Cass.civ. 3ème, 3 October 2012, X…, Y… and Z… spouses v. Hôtellerie Richepanse, no. 11-17177

In a very recent decision issued on 3 October 2012, the French Supreme Court (Cour de cassation) settled the issue of when default interest begins to accrue on a lease renewal rent set by a court. The Supreme Court has put an end to the controversy surrounding this issue, by clarifying the point of departure of default interest.

It had previously considered that default interest begins to accrue from the date of service of a writ seeking a review of the rent (see, for example: Cass. 3ème 14, 1969, Bull. civ. III, no. 238) before considering that the default interest on the rent under the renewed lease begins to accrue from the effective date of renewal (see, for example: Cass. 3ème 30 Jan. 1991, Bull. civ. III, no. 44).

The Paris Court of Appeal’s rulings in this field have also fluctuated, having held that interest accrues from the effective date of renewal before changing its position and holding that it accrues from the date of the court decision setting the rent.

The Supreme Court now considers that default interest on rent runs, by operation of law, absent agreement to the contrary, from the date of the application for the rent review by the court.

In the case at point, the owners of commercial premises had served notice of termination of the lease on the lessee together with a renewal offer. The lessee having refused the proposed rent increase, the owners had gone to court seeking a rent review.

In application of Article 1155 of the French Civil Code which provides that all accrued income, including rent, produces interest from the date of the claim or of the agreement, the Supreme Court has reaffirmed its 1969 position that default interest runs, by operation of law, from the date of the application for a rent review and not from the date the court sets the new rent.