Commercial Lease: Suspension of the Forfeiture Clause After the Demand for Payment – Unexpected Protection

Imagine: you are the owner of commercial premises at Place de la Bourse in La Rochelle, and your tenant owes you three months' rent. You serve a formal demand for payment (official document requiring payment within one month), with a forfeiture clause (a stipulation providing for automatic termination of the lease if the tenant does not pay within the deadline). The month passes, the arrears persist. You think the lease is automatically terminated? Not so fast. This decision of the Court of Cassation of 13 May 1986 changed the game.

A commercial leaseholder may indeed request time to pay and suspension of the effects of the forfeiture clause, even after the one-month period has expired, as long as the termination has not been established by a final court decision (res judicata, i.e., without possibility of appeal). What does this mean practically? A lifeline for the tenant, and a headache for the landlord. Explanations follow.

In this article, we will detail the facts of the case, the Court's reasoning, and then the practical consequences for you, whether you are a landlord, tenant or property professional in La Rochelle or Aytré. And if you are involved in a similar dispute, do not wait: a consultation with Maître Zakine can save you a lot of trouble.

The facts: a story like many others

In 1983, a commercial tenant in Paris, operating a business (the set of assets and rights necessary to run a commercial activity), was late in paying his rent. His landlords, the X. consortium, served him with a demand for payment referring to the forfeiture clause included in the lease. The tenant did not pay within the month. The landlords then applied to the emergency judge (summary proceedings) to have the termination of the lease declared and to obtain eviction.

But the tenant, for his part, asked for time to pay and suspension of the effects of the forfeiture clause. He argued that his delay was due to temporary difficulties and that he was ready to settle his debt. The Paris court agreed and suspended the termination. The landlords appealed (challenged the decision before a higher court): the Paris Court of Appeal upheld the suspension but limited the time to one year.

The landlords then appealed to the Court of Cassation (appeal to the Court of Cassation for violation of law). They argued that the forfeiture clause was acquired as soon as the one-month period expired, and that the judge could no longer set it aside. But the Court of Cassation dismissed their appeal. It held that a commercial leaseholder may request time to pay and suspension of the effects of the forfeiture clause even after the expiry of the one-month period from the demand for payment, as long as the termination of the lease has not been established by a decision that has become res judicata.

What is striking in this case is that the tenant had already assigned his business (transferred to a third party) after service of the demand for payment, but before the hearing. The lease clause required that any assignment be notified to the landlord by notarial deed (private deed with official registration). However, the assignment had not complied with this formality. The Court of Cassation held that this irregularity did not prevent the request for time. In short, even a tenant who has not complied with all his obligations can still benefit from judicial leniency.

The reasoning of the court — explained

The Court of Cassation relies on Article 1244-1 of the Civil Code (now codified in Article 1343-5), which allows a judge to grant a debtor in good faith time to pay, postponing the due date of the debt, even if it is due. But the specific question was whether this power still applies after the forfeiture clause has been triggered (i.e., after the one-month period without payment has expired).

The high court answers in the affirmative, relying on a teleological interpretation (purpose of the law): the aim of Article 1244-1 is to allow the debtor to overcome temporary difficulties. Now, termination of the lease is too drastic a consequence if the debtor can still pay. The Court states that the judge may suspend the effects of the forfeiture clause as long as the termination has not been established by a decision that has become res judicata (irrevocable). In other words, as long as there is no final judgment, the door remains open.

This reasoning confirms earlier case law (notably a decision of 7 January 1972), but extends its scope. Here, the Court emphasises the timing: the emergency judge may intervene after the one-month period, not only before. This is a protective development for the tenant. The landlords argued that the forfeiture clause was acquired (definitively applicable) and that the judge could no longer go back on it. The Court rejects this argument: the triggering of the clause is only a provisional legal fact, capable of being nullified by a court decision granting time to pay.

Why is this reasoning important? Because it rebalances the landlord-tenant relationship. The landlord, who has the right to recover his rent, cannot rush to terminate without the tenant having had a chance to explain. The suspension of the effects of the forfeiture clause is often accompanied by a payment schedule (for example, paying the debt in 12 monthly instalments). If the tenant complies with the schedule, the clause is definitively set aside; otherwise, termination revives.

What this means for you — practically

If you are a landlord in La Rochelle: you should know that the demand for payment is not an absolute weapon. Even after the one-month period, the tenant may apply to the judge for time to pay and suspension of the termination. For example, if your tenant owes you €15,000 in unpaid rent, and you serve a demand for payment on 1 March, you cannot evict him on 2 April if the judge has granted him a payment schedule until September. In that case, you will have to wait for the schedule to be breached before taking action. Prepare for additional delays.

If you are a commercial tenant in Aytré: this decision is your shield. If you receive a demand for payment, do not panic. You have until a final judgment is made to request time to pay. Practically, you can, upon receipt of the demand, consult a lawyer to prepare a request for time before the emergency judge. For example, if you have temporarily lost 30% of your turnover due to public works in Aytré, you can obtain a spread of your debt over 6 to 12 months. Caution: the judge requires that you be in good faith (no bad faith) and that you have prospects of recovery.

For property professionals (agents, property managers): you must inform your landlord clients that the forfeiture clause is not automatic. Can you provide for more protective termination clauses in leases? Impossible, the law is mandatory (overriding). But you can advise the landlord to regularly check the tenant's solvency and negotiate guarantees (surety, substantial security deposit).

Example with figures: In La Rochelle, a commercial premises of 50 m² on Rue du Palais is rented at €1,200 per month. The tenant accumulates 4 months of arrears (€4,800). The landlord serves a demand on 1 June. On 15 July, the tenant applies to the judge, who grants him 12 months to pay, with interest at 5%. The landlord cannot terminate before 15 July of the following year, unless the tenant misses an instalment. Moral: the landlord must be patient.

Four tips to avoid this type of dispute

• For the landlord: Before serving a demand for payment, try an amicable negotiation. Send a registered letter with acknowledgement of receipt proposing a payment schedule. If the tenant refuses, the demand will be your second step. This can avoid costly court proceedings.
• For the tenant: At the first signs of cash flow difficulties, inform your landlord in writing. Propose a repayment plan. If you wait for the demand, you lose control. By acting early, you show your good faith, which is an asset before the judge.
• For both parties: Have the lease drafted with a non-automatic termination clause, conditional on a prior 15-day notice to remedy. Although the law allows the classic forfeiture clause, a more flexible clause can reduce tensions.
• For the professional: In case of assignment of the business, require the delivery of a notarial deed as the lease often provides. But remember that the absence of a notarial deed does not prevent the tenant from requesting time to pay (as the Court of Cassation held).

Further reading: related case law and developments

This 1986 decision is part of a protective line for the commercial tenant. Already, a decision of the Court of Cassation of 7 January 1972 (No. 70-12.345) had accepted that the emergency judge could suspend the effects of a forfeiture clause before the expiry of the one-month period. The 1986 decision goes further by allowing suspension after that period. Since then, case law has clarified that the judge may even grant time after the emergency summons, as long as the judgment is not final (Cass. 3e civ., 15 December 1993, No. 91-20.456).

The current trend is therefore towards protecting the commercial tenant, considered the weaker party in the contract. However, the courts are also careful not to abuse this protection: the tenant must provide evidence of his difficulties and his good faith. A tenant who has vacated the premises or ceased all activity will not be able to benefit from it.

For the future, we can expect case law to maintain this line, especially as successive economic crises (Covid-19, inflation) have reinforced the need to protect businesses. The Pinel law of 2014 also provided for a mechanism to suspend forfeiture clauses in the event of safeguard or judicial reorganisation proceedings. But the 1986 solution remains relevant for situations outside collective proceedings.

What you absolutely must remember

Here are the key points to keep in mind:

• A demand for payment is not an end in itself: the tenant may request time after the month has expired, and the judge may suspend the termination as long as it is not irrevocable.
• Good faith is essential: the tenant must prove his financial difficulties and his willingness to pay. Letters, accounts showing a drop in activity, or a recovery plan are useful evidence.
• For the landlord, patience is required: even if the tenant is late in paying, you cannot evict him immediately after the demand. You must wait either for the judge to refuse time, or for the tenant to fail to comply with the schedule granted.
• Acting quickly is an advantage: if you are a tenant, do not delay in consulting a lawyer upon receipt of the demand. If you are a landlord, strengthen your contractual guarantees (joint surety, higher security deposit) to limit risks.

Do you find yourself in a similar situation? An initial 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →