Commercial rent payments in France

To date, we have listed more than fifty decisions relating to this issue.

The proceedings were mainly summary proceedings (référé). A few decisions are decisions on the merits of the case (some being specific litigations on enforcement – juge de l’exécution/JEX)

It is currently difficult to identify a clear trend in the case law, especially as many summary judgments have found that there are serious challenge for the grounds on which the plaintiff has brought the matter before the court and that those would need to be definitely settled by a trial judge (juge du fond). Moreover, there are still too few decisions on the merits to allow final conclusions to be drawn.

Subject to future case law on the merits, no argument put forward by the lessees before the courts currently enables them with certainty to escape their obligation to pay rent, although the grounds relating to (i) the performance of the contract in good faith and (ii) the partial loss of the rented property currently seem to be the most likely to be accepted by the judge in order to grant an application for suspension of the Covid-19 rent.

Numerous decisions, rendered in summary proceedings but also on the merits (TJ Paris, 10 July 2020, no. 20/04516), consider that because of the parties’ obligation to perform the contract in good faith, "the parties are required, in the event of exceptional circumstances, to verify whether these circumstances do not make it necessary to adapt the terms of performance of their respective obligations". 

Thus, when faced with this argument, judges will analyse on a case-by-case basis the behaviour of the parties prior to the dispute (e.g. the existence of amicable negotiations and/or proposals to postpone or spread out the payment of the disputed rents).

The loss of the leased property is governed by Article 1722 of the French Civil Code. As this provision is not of public order, it can only be invoked if the parties have waived it contractually. 

Decisions handed down in summary proceedings are divergent. A trend considering that the impossibility for the lessee to enjoy its premises due to the administrative closure obligation is a partial loss of the leased property could begin to emerge before some judicial courts. 

Thus, the argument relating to the partial loss of the rented property was upheld by the enforcement judge of the Paris judicial court (TJ Paris, JEX, 27 October 2020, No. 20/81460; TJ Paris, JEX, 20 January 2021, No. 20/80983; TJ Paris, JEX, 14 May 2021, No. 20/81457). It was also upheld on the merits by the judicial court of La Rochelle in a judgment dated 23 March 2021 (n°20/02428). 

However, these are decisions of first instance, and the only appeal decision on this issue that we are aware of rejected the plea of loss of the leased property, considering that (i) the impossibility of operating because of the state of health emergency explained itself by the economic activity that was developed in the premises and not by the premises themselves and (ii) that it was limited in time, "which is not provided for in article 1722 of the Civil Code" (CA Versailles, 6 May 2021, n°19/08848).

It will therefore be necessary to be attentive to future case law to determine which position takes precedence.

This argument is frequently invoked as a corollary to the lessor's failure to fulfil its obligation to deliver the property.

Numerous decisions handed down in summary proceedings have held that the plea of non-performance constitutes a serious dispute to be decided by the trial judge. They are therefore not significant.

Although no definitive conclusions can yet be drawn, a judgment on the merits handed down by the judicial court of Paris on 25 February 2021 (no. 18/02353) deserves attention both because of (i) its reasoning and (ii) the publicity that the court gave it.

The lessee argued that the administrative closure of his business had prevented him from carrying on his commercial activity and that this circumstance constituted a breach by the lessor of his obligation to deliver the property and ensure its peaceful enjoyment. According to the lessee, the lessor's failure to perform its obligation was sufficiently serious to justify the exception of non-performance regarding the payment of the rent due between 15 March 2020 and 11 May 2020.

The Paris court rejected the lessee's argument, considering that the lessor's obligation to deliver "does not oblige the lessor to guarantee the lessee the goodwill of the leased premises and the stability of the normative framework in which its activity is carried out" and that the lessee's disturbance of enjoyment, resulting from the administrative closure of its business due to the health crisis, "is not guaranteed by the lessor".

In view of the decisions rendered, the argument of force majeure frequently comes up against several obstacles. 
Firstly, there is no consensus to date as to whether the administrative closure measures or the pandemic meet the necessary conditions to constitute force majeure. 

Secondly, the debtor of a contractual obligation to pay that has not been performed cannot be relieved of this obligation by invoking force majeure, as has been pointed out in several judgments. 

Although this principle is tempered in the event that the debtor demonstrates that it is materially impossible to make the payment, a number of rulings have held that the lessee did not justify cash-flow difficulties making it impossible to fulfil his obligation to pay the rent.

Since the 2016 reform of contract law, the French Civil Code provides for the possibility of requesting a renegotiation of the contract in the event of a change in circumstances unforeseeable at the time of the conclusion of the contract making performance excessively onerous for one party. 

However, this possibility is only available for contracts entered into after 1 October 2016 and provisions of many leases set forth an express waiver to the use of this mechanism.

Only a few summary judgments have ruled on this ground and the judges have taken divergent positions. It is therefore not possible, at this stage, to assess the effectiveness of this ground.

This ground is rejected by the judges.

The purpose of this provision is to temporarily prohibit the lessor from exercising a certain number of enforcement measures to recover rents due between 12 March 2020 and 23 June 2020. 

It does not result in suspending the rent due by the lessee.

The purpose of Article 14 of Law n°2020-1379 is to prohibit, for a specific period of time, any measure likely to affect the continuity of the contractual relationship between lessors and lessees affected by administrative restrictions related to the Covid-19 in connection with the non-payment or late payment of rents due during the period in which the restrictions are in force and to allow lessees time to return to normal activity in order to meet their obligations (the protection applies until two months after the end of the restriction measures).

In the context of summary proceedings, the Paris Court of First Instance (21 January 2021, No. 20/55750) ruled that this provision, which came into force on 17 October 2020, is of immediate application and concerns ongoing proceedings.