Rent indexation clauses: recent case law

The application of indexation clauses inserted in commercial leases regularly raises various issues, which case law strives to resolve pragmatically.

Definition of the indexation clause

The indexation clause or sliding scale clause is an indexation mechanism by which the rent is automatically revised according to the price of an economic or monetary index, at regular deadlines determined in advance by the parties to the commercial lease agreement.

This clause has a dual interest:

• It protects the parties against the risks of changes in the value of the currency of payment of the financial obligations of the lease. As the commercial lease is indeed concluded for a fairly long period, it could become unbalanced over time, due to economic circumstances.
• It allows a more flexible rent revision than that resulting from the application of Article L145-38 of the Commercial Code relating to the triennial rent revision, without excluding this mechanism. The sliding scale clause makes it possible to change the rent on an annual basis. The rent thus changes automatically, without the parties needing to wait for the expiry of the three-year period which makes it possible to request the legal revision of the rent and to complete particular formalities.

Since the Pinel law of 18 June 2014, the benchmark to be favoured is the commercial rent index.

However, Articles L112-1 and L112-2 of the Monetary and Financial Code do not preclude reference to the construction cost index.

The indexation clause raises various issues, both on its validity and on its implementation.

Litigation related to the existence of a sliding scale clause

The existence of a scale clause may be called into question by one of the parties to the commercial lease contract if its wording does not make it possible to give it a clear and precise meaning.

When the clause is poorly drafted and equivocal, it is up to the trial judges to seek the common intention of the parties to interpret the clause, without distorting it.

The Court of Justice of Valencia was recently called upon to take a position on the validity of an indexation clause (judgment of 15 April 2025, No.25/00180).

In this case, the commercial lease provided for a clause entitled “Indexation” according to which the annual review of the rent would be carried out “in accordance with the provisions of Article L. 145-38 of the Commercial Code“.

This clause also specified that it was not a sliding scale clause.

The drafting of this clause involved a clear contradiction, linked to a confusion between the concepts of sliding scale clause and triennial rent review.

Indeed, even if these mechanisms both make it possible to revise the rent during the execution of the commercial lease, their conditions of application differ significantly.

The triennial rent review is indeed a legal review mechanism, provided for in Article L145-38 of the Commercial Code. This mechanism may be implemented by either party only after a period of three years from the entry into force of the lease or the last fixing of the rent and by registered letter with acknowledgement of receipt.

The sliding scale clause, on the contrary, is a contractual mechanism that applies automatically, ipso jure, without particular formality of the parties as long as it is stipulated in the lease.

In deciding on the interpretation of the clause inserted in the lease, the Court of Justice of Valencia relied on Article 1190 of the Civil Code which allows the contract to be interpreted in favour of the debtor.

For the court, the fact that the clause refers to Article L145-38 of the Commercial Code should be interpreted as a three-year review clause.

Litigation related to the limitation of the direction of variation of the index

If the parties can validly insert an indexation clause in a commercial lease, the content of the clause is relatively framed.

Thus, the indexation clauses must comply with the provisions of Articles L112-1 and L112-2 of the Monetary and Financial Code, according to which ” Any clause of a contract with successive performance, and in particular leases and rentals of any kind, providing for the taking into account of a period of variation of the index greater than the period elapsing between each revision […] “and” Any clause providing for an indexation on the variation of the national index of the cost of construction published by the National Institute of Statistics and Economic Studies or, for commercial or artisanal activities defined by decree, on the variation of the quarterly index of commercial rents published under the conditions fixed by this same decree by the National Institute of Statistics and Economic Studies […] “shall be deemed unwritten..

The Court of Cassation also stated that indexation clauses cannot exclude any downward revision of the rent or limit the decline in the original rent by introducing a floor rent.

The penalty incurred when the indexation clause limits or excludes a downward variation has been the subject of much debate.

The Court of Cassation established that the indexation clauses, which exclude any reciprocity of the variation by providing that the indexation would only be carried out in the event of an increase in drafting, are contrary to Article L145-39 of the Commercial Code and must be deemed unwritten pursuant to Article L145-15 of the Commercial Code.

Indeed, this lack of reciprocity, even if it does not create distortion within the meaning of Article L112-1 of the Monetary and Financial Code, defeats the normal game of indexation.

The neutralization of years of decline in the benchmark index has the effect of modifying the time taken to reach the quarter change threshold, conditioning the revision of the rent, as it would result from the real evolution of the index.

If the sanction of the illicit indexation clause is now clearly defined, its implementation may be less obvious.

The question arose as to whether the unwritten character applied to the entire clause or only to its illicit stipulations.

In a judgment of 22 May 2025 (No. 23-23.336), the Court of Cassation recalled the principle according to which any indexation clause prohibiting the downward variation of the rent is deemed unwritten and specified that the trial judges must investigate whether it is possible to remove from the clause the only illegal stipulations without undermining the consistency of the clause, regardless of whether the illegal stipulations were considered as a determining reason for the conclusion of the lease, without which one of the parties would not have contracted.

In other words, the trial judges may maintain the application of the indexation clause between the parties by depriving the only illicit stipulations of effect.

In this way, the indexation clause continues to apply, but the variation can take place both upwards and downwards, even if a party had made the illicit stipulations a determining reason for its consent to the commercial lease.

This solution was taken up by the Court of Cassation in a judgment of 19 June 2025 (No.23-18.853).

In the latter, the Court of Cassation deepens its reasoning by specifying that the indexation clause is divisible.

Because of this divisible nature of the clause, the Court of Cassation validates the position of the trial judges who considered that only certain words stipulated in the indexation clause should be deemed unwritten.

Thus, the terms “only upwards” present in the clause are deemed unwritten and the rest of the clause may subsist and continue to govern the variation of the rent.

Conclusion

The aforementioned case law must encourage tenants to:

• be attentive to the drafting and scope of the indexation clauses proposed to them by the lessors when concluding a commercial lease,
• have the indexation clauses audited during the life of the commercial lease, and to challenge those that would be unlawful. Indeed, in the event of illegality, tenants benefit from negotiation leverage sincethey are then entitled to request the return of overpaid or unduly called rents under the illegal indexation, within the limit of the limitation period.