Widely publicized by the Court of Cassation itself, the rulings rendered on June 30, 2022 (No. 21-19.889, 21-20.127 and 21-20.190) in the three test cases it selected, in order to unify the case law in this area, have decided the issue in favor of the lessors.
As a reminder, the High Court rejected the three legal grounds drawn from the Civil Code, regularly invoked by lessees to justify the non-payment of their commercial rents during periods of confinement with imposed closure of premises open to the public, by ruling that the state of health emergency :
– did not characterize the loss of the leased property,
– did not characterize the lessor’s non-performance of its obligation to deliver the leased premises,
– or did not constitute a situation of force majeure.
Nevertheless, one may not be totally convinced by the reasoning of the Cour de cassation.
1. On the loss of the leased thing
The argument that the prohibition of public access to stores and business premises is equivalent to a total or partial, and in any event temporary, loss of the leased premises could have been accepted (as the Paris Court of Appeal had done in summary proceedings, cf. its decision in Pôle 1, chamber 3, of March 30, 2022, no. 21/16710). Indeed, classic case law holds that the loss of the leased thing, within the meaning of article 1722 of the Civil Code, is not limited to material loss, but can be constituted by a legal loss (Cass. 3e civ. May 12, 1975, n° 73-14. 051; Cass. 3e civ. 7 Jan. 1987, n° 85-15.381), in particular when the impediment to use the leased thing results from the order of an authority (Cass. civ. 22 Nov. 1922, D.P. 1925, summ. p. 213; Cass. civ. 14 Jan. 1941, D.P. 1941, p. 66). Moreover, the Court of Cassation has admitted on several occasions that the limited time of the loss does not prevent the application of article 1722 of the Civil Code (Cass. 1ère civ. 29 Nov. 1965, Bull. civ., I, n° 655; Cass. 3e civ. 17 June 1980, Bull. civ. 1980, III, n° 116).
In rejecting the argument based on the loss of the leased property, the Court of Cassation ruled that the prohibitions on access to stores and commercial premises are a “general and temporary measure, without any direct link to the contractual destination of the leased premises”, the effect of which “cannot therefore be assimilated to the loss of the property within the meaning of article 1722 of the Civil Code”.
However, article 1722 of the Civil Code does not distinguish between a general and a specific cause for the loss of the leased property. Moreover, it is difficult to see how the closure of the premises to the public would be “without a direct link to the contractual destination”, since it is a commercial premises intended, by its very nature, precisely for the reception of customers.
The rented thing can be considered as lost as soon as it can no longer be used in accordance with its purpose. However, the Court of Cassation referred to the categories of establishment receiving the public, while at the same time referring to the impossibility of using the premises or the building (the establishment receiving the public) in accordance with its destination (the categories of establishment).
His rejection of this argument is therefore not based on any solid foundation.
2. On the exception of non-performance
On the lessees’ argument that, since their premises were closed to customers, the lessors were unable to ensure their peaceful enjoyment of the leased property and to provide them with premises that continually conformed to their use, The Court of Cassation decided that the exception of non-performance can only come into play in the case of fault on the part of the debtor, not when the performance results “solely from the legislator’s act” and is not “attributable to the lessors”.
However, in accordance with long-standing case-law and a unanimous and constant doctrine, the absence of fault on the part of the debtor (in this case the lessor), prevented by force majeure, has never excluded either termination or the operation of the exception of non-performance.
Moreover, articles 1219 and 1220 of the Civil Code refer only to performance or non-performance, without any consideration of fault or imputability.
The Court of Cassation’s rejection of the exception of non-performance argument is therefore contrary to positive law.
3. On force majeure
Finally, the Cour de cassation held that the lessee is not entitled to invoke force majeure on the ground that “a creditor [here the lessee] who has not been able to benefit from the consideration to which he was entitled [here the delivery by the lessor of premises in conformity with his use] cannot obtain the resolution of the contract or the suspension of his obligation by invoking force majeure.
The High Court has therefore applied literally the provisions of article 1218 of the Civil Code, which refer only to the impediment of the debtor of the obligation by force majeure, not that of the creditor.
However, there are cases where the impediment does not particularly concern the debtor and the creditor, but the contract itself.
When the Government prohibited establishments receiving the public from receiving the public during certain periods, it was the very subject matter of the lease contract, namely a store intended to receive customers, that was affected by these measures.
A commercial lease cannot be enforced on premises that are objectively out of use, since they are closed to the public.
This is not a case of subjective force majeure (affecting one of the parties), but a case of objective force majeure. The question is therefore not so much whether or not there has been non-performance of the debtor’s obligation, but rather whether the contract itself, deprived of its substance, can continue to be performed. However, the Court of Cassation has already held in the past that this could well be a case of force majeure (in a situation of unforeseeable withdrawal by the administrative authority of a building permit, on the grounds of health precautions, comparable to a “fait du prince”) (Cass. 3e civ. June 1, 2011, n° 09-70.502).
The Court of Cassation thus did not take into account the real aspect of the impediment and somewhat contradicted its own jurisprudence, no doubt under political pressure.
As can be seen, the reasoning of these judgments of 30 June 2022, summarily presented by some as having definitively “blown the whistle” for the lessees, is far from being unassailable.
Moreover, these rulings cannot be extended to all situations where rent payments are suspended, such as, for example, in cases of impromptu closure of premises imposed by lessors during the first containment period, “as a precaution”, even though these were not establishments receiving the public, which were affected by governmental bans.
The debate on the non-payment of rent during confinements thus remains, in our view, open, until the Court of Cassation has examined all of the appeals before it, especially since it has not yet ruled on the argument based on the application to commercial leases of the legal mechanism of unforeseeability, introduced by Ordinance No. 2016-131 of February 10, 2016 reforming the law of contracts, the general regime and proof of obligations, which entered into force on October 1, 2016.
The latter introduced article 1195 of the Civil Code, which offers, when “a change in circumstances unforeseeable at the time of the conclusion of the contract [which] renders performance excessively onerous for a party who had not agreed to assume the risk,” the possibility for that party to request “adaptation” of the contract in court, in the absence of any amicable renegotiation agreement with the co-contractor.
However, the parties must not have expressly excluded its application in the commercial leases binding them (essentially at the insistence of forward-looking lessors), as this article is not of public order.
Assuming that they have not done so, the Court of Cassation has not yet ruled on the question of whether the situation experienced since the outbreak of the COVID 19 epidemic constitutes a change in unforeseeable circumstances that makes it excessively onerous for the lessees to perform the lease contract.
While the socio-economic consequences of the situation, which are considerable and unprecedented in France, undoubtedly constitute a change in unforeseeable circumstances, have they made the payment of rent excessively onerous? In any event, the excessively onerous nature of the rent for the commercial lease, following the occurrence of the change in unforeseeable circumstances, is unlikely to result solely from the period of administrative closure. In order for the argument to be accepted, it will still be necessary to demonstrate that the payment of rent remains an excessively onerous burden for the lessees beyond the period following the confinement, taking into account the long-term economic upheavals generated by the health crisis (such as, for example, the desertification of certain formerly busy neighborhoods, due to the lasting introduction of telecommuting into the way of life).
It should be noted, however, that Article 1195 of the Civil Code is of limited immediate practical interest, since it provides that the debtor who intends to implement the mechanism of unforeseeability “shall continue to perform his obligations during the renegotiation”, so that the lessee ultimately remains obliged to pay the lessor the rents and charges as they fall due, even during periods of administrative closure, since only a court decision can “adapt” the lease contract in the long term.
Despite appearances, the June 30, 2009 rulings do not constitute an unshakeable foundation on which lessors can rest to sweep away all the requests for rent exemptions or refusals to pay that lessees have made to them in connection with the administrative closures of their commercial premises imposed by the health crisis.
The courageous lessees still have arguments and may well succeed in convincing the courts of first instance, which are not very sensitive to the reasoning followed by the Court of Cassation, to accept them favorably.
More than ever, in our opinion, given the fragile foundations of the June 30, 2022 rulings, but also the obligation to execute agreements in good faith that is imposed on the parties, it is therefore important that lessors and lessees maintain a constructive dialogue and favor amicable solutions in good understanding, to ensure the durability of their leases.