Impossibility for the Lessor of commercial premises […]

Court of Cassation, 3^rd civil chamber, January 25, 2023, n°22-10.648

In a decision dated January 25, 2023, the Third Civil Chamber of the Court of Cassation held that: the implementation of a first demand guarantee by the lessor of commercial premises in order to obtain payment of unpaid rents during the period of closure of businesses due to covid-19 is characterized as a manifestly unlawful disturbance, in view of the legal prohibition on lessors implementing personal sureties guaranteeing the payment of rents during these protected periods

In the case presented to the Court, a lessor of commercial premises (a Société Civile Immobilière in this case) had obtained from its tenant, at the time of the conclusion of the commercial lease, the provision of a guarantee on first demand granted by a bank in the event of non-payment of rent by the tenant.

This type of guarantee, now common in the context of commercial leases, allows the lessor to obtain a strong security insofar as the Bank is obliged to perform and make payment to the benefit of the lessor, at the latter’s first request, without being able to invoke any exception.

In this case, the lessee having failed to pay the rent due to the closure of his business during the second confinement of the year 2020 linked to the Covid-19 sanitary crisis, the SCI lessor requested the Bank to pay the amount of the guarantee made available in case of non-payment of rent.

The tenant then filed a summary action to prohibit the Bank from proceeding with the settlement requested by the Landlord for the unpaid rent.

The question submitted to the Court in this case is then simple: is it possible for a Landlord to request the application of a first demand guarantee in case of unpaid rents during periods of health emergency related to the Covid-19 epidemic?

The Court answered in the negative, holding that “the first demand guarantee constituted a personal surety governed by article 2321 of the Civil Code, the Court of Appeal was able to deduce that its implementation […] constituted a manifestly illicit disturbance”.

The High Jurisdiction recalls that “article 14 of the law n° 2020-1379 of November 14, 2020 prohibits […] the implementation of all real and personal securities guaranteeing the payment of rents or rental charges relating to professional or commercial premises”.

Indeed, Article 14 of Law No. 2020-1379 of November 14, 2020 authorizing the extension of the state of health emergency in the context of the second containment of the French population in the year 2020 specified that:” During this same period, the real and personal securities guaranteeing the payment of the rents and rental charges concerned may not be implemented and the lessor may not take any protective measures. “.

Thus, enforcement is suspended for commercial rents due on or after October 17, 2020 until August 1^st, 2021 (two months from the date the business ceased to be affected by a police action imposed on June 1^st, 2021).

This neutralization of penalties for non-payment of commercial rents under the second 2020 containment echoes the solution adopted during the first containment by Section 4 of Ordinance No. 2020-316 of March 25, 2020, which similarly provided that businesses affected by the epidemic could not “In the event that a tenant fails to pay the rent or rental charges for his or her business premises, he or she may be subject to financial penalties or interest for late payment, damages, a penalty payment, the enforcement of a resolutory clause, a penalty clause or any clause providing for forfeiture, or the activation of guarantees or sureties.

Therefore, in holding that the first demand guarantee constitutes a personal security, the Court specifies in the cited decision that even this strong guarantee obtained by the Lessor is paralyzed in case of default of payment of the commercial rents during the periods of sanitary emergencies related to the Covid-19 epidemic and the confinement of the French population.

This ruling is therefore in keeping with the protective spirit of the derogatory texts limiting sanctions and the activation of guarantees in the event of non-payment of commercial rents during the health crisis period, even though, in finethat such rents remain payable and that tenants of commercial premises remain liable for payment of such rents due during the health crisis.