Lessees might argue that the latest decisions from the French Government that are leading to the shutdowns of "non-essential" commercial premises amounts to a certain type of force majeure so-called "fait du prince". Indeed, the purpose of the lease agreement (i.e. the use of commercial premises) is no longer existent and the leased premises are no longer usable for their intended use following the Government orders. This theory has been applied in some exceptional instances in case law and where shutdowns were ordered on a permanent basis.
In the context of the COVID-19 epidemic, the shutdowns of "non-essential" commercial premises by the French Government, even on a temporary basis for now, could be deemed in our opinion as a "fait du prince". On this basis, lessees could, in our opinion, try to claim the suspension of the lease during the epidemic period and thus suspend the rent.
In addition, lessees may invoke a defence of anticipatory breach (“exception d’inexécution”) due to the failure from the landlord to make the leased space available in order to seek a rent reduction. On this, we recommend carefully reviewing the terms and conditions of each lease agreements as parties could have waived this defence in their lease agreements.
Landlords could argue that the drafting of the above mentioned Order refers to the lessee’s activities and thus it is part of the lessee’s occupational risk that such activities are (temporarily) prohibited.
The law declaring the state of health emergency as of 12 March 2020 was enacted on 23 March 2020. Under the state of emergency, which is initially set to last 2 months, significant and derogatory measures notably economic measures can be taken by the French Government. One of the first measure taken on 25 March 2020 by way of ordinance No. 2020- 316 relates to the suspension of payment of commercial rents during the period of the state of emergency. Although the scope of this measure is expected to be clarified by way of decree, it seems like this suspension of rents will apply to small businesses only.
Another ordinance (n°2020-306) provides that during the declared sanitary state of emergency all penalties, penalty provisions and/or termination provisions shall not apply, but can only be effective one month after the expiry of such state of emergency. As of today, it is planned that the sanitary state of emergency terminates on 24 May 2020. To summarize, the rent remains due but the payment is suspended without any penalties.
In addition, during this period, the landlord cannot terminate the lease agreement or introduce a court debt action. However, at the current state of regulation, it seems possible for a landlord to make a seizure on the lessee’s bank account or to activate the guarantee provided by the lessee under the lease agreement (cash deposit, bank guarantee).