Commercial lease and collective proceedings from the tenant's point of view

The opening of collective proceedings: the commercial lease is not automatically terminated. The article examines I) the continuation of the lease and its consequences; II) the interruption of shares and the freezing of previous rents. Support avoids procedural pitfalls.

The principle of the continuation of the commercial lease in insolvency proceedings

public policy principle

In terms of collective proceedings, the general principle is that ongoing contracts, including commercial leases, continue despite the opening of the procedure. Article L.622-13 I of the Commercial Code (safeguard and receivership) enshrines this principle of public policy: any contractual clause providing for automatic termination in the event of the opening of proceedings is ineffective. The same applies to receivership (L.631-14) and liquidation (L.641-11-1).

The objective is clear: to allow the company to continue to operate its essential contracts, including the commercial lease.

The lessor remains bound by its main obligations (in particular delivery of the premises and guarantee of peaceful enjoyment – Article 1719 of the Civil Code), while the lessee must pay the rents after the opening. Previous rents and charges are frozen and must be reported as liabilities, avoiding any automatic termination.

The power to require continuation of the lease

The judicial administrator, when appointed, holds the exclusive prerogative to require the continuation of the lease (Articles L.622-13 II and L.631-14 I of the Commercial Code). In liquidation, this right is vested in the liquidator or the appointed director. If no director is appointed, the debtor may itself decide on the continuation of the lease.

The continuation of the lease and its counterpart: the payment of current rents

The continuation of the lease implies compliance with the contractual obligations in force at the time of the opening of the procedure. The lessor retains the right to subsequent rents, while previous rents remain frozen and must be declared as liabilities.

This distinction, which is often a source of litigation, requires careful reading of the texts and accurate verification of claims.

The ability of the administrator to terminate the lease

The administrator has the possibility to terminate the commercial lease out of court and at his own discretion, according to Articles L.622-14 (safeguard), L.631-14 I (recovery) and L.641-12 I (liquidation) of the French Commercial Code. These provisions apply specifically to leases relating to buildings used for the activity of the company and supplement the general principle of continuation of the lease provided for in L.622-13.

In this context, the lessor’s formal notice to obtain a decision from the administrator is ineffective: only the administrator may, without reason, decide to terminate the lease.

Litigation of subsequent rents

In the event of non-payment of rents subsequent to the opening judgment, the lessor has two separate routes against the lessee.

Termination based on the provisions of the collective proceedings

According to Article L.622-14 2°, the lessor may request the termination of the lease for non-payment of rents subsequent to the opening judgment, but only after a period of three months following the judgment. If the payment occurs before the expiry of this period, the termination cannot be pronounced. This rule also applies in judicial liquidation (L.641-12).

Termination based on the termination clause of the lease

The lessor may also invoke the termination clause provided for in the contract. This path is the responsibility of the judicial judge and tends to see the play of the resolutory clause, the termination of the lease and, ultimately, the eviction of the tenant. In the context of such a procedure, the tenant may, however, request payment deadlines.

The distinction between these two mechanisms – litigation specific to collective proceedings or application of the resolutory clause – is technical and involves important issues for the protection of the rights of each party. A legal analysis makes it possible to choose the most appropriate strategy and avoid procedural errors.

The principle of the interruption of actions, in particular in payment of rents and charges born before the opening of collective proceedings

public policy principle

The opening of collective proceedings results in the interruption or suspension of legal proceedings against the debtor. Article L.622-22 I of the Commercial Code specifies that the opening judgment:

“interrupts or prohibits any legal action on the part of all creditors […] seeking to order the debtor to pay a sum of money or to terminate a contract for failure to pay a sum of money.”

Specifically, this provision blocks any procedure aimed at terminating the lease or applying the termination clause for rents and charges prior to the opening of the procedure.

The lessor can only declare his claim to the judicial agent, and this procedure is then limited to the establishment and recovery of the sums due.

The distinction between prior and subsequent receivables is often difficult to establish and can

A defence to prevent the termination of the commercial lease

For the tenant, the opening of collective proceedings is an effective protection tool. It suspends the actions of the lessor and blocks enforcement measures, thus offering valuable time to regularize its situation or negotiate amicable solutions.

However, this mechanism is only fully effective if action is taken before a decision to terminate the lease has become final. Case law confirms that the acquisition of the termination clause is deprived of effect if it has not been established by a decision that has become final (Court of Cassation, 23 November 2004, Commercial Chamber, 03-16.196; Court of Cassation, 26 May 2016, Civ. 3, 15-12.750).

In this context, the role of the lawyer is decisive:

• analyze the procedural schedule to intervene in time,
• identify the risks related to previous and subsequent receivables,
• secure the tenant’s position and anticipate the lessor’s disputes.

Thus, a collective procedure, far from being only a constraint, can become a strategic lever to protect the right to lease and ensure the continuity of commercial activity. Expert reading of texts and control of procedural deadlines make it possible to transform a critical situation into an opportunity for legal security.

Our business real estate team is at your disposal to take the right steps.