No Door or Entrance Fee

This is the amount paid by the tenant of a commercial lease to the owner of the rented premises upon entry into the premises.

It is legally qualified:

• either a rent supplement by which the landlord wishes to protect himself against rent increases that do not follow the increase in the actual rental value of the premises;
• either as an indemnity corresponding to the pecuniary consideration of elements of various kinds, in particular commercial advantages unrelated to the rent;
• or as an indemnity corresponding to the pecuniary consideration for the depreciation of the value of the premises: in fact, if the owner wishes to take over the premises, he must pay the tenant an eviction indemnity.

It can also be mixed (rent supplement and compensation).

We invite you to discover here our page on the drafting and negotiation of the commercial lease.

The landlord and the tenant must clearly specify in the lease the qualification they intend to give to the door step. Failing this, the judges seek the common intention of the parties. In this case, they generally consider the door step as a rent supplement. This point is important insofar as tax consequences are attached to this qualification.

Indeed, if the door step is qualified as a rent supplement:

• the lessor treats the amount received as property income and must subject it to VAT;
• the tenant deducts the amount of the door step for the calculation of its tax result at the rate of an annual share calculated linearly over the term of the lease.

On the other hand, if the door step has an compensatory nature:

• the lessor is not taxed on the amount received, which is not subject to VAT, the compensation being considered as the consideration for the depreciation of the value of the premises;
• the lessee immobilizes the door step which is a non-depreciable intangible asset, and not subject to registration duty when acquired.