Local shops: Limit the risk of uncapping!
In the absence of other reasons, the lessors attempt to de-cap the rent of the renewed lease by invoking a modification of the local commercial factors. However, such a change may be limited when it comes to convenience stores.
During the renewal of the commercial lease, in the event of an increase in the rental value, the lessors will try to see their rent increase.
Recall that it is necessary, in the absence of a commercial lease duration of more than twelve years, a reason for de-capping, for the rent of the renewed lease to be fixed at the rental value.
Otherwise, the rent of the renewed lease will be fixed according to the variation of the indices (of commercial rents): this is the ceiling of the rent.
Often, failing to be able to invoke the reasons for related to a significant change in the characteristics of the premises, the destination of the premises or the respective obligations of the parties, the lessor will argue, sometimes in desperation, that there has been, during the expired lease, a significant change in the local factors of commerciality.
This would allow them to de-cap the rent of the renewed lease.
It must also have been likely to have a favourable impact on the trade in question (3rd Civil Chamber, 14 September 2011, No. 10-30.825).
Some decisions are even more severe, sincethey require the demonstration of an impact on the activity carried out by the tenant to de-cap the rent of the commercial lease (Cass. 3rd civ., 17 Jan. 2012, No. 11-12090)
In general, case law considers that the sector to be studied, in which changes in local factors of commerciality will be highlighted, is located within a radius of 400 meters around the trade (or even more according to certain activities such as those of garages, dealers, etc.).
However, it should be remembered that this scope is reduced when many competing businesses are established (CA Paris, June 24, 1982, JurisData 1982-024286) or when it comes to local trade (CA Paris, March 26, 2008, No. 06/19672).
For illustration, it was judged, in the case of a pharmacy, that:
“The limited nature of the means available to the pharmacist to make the difference with a competitor requires reducing the catchment area to 200 meters, at least in urban areas with a high density of pharmacies” (CA Paris, 15 Nov. 2006, No. 05/13709).
Another decision retained, for the pharmacy business, a radius of 100 meters (CA Paris, April 18, 2005, No. 03/15010).
In a decision dated 12 October 2018 (No. 14/17316), the Commercial Rent Judge of the Paris Court of Justice retained a radius of 200 meters for a bakery business.
This means that it is appropriate to recall, for certain businesses, in particular bakeries and pharmacies, that the radius in which the evolution of local factors of commerciality will be studied, must be restricted.
It is therefore appropriate for the commercial tenant to list its various competitors located in its catchment area.
Thus the modifications of the local factors of commerciality that appeared within a radius of more than 200 meters should not be taken into consideration, making it possible to minimize the risk of de-capping the rent of the renewed lease.
Thus, the lessee could benefit from a capped rent, fixed according to the variation of the indices, even if the rental value is higher.
This practice is entirely justified since, in the event of competing businesses in the sector, competing businesses can easily capture part of the flow of barges, limiting the profits of the business whose lease is renewed.
We thus recommend, during a procedure for fixing the rent of the renewed lease, to ask the rent judge to limit the mission of the appointed expert to a study of the modifications of the local factors of commerciality within a radius of 200 meters around the business in question.
This practice, especially in urban areas, can also be extended to many shops such as opticians, shoemakers, or florists.
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