Conditions for Termination of Lease for Unpaid Rent during the Observation Period.
In a recent ruling, the French Court of Cassation clarified the conditions for terminating a lease due to unpaid rent owed by a tenant undergoing judicial reorganization. The court reiterated that the lease termination for unpaid rent accrued after the opening judgment cannot be confirmed by the supervising judge if the payments are made before the judge issues a decision.
Reference: Cass. com. 12-6-2024 n° 22-24.177 FS-B, Sté Les pressings réunis v. Sté 5 à sec Rif.
Case Facts
In this case, a commercial tenant was placed under judicial reorganization. Four months later, the landlord filed a request with the supervising judge to have the lease terminated due to non-payment of rent and charges accrued after the opening judgment. However, the tenant paid the overdue rent before the judge made a ruling, leading the court to reject the landlord’s request for lease termination.
Decision of the Court of Cassation
The Court of Cassation upheld the decision of the supervising judge, dismissing the landlord’s request. The court ruled that since the rent was paid before the judge made a decision, there was no grounds for terminating the lease.
Key Points to Remember
- Legal Framework: In cases of safeguarding, reorganization, or liquidation of the tenant, the landlord may request the termination of the lease for non-payment of rent and charges accrued after the opening judgment of the collective procedure, but only after a period of three months from the date of the judgment (C. com. art. L 622-14, 2°, L 631-14, al. 1 and L 641-12, 3°).
- Payment Grace Period: The administrator, or the tenant if no administrator is appointed, has a three-month period to pay the rent due after the opening of the procedure. The landlord cannot oppose this payment nor request judicial intervention during this period.
- Conditions for Termination: If the tenant pays the rent before the supervising judge issues a decision, the lease cannot be terminated, even if the landlord’s request is filed after the expiration of the three-month period.
- Interpretation by the Court of Cassation: The Court dismissed the landlord’s argument that the mere existence of unpaid rent at the end of the three-month period was sufficient to justify the automatic termination of the lease. The key factor remains the tenant’s payment of the rent before the supervising judge’s decision.
Conclusion
This ruling clarifies that within the context of collective procedures, if the tenant pays the due rent within the allowed period and before the judge’s decision, lease termination cannot be granted. Landlords must ensure that the rent remains unpaid at the time the supervising judge rules in order to obtain lease termination.
This decision is crucial for practitioners in commercial lease law, as it underscores the importance of the timing of payments within the framework of collective procedures.
For further questions on late payment penalties or to seek personalized legal advice, feel free to contact our law firm.