Rent indexation in France: ILC, ILAT and ICC

Most French commercial leases contain an indexation clause: once a year, usually on the lease anniversary, the rent moves in line with a published index. The calculation itself is short. The difficulty is everything around it: picking the right index readings, waiting for publication, applying the lease's own limits, and billing the difference when the new figure arrives after the date it applies from.

This guide covers commercial and office leases. Residential leases follow a separate regime, noted briefly at the end of the rules section.

The indices

The indices are published quarterly by INSEE, the French statistics office, usually a few months after the quarter they measure. Each lease names the one it uses.

• ILC (indice des loyers commerciaux): for retail and craft businesses.
• ILAT (indice des loyers des activités tertiaires): for offices, warehouses and other service activities.
• ICC (indice du coût de la construction): the historical reference. ILC and ILAT have largely replaced it since the Pinel reform of 2014, but many older leases still name it.

The index is the one written in the lease. If you think the lease names the wrong index for the activity, that is a legal question for the parties, not something to fix quietly in the next invoice.

The calculation

For an index published as a level, the revised rent is:

new rent = current rent × (new index ÷ reference index)

The reference index is the reading the last revision used (or the base reading named in the lease, for the first revision). The new index is the reading for the same quarter one year later. Using the same quarter on both sides matters: the period between the two readings should match the period between revisions, and courts have treated mismatched periods as a defect in the clause.

A worked example: rent of 48,000 euros a year, reference reading 130.00, new reading 133.25. The ratio is 1.025, so the new rent is 49,200 euros. Next year, 133.25 becomes the reference.

Rules and limits that change the result

• Contractual caps and floors. Some leases cap the yearly change, set a floor, or apply only a share of the index movement. Apply them exactly as written.
• Upward-only clauses. Courts have struck down clauses that let the rent rise but never fall. If a lease contains one, take advice before relying on it.
• Statutory caps. In recent years the law has temporarily capped some index movements, for small businesses and for residential rents. Check whether a cap applies to the quarter you are using.
• Large movements. When indexation has moved the rent by more than a quarter since it was last set by agreement or by the court, either party can ask for the rent to be reviewed.
• Residential leases. These use the IRL (indice de référence des loyers), follow their own rules, and a landlord who is late in applying a revision can lose part of it. Check the residential rules separately.

Late publication and the catch-up

The anniversary often falls before INSEE has published the reading it needs. The clause still takes effect from its contractual date, so invoices issued in the meantime are billed at the old rent. When the reading arrives, the tenant owes the difference for the days already billed.

That difference should be billed once, as a clearly labelled catch-up line, and the regular rent should move to the new figure from then on. The usual errors are billing the catch-up twice, forgetting it entirely, or folding it silently into the new rent so that nobody can check it.

Common mistakes

• Using the latest published reading instead of the quarter named in the lease.
• Measuring each year against the original base reading, instead of the reading used at the previous revision.
• Indexing lines the lease does not index, such as service charge provisions.
• Ignoring a cap, a floor or a partial-indexation clause.
• Applying a provisional or later-corrected index value without checking it.
• Letting a revision slip for months, then billing a large catch-up without warning.

Step by step

1. List the leases whose revision date falls in the coming period.
2. For each one, check the index, the reference quarter and the reference reading in the lease.
3. Wait for the new reading to be published, and check it against the official source.
4. Calculate the new rent, then apply any cap, floor or partial indexation.
5. Have someone other than the preparer approve the figure.
6. Tell the tenant, update the rent from its effective date, and bill any catch-up once.
7. Record the reading you used: it is next year's reference.

How PropertyOne handles it

• Each lease records its index, its reference reading, its revision date, and any cap, floor or application percentage, and each rent line says whether it is indexed.
• Index values are collected automatically. A reading that looks out of line with the series is held for review before any lease can use it.
• When a revision falls due, PropertyOne proposes the new rent as a lease amendment, showing the reading, the reference, the percentage change and the limits applied. If the reading is not published yet, the review waits rather than guessing.
• Nothing changes until someone with approval rights ratifies the amendment. The proposer and the approver are both recorded.
• On ratification the reference reading moves to the one just applied, so the next revision chains from it.
• When a revision is ratified after its effective date, the next invoice carries a single prorated catch-up line, and the amendment is marked so it is never billed twice.
• During billing review, an invoice that rises past its lease's indexation cap is flagged before it is issued.