Rent Capping at Renewal: Key Points
The cap (Art. L. 145-34 C. com.) limits the rent increase at renewal to the variation in the ILC or ILAT index over the duration of the expired lease. Market rental value is displaced and only applies where the cap does not, or where market value is lower than the capped figure.
Four cumulative conditions for capping to apply: nine-year effective term (tacit extension up to twelve years); no notable modification of the four Art. L. 145-33 criteria; market value not lower than the cap; premises not excluded from capping (offices, single-use, bare land). Failure of any one = market value.
Formula: initial rent × (last published index ÷ index from start of expired lease). No abatement is permitted on a cap-formula rent (Cass. 3e civ., 12 November 2020). Above twelve years of effective duration: capping no longer applies.
The cap is always calculated from the original initial rent at the start of the lease: rent-free periods are ignored; triennial revisions are ignored; only the base contractual rent at inception matters. Stepped rents: use the initial step, not the final step — which can anomalously produce a cap below the last paid rent.
A notable voluntary mid-lease rent increase agreed between the parties (outside the indexation mechanism) may justify uncapping entirely. Minor modifications do not. A tenant who proposes a rent above the cap without any reservation is treated as having waived the cap benefit.

The Capping Principle

Article L. 145-34 of the Code de commerce provides that at renewal of a lease whose duration does not exceed nine years, the percentage variation in the new rent may not exceed the variation in the applicable commercial rent index (ILC or ILAT) over the period from the initial rent setting of the expired lease to the date of renewal. Market rental value is displaced: it only applies where the cap does not apply or where the market value is lower than the cap.

The capping rule is not mandatory: the parties can agree in the original lease or at renewal to fix the new rent at market value or any other method. The rule applies by default only in judicial fixation proceedings. A tenant who proposes a new rent above the cap without any reservation is treated as having waived the cap benefit.

The cap applies cumulatively with four conditions:

  • The contractual duration is nine years or the effective duration (including tacit extension) does not exceed twelve years;
  • No notable modification of any of the four criteria from Art. L. 145-33 has occurred;
  • The market rental value is not lower than the cap;
  • The premises are not of a type automatically excluded from capping (offices, single-use premises, bare land).

All four conditions are cumulative: failure of any one means the rent is fixed at market value instead.

The Calculation Formula

Capped rent = Initial rent × (Multiplier index ÷ Divisor index)
Multiplier = last published quarterly ILC/ILAT at date of renewal  |  Divisor = same quarter index from the start of the expired lease

The multiplier index is the last published quarterly ILC (or ILAT) at the date of renewal. The divisor index is the index for the same quarter a number of years earlier, equal to the effective duration of the expired lease. No abatement may be applied to a rent calculated under the cap formula (Cass. 3e civ., 12 November 2020).

  • Standard nine-year lease renewed at contractual term: the divisor index is nine years before the multiplier;
  • Lease renewed after tacit extension (not exceeding twelve years): the period used is the actual elapsed duration from the original start date to the renewal date;
  • Above twelve years of effective duration: capping no longer applies and the rent is fixed at market value;
  • Lease renewed after right of repentance: the index variation is calculated from the original start date to the date of the repentance notice.

The Initial Rent: Edge Cases

Rent-Free Periods

A rent-free period (franchise de loyer) or reduced rent period granted at the outset has no effect on the cap calculation: only the base contractual rent is used, without regard to franchises or reductions (Cass. 3e civ., 17 May 2006).

Stepped Rents

Where the lease stipulates a stepped rent (loyer par paliers) with successive increases, the cap is calculated from the initial rent at the start of the lease, not from the final step (Cass. 3e civ., 6 March 2013). In practice, this can produce a capped rent below the last contractual step — an anomalous outcome since capping is meant to limit increases, not produce decreases. The parties should expressly address in the lease or an amendment how the stepped rent interacts with the cap, and landlords should consider designating the final step as the new base rent.

Mid-Lease Rent Revisions

A triennial revision during the lease does not affect the cap calculation: the cap at renewal is calculated from the rent as originally fixed at the start of the lease, not from the revised rent (Cass. 3e civ., 11 April 2019, n° 18-14.252). However, a material voluntary increase agreed outside the indexation mechanism may constitute a “notable modification of the obligations of the parties” justifying uncapping (Cass. 3e civ., 4 April 2001), provided the modification is genuinely notable (Cass. 3e civ., 21 March 2006).

Key Money (Pas-de-porte)

If key money was characterised as a rent supplement, one-ninth of its amount is added to the annual rent base (Cass. 3e civ., 12 February 1980). If characterised as an indemnity compensating the landlord for granting commercial property rights, it is not integrated. There is also case law treating a key money supplement as a ground for uncapping altogether. The parties can expressly agree in the lease that the key money, even if characterised as a rent supplement, will not be integrated into the base rent for cap purposes.

💡
Cap vs Triennial Revision: Not Interchangeable

The cap formula and the triennial revision formula use the same index ratio structure but apply it differently. For capping at renewal: multiplier = last published index; divisor = index from the start of the expired lease; base = original initial rent. For triennial revision: multiplier = index at quarter of revision demand; divisor = index from quarter of last rent fixation; base = last revised rent. These are entirely distinct calculations.

Worked Examples

Example 1 — Nine-Year Lease Renewed at Contractual Term

Lease started 1 January 2013; initial rent €50,000/year; renewed 1 January 2022.

Multiplier index (ILC Q3 2021): 110.78

Divisor index (ILC Q3 2012): 102.46

Capped rent = (50,000 × 110.78) ÷ 102.46 = €54,060/year
Example 2 — Nine-Year Lease Renewed After 11 Years and 3 Quarters of Tacit Extension

Lease started 1 January 2013; initial rent €50,000/year; renewal effective 1 October 2021 (11 years + 3 quarters elapsed).

Multiplier index (ILC Q2 2021): 110.00

Divisor index (ILC Q3 2012, 11 years 3 quarters earlier): 92.86

Capped rent = (50,000 × 110.00) ÷ 92.86 = €59,229/year
Example 3 — Nine-Year Lease Renewed After Right of Repentance

Lease started 1 January 2010; initial rent €50,000/year; lease expired 31 December 2018; repentance exercised 1 March 2021 (12 years and 1 quarter from start).

Multiplier index (ILC Q4 2020): 111.33

Divisor index (ILC Q4 2009, 12 years 1 quarter earlier): 93.46

Capped rent = (50,000 × 111.33) ÷ 93.46 = €59,560/year
Practical Checklist: Calculating the Capped Rent
Confirm that capping applies: verify the four cumulative conditions. Is the effective duration nine years or less (or up to twelve years in tacit extension)? Has any notable modification of the Art. L. 145-33 criteria occurred? Is the market value at least as high as the capped figure? Is the premises type eligible for capping?
Identify the base rent: use the original contractual rent at inception of the expired lease. Discard any rent-free period benefit, any triennial revision, and any stepped rent increase. Only a notable voluntary mid-lease increase agreed outside the indexation mechanism can affect the cap or the uncapping analysis.
Select the correct indices: multiplier = last published quarterly ILC/ILAT at the date of renewal; divisor = same quarter index measured back the full effective duration of the expired lease. For tacit extension leases, count from the original start date to the renewal date.
Key money: determine whether it was characterised as a rent supplement (one-ninth integration into base) or an indemnity (no integration). Where relevant, check whether the parties contractually excluded integration into the cap base.
Stepped rent trap: if the lease has a stepped rent structure, calculate the cap from the first step. If the result is below the last contractual step, flag this anomaly explicitly and consider whether an express amendment before renewal is advisable to designate a more appropriate base.
Preparing for a Lease Renewal Negotiation?

The capping calculation appears mechanical but the choice of base rent, the treatment of stepped rents, key money, and mid-lease revisions each require careful analysis. We advise landlords and tenants on renewal rent strategy and the computation of the capped and market-value alternatives.

Book a Consultation

Legal Notice. This article is for general information and educational purposes only. It does not constitute legal advice. Laws and regulations may have changed since publication. Always seek qualified French legal advice on rent capping in a French commercial lease.