Following the Emergency Act No. 2020-290 of March 23, 2020 to deal with the COVID-19 epidemic, which empowered the Government to issue various orders to deal with the economic consequences of the epidemic, twenty-six orders were issued on March 25, 2020.

This is the case of Order No. 2020-316 of March 25, 2020 relating to the payment of rents, water, gas and electricity bills relating to the business premises of companies whose activity is affected by the spread of the COVID-19 epidemic.

First of all, it should be noticed (and the difference is significant) that although the Enabling Act of 23 March 2020 only provided for the postponement of rents, the Ordinance of March 25, 2020 extends it to rental charges.

In fact, this Ordinance does not exactly reflect the terms of the enabling law of March 23, 2020.

Update on the situation, as it stands, since an implementing decree is still awaited.

Under the terms of the Order, is the suspension of the payment of rents (and rental charges) permitted?

All real estate operators questioned the suspension of rents which was announced by the presidential speech of March 16, 2020 concerning certain companies, namely “the smallest of them” and “those facing difficulties“.

Questions remained topical with the law of 23 March 2020, which referred to the postponement of rents.

Finally, the Ordinance makes no mention of the suspension or postponement of rents and rental charges.

It provides in fact that the tenants referred to in Article 1 of the Ordinance may not suffer, as a result of non-payment of rent and rental charges:

“financial penalties or interest for late payment, damages, periodic penalty payments, the execution of a resolutory clause, a penalty clause or any clause providing for lapse, or the activation of guarantees or securities ».

Thus, without going so far as to establish an automatic postponement of rents and rental charges, the Government acknowledges the impossibility for lessors to implement the aforementioned sanctions in the event of non-payment of rents and charges.

This change of position seems to be justified by a desire to limit the legislator’s interference in the terms of the contract. Indeed, the binding force of agreements remains the rule and the exceptions are limited.

In conclusion, the obligation to pay the rents and rental charges at the contractually agreed term remains, but the landlord cannot invoke a possible default in payment to apply the above-mentioned sanctions.

Who’s concerned?

The Government did not adopt the terms of the Enabling Act, which provided that the measure should apply to microenterprises, i.e. those that occupy less than 10 people and have an annual revenue or balance sheet total not exceeding 2 million Euros.

The Ordinance provides that this measure applies to ” individuals and legal entities governed by private law exercising an economic activity who are likely to benefit from the solidarity fund mentioned in Article 1 of Ordinance No. 2020-317 of 25 March 2020 “, i.e. those ” exercising an economic activity particularly affected by the economic, financial and social consequences of the spread of COVID-19 “.

Contrary to the terms of the Enabling Act, which provided for objective and precise conditions, the Ordinance refers to a decree to be published.

The Ordinance does not distinguish between the companies affected by the mandatory closing of non-essential businesses and the others. This suggests that any business that meets the criteria laid down in the forthcoming decree will be able to enjoy the suspension of penalties for non-payment of rents at the contractually agreed term.

How long does the mechanism take?

The absence of consequences attached to the non-payment of rents when due concerns rents and charges due from March 12, 2020 and until the expiry of a period of two months after the date of cessation of the state of health emergency.

 

For more information :

#COVID-19 : Can the payment of rent, water, electricity or gas be suspended?

#COVID-19 : The suspension of rents and the law n°2020-290 of March 23, 2020 to face the epidemic

Hanan CHAOUI

Partner - Commercial lease and real estate
Hanan Chaoui holds a doctorate in law and specializes in real estate. She assists her clients having leasing disputes with any type of assets and rental relations. She accompanies them on problematics such as eviction compensation and fixing the rent. She conducts audits and analysis of rental conditions as well as drafting and negotiating rental agreements.

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Oriane COHEN

Associate - Real estate & construction law
Oriane Cohen has been a member of the Paris Bar since 2018 and works in real estate law alongside Hanan Chaoui.

She assists her clients in both advisory and litigation work on all aspects of private real estate law.

She is particularly involved in rental litigation on all types of assets and rental relationships.

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