The case concerned commercial premises for which the Montpellier Court of Appeal had refused to deduct the taxe foncière (property tax) from the gross rental value. The judges had considered that the comparables adopted by the expert were in line with common practice in the sector, where the tax is usually borne by the tenant.
The Court of Cassation (French Supreme Court) quashed this ruling, holding that, unless the lease expressly provides otherwise, payment of the property tax should normally be borne by the landlord. Accordingly, obligations normally incumbent on the landlord but transferred to the tenant should logically reduce the rental value of the leased property, pursuant to Articles L.145-33 and R.145-8 of the French Commercial Code.
This decision highlights the importance of a rigorous interpretation of the legislation in force, particularly as regards service charges and their influence on the determination of commercial rents. It is consistent with earlier decisions in which the Court had already held that, unless expressly stipulated, certain taxes such as property tax must be borne by the landlord and not recharged to the tenant without clear agreement.
The Court of Cassation thus affirmed that, under the Pinel Act and its requirements concerning the specification of charges in lease agreements, practices for transferring charges must be explicitly defined in order to be valid. This clarification is essential to ensure fairness between the parties and to avoid future disputes.
In conclusion, this reiteration by the Supreme Court of its position could prompt valuers and courts to reconsider their approach when assessing rental value for the purpose of setting commercial rents, by taking more systematic account of the contractual and statutory provisions on the allocation of charges between landlords and tenants. This could have a significant impact on common practice in commercial real estate, especially for new leases or on the renewal of existing leases.
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