Commercial leases & indexation clause : important decision of the Court of Cassation dated January 12th, 2022

In a decision of January 12, 2022 (Appeal no. 21-11.169), the 3rd Civil Chamber of the Court of Cassation confirms the limits of the scope of the deemed unwritten nature of an indexation clause that operates exclusively upwards in a commercial lease.

This decision partially reverses a decision of November 5, 2020 (n° 19/01229), according to which the Court of Appeal of Versailles had confirmed a decision of first instance having deemed such a clause unwritten in its entirety, on the grounds that “the lessor’s intention was to make it, without distinction of its different parts, an essential and determining condition of his consent, all the stipulations of this clause being of an essential nature, leading to their indivisibility and preventing a choice between them in order to keep only some of them”.

In the case that gave rise to this decision, the disputed clause stated: “This indexation clause constitutes an essential and determining condition without which the lessor would not have contracted. Consequently, its partial or total non-application may authorize the lessor, and only the lessor, to request the termination of the lease, without any compensation to the lessee.

Considering that this reasoning was insufficient to characterize the indivisibility of the clause and recalling once again that only the prohibited stipulation must be deemed unwritten, the Court of Cassation overturned this decision insofar as it ordered the lessor to return to the lessee the sums resulting from the indexation of his rent.

It will be recalled that, in two decisions rendered on June 30, 2021 (No. 20-11.685 and No. 19-23.038), the Court of Cassation, partly reversing its previous positions, established the imprescriptible nature of the action seeking to declare unwritten any indexation clause that only applies upwards, on the basis of article L.145-39 of the Commercial Code, while limiting the consequences of such a sanction, by ruling that “… Only the prohibited provision must be deemed unwritten”.

This decision nevertheless allows the clause to be deemed unwritten in its entirety if it is indivisible.

In practice, it is very common, as in the case that gave rise to the January 12, 2022 decision, for indexation clauses in commercial leases to expressly state the essential nature of the mechanism for the lessor.

To admit that such a stipulation characterizes the indivisibility of the clause would have defeated, in fact, the will of the Court of Cassation to limit the scope of the clause deemed unwritten and thus to avoid indexation clauses being reduced to nothing for the past, within the limit of the five-year statute of limitations (article 2224 C. civ.), but especially for the entire residual duration of the current lease and its potential renewals.

Thus, except in exceptional cases, the defective clause, even if qualified as essential, will have to be corrected and not annihilated, which will lead to the deletion of the stipulation excluding the decrease of the rent for the future and to rectify the indexation calculations by taking into account possible decreases of the indexes, over the last five years.