variable cap, the theoretical renewal rent reference may be materially higher than the guaranteed minimum, reducing the exposure.
The valuation of eviction indemnity in a French shopping centre context requires specialist legal and expert valuation advice — particularly where a binary rent structure, online sales, or a disputed autonomous market analysis are in play.
Book a ConsultationThis article is for general information and educational purposes only. It does not constitute legal advice. The legal framework described reflects French law and jurisprudence as at 2025. Eviction indemnity disputes in French shopping centres involve complex legal and valuation analysis. Always seek qualified legal and expert advice before any eviction, negotiation, or litigation.
