COVID-19 – Temporary emergency measures for owners and tenants in France – Real estate and construction

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Following the emergency crisis caused by the COVID-19 pandemic, the French government has moved from limiting large gatherings to organizing lockdowns across the country.

In this context, emergency law n ° 2020-290 of 23 March 2020 (the “Act“) creates a state of health emergency allowing the government to take specific temporary measures by ordinance, that is to say without having to go through Parliament. At this stage, the state of health emergency has been declared for a period of two months from March 24, 2020, but can be extended.

What does this mean for owners and tenants?

The law allows the government to legislate “allowing the postponement or total staggering of the payment of rents, water, gas and electricity bills relating to professional and commercial premises and to waive financial penalties and suspensions, interruptions or reductions of supplies that may be applied in the event of non-payment of these invoices, for the benefit of microenterprises […] whose activity is affected by the spread of the epidemic” or “modifying, while respecting reciprocal rights, the obligations of companies exercising an economic activity vis-à-vis their customers and suppliers […], in particular in terms of payment terms and penalties and the nature of the counterparties“.

Through a series of 30 ordinances published since March 26, 2020, the government has specified emergency measures likely to be of interest to owners and tenants, in particular:

The establishment of a solidarity fund to provide financial assistance to very small businesses1

The emergency fund aims to provide financial assistance to very small companies, with 10 employees or less, an annual turnover of less than 1 million euros and a taxable profit of less than 60,000 euros during the previous financial year. and not controlled by a commercial company within the meaning of Article L. 233-3 of the Commercial Code.

This fund has a very limited duration of three months, which can be extended for a maximum of three months (ie a total of six months).

A specific regime concerning the payment of rents and supplies of public services2

Owners are prohibited from activating automatic termination clauses or charging penalties, interest on late payment, or other financial penalties, or forfeiture clauses or from calling on third-party guarantees, due to the non-payment of rents or related service charges or commercial premises due between March 12, 2020 and the expiration of a period of two months after the end of the state of health emergency.

However, this system is only accessible to very small businesses eligible for the solidarity fund.

A general regime for payments under contracts3, which would be available to tenants not eligible for the specific regime.

It is forbidden for a party to activate the penalty payment, automatic termination clauses, penalty clauses or forfeiture clauses against the other party who has not respected a commitment due between March 12 2020 and the expiration of a period of one month after the end. state of health emergency. These on-call or penalty clauses take effect and are enforceable from the expiration of a period of one month after the expiration of this period if the debtor has not performed his obligation before this period.

This general regime can be applied to leases and would allow tenants to defer payments without risk of forfeiture or penalty. However, homeowners can still use third-party guarantees to cover unpaid amounts.

An automatic extension of the period during which a party can oppose the automatic renewal of the contract4

Where an agreement can only be terminated for a specified period or is automatically renewed if not terminated for a specified period, that period is extended if it expires between March 12, 2020 and the expiration of a one month after the end of the state of health emergency, two months after the end of this period.

This regime would apply to service or public service contracts, or even civil leases, which generally include provisions for automatic renewal.

If you have any questions about the issues raised in this article, please contact us.

Footnotes

1. Ordinance n ° 2020-317 of March 25, 2020 and decree n ° 2020-371 of March 30

2. Ordinance No. 2020-316 of March 25, 2020

3. Ordinance No. 2020-306 of March 25, 2020

4. Ordinance No. 2020-306 of March 25, 2020

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought on your particular situation.

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