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Covid-19: The Fate Of Commercial Rents In The Face Of The Health Crisis

The spread of the covid-19 virus forced the French authorities to take strict containment measures and order the closure of certain professional establishments, which caused serious economic hardship for these tenants.

Lessors are then likely to be confronted with the refusal of their tenant to honor the payment of rents and charges even though they themselves are, at least in part, dependent on these payments to honor their own due dates. investment.

Are these refusals to pay still legitimate? What are the lessor's means of action to oblige the tenant to honor his commitments?

An ordinance no.2020-316 of March 25, 2020 established a temporary protection regime for small businesses (less than 10 employees and less than one million euros in turnover).

From March 12, 2020 and up to two months after the date of cessation of the state of health emergency, these small businesses may not incur any financial penalty or interest on late payment and no resolving or penal clause may be used. implemented against them for failure to pay rent or charges.

No guarantee or deposit can be invoked and the procedure for terminating commercial leases, provided for in the event of the opening of collective proceedings, is also neutralized.

It is not, however, a question of canceling the rent and the rental charges, of which the lessor is still legitimately a creditor, but only of prohibiting the sanctions linked to failure to meet payment deadlines.

Regarding tenants who are not eligible for the measures put in place by the government, they might be tempted to turn to traditional tools of contract law to avoid paying their rents and charges.

However, the tenant could not first of all seriously support, to refuse to honor his payments, an exception of non-performance for failure to deliver the rented property, since the impossibility of carrying out the activity is not attributable to the lessor and local but at the activity itself which was the subject of an administrative closure.

The lessor could also legitimately oppose the qualification of force majeure if the tenant were to invoke it to evade the payment of rent and charges.

The Court of Cassation considered that "the debtor of a sum of money cannot be exempt from paying by invoking force majeure" (Com. 16/09/2014, n ° 13-20306).

Furthermore, trying to demonstrate, as required by the case law, that there is a direct causal link between the epidemic and the total inability to pay its installments is difficult or impossible proof to provide insofar as there is almost systematically appropriate measures to be implemented: bank financing, state aid, online sales, delivery and / or drive service, etc.

Regarding the use of the improvisation mechanism of article 1195 of the Civil Code, it is only possible for leases concluded or renewed after October 1, 2016 and which have not ruled out the possibility of having recourse to this article.

In this case the tenant, if he demonstrates the unpredictability of the epidemic and the excessively expensive execution of the lease for him, could then ask his lessor for a renegotiation of the terms of the lease in order to temporarily adapt it to new economic circumstances .

But renegotiation is not an obligation for the lessor, and if it fails, it is up to the tenant to refer the matter to the judge to adapt the content of the contract, demonstrating it excessively expensive, with all the uncertainties linked to this praetorian appreciation.

The risk for the lessor would however be that the judges uphold the jurisprudence relating to good faith, based this time on the new article 1104 of the Civil Code, to sanction the lessor who did not cooperate enough with his tenant to find a solution to the imbalance that has appeared.

In all cases, without the lessor's agreement, the lessee remains bound to pay the rent and charges on the due dates.

The most formidable pitfall for the lessor nevertheless remains the possibility for the tenant to ask the judge for grace periods, in accordance with article L145-41 Al 2 of the Commercial Code.

The tenant in fact has the right to ask the judge for payment terms and especially the suspension of the effects of the termination clause, as long as the termination of the lease is not established by a decision which has the force of res judicata.

In accordance with article 1343-5 of the Civil Code, payment periods could be granted for a maximum of two years by the judge, taking into account the situation of the tenant and the needs of the lessor.

The lessor therefore has arguments to oppose unscrupulous tenants who no longer pay their debts, but it is not safe for the judge to interfere by neutralizing these arguments to grant additional payment terms to the tenant.

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Vincent Gautier's picture

Vincent GAUTIER holds a DEA from the University of Paris I La Sorbonne and is a partner of the law firm Jean Claude Coulon & Associés. He is specialised in business law and especially in corporate law, mergers and acquisitions particularly the acquisition of companies holding real estate assets.