Tribune de Lyon 2021 Legal Guide: “How to justify the non-payment of commercial rents during the health crisis?”

The 2021 Legal Guide published by Tribune de Lyon offers precise and pragmatic answers to concrete issues faced by business owners/managers.

Catherine Nommick contributed to this Guide through an article entitled “How to justify the non-payment of commercial rents during the health crisis?”.

This article is reproduced below and a courtesy English translation follows.

“How to justify the non-payment of commercial rents during the health crisis?”[1]

Catherine Nommick, Partner, Soulier Avocats

Focus on a recent decision of the Enforcement Judge who relieved a lessee from its obligation to pay the rents.

The payment of commercial rents during successive lockdown periods is an issue that has given rise to numerous disputes.

Arguments based on force majeure, unforeseeability (a French law concept close to that of hardship) or non-performance, often used by lessees as a justification for not paying rents, have been dismissed in the majority of court decisions handed down on this subject. In this context, the preferred course of action seemed to be the renegotiation of the lease agreement, as per the principle of good faith that governs the performance of contracts.

However, on January 20, 2021, the Enforcement Judge of the Paris Judicial Court (No. RG 20/80923) opened up another way in ruling that the legal impossibility of operating the leased premises during the term of the lease, resulting from a decision of the public authorities, is comparable to the loss of the leased property, as provided for in Article 1722 of the French Civil Code. As such, the lessee company could not be required to pay rents during the administrative “lockdown” measure, i.e., from March 16 to May 11, 2020

At this stage, it is of course only a first instance decision that needs to be upheld. Yet, the “loss of the leased property” will conceivably be relied upon in future disputes where lessees are unable to use the leased property because of an administrative closure measure.

[1] An extended version of this article is available on our Blog: The “loss of the leased property”: The legal basis relied upon to relieve a commercial lessee from its obligation to pay the rent during the first lockdown