Commercial Lease and Judicial Liquidation: Can the Landlord Refuse a Transferee?

You are the owner of a commercial property in Besançon, rue des Granges, and you learn that your tenant, a café brand, is in judicial liquidation. The liquidator has just informed you that he will transfer the lease to a new operator without asking for your opinion. You wonder: do I have a say? Can I refuse this new tenant?

This question, I receive regularly in my office in Besançon. The answer has long been unclear, but the Court of Cassation ruled on 19 April 2023 (appeal no. 21-20.655). It says that the liquidator must respect the lease clause requiring the landlord's approval of the transferee. In other words, you can say no. Explanations.

The facts: a story that happens every day

In May 2013, an SCI (civil real estate company) owner of a property in Paris grants a commercial lease to the company Feel Good Coffee for a term of nine years. The contract contains a standard clause: any assignment of the lease is subject to the prior approval of the landlord. In 2017, the tenant company is placed in judicial liquidation. The liquidator obtains from the supervising judge authorisation to transfer the business and the lease to a third party, without seeking the owner's consent.

The owner challenges this assignment before the court, then on appeal. The Paris Court of Appeal rules in his favour: the liquidator cannot override the approval clause. The liquidator appeals to the Court of Cassation, arguing that in judicial liquidation, the assignment of the lease is free and the supervising judge can authorise anything. But the Court of Cassation dismisses his appeal and upholds the appeal decision.

The reasoning of the court — dissected

The Court of Cassation relies on two texts: Article 1134 of the Civil Code (in its version prior to 2016, which sets out the principle of binding force of contracts: parties must perform what they have signed) and Articles L. 145-16, L. 641-12 and L. 642-19 of the Commercial Code. These articles govern the assignment of the lease in judicial liquidation.

What the law says: In liquidation, the liquidator may assign the lease with the authorisation of the supervising judge, but this assignment is made "on the terms provided for in the contract at the date of the opening judgment". One exception: the clause that would impose on the assignor (the tenant in liquidation) joint and several obligations with the assignee (guarantee of unpaid rent) is excluded. For the rest, the contract continues to apply.

The approval clause is part of the contract terms. Therefore the liquidator must respect it. The Court specifies that the supervising judge cannot authorise an assignment that would violate this clause. This is a confirmation of case law: the binding force of the contract prevails, even in collective proceedings.

In short, the owner retains his right to scrutinise the entry of a new tenant. This was not a foregone conclusion: some courts considered that judicial liquidation justified overriding this to facilitate the takeover. But the Court of Cassation says no.

What this changes for you — concretely

For the landlord: You can refuse a transferee who does not suit you (e.g., poor financial situation, activity incompatible with your property). In Besançon, if your tenant is a clothing store in liquidation and the buyer wants to open a fast-food outlet, you can say no if the lease prohibits catering. Concrete example: monthly rent of €2,000, if the transferee goes bankrupt after six months, you lose €12,000. Better a refusal than a risky tenant.

For the tenant in liquidation: You (or your liquidator) must obtain the owner's consent before assigning the lease. Without this consent, the assignment can be annulled. In Montbéliard, if you are a trader and want to resell your business with the lease, plan ahead.

For the buyer (transferee): Before buying a business in liquidation, check that the landlord has given his consent. Otherwise, you risk being left without a lease, and therefore without premises.

What few people know: even if the supervising judge authorises the assignment, the owner can challenge it in court. undefined, I have come across cases where owners obtained the annulment of the assignment because the liquidator had neglected to seek approval.

Four tips to avoid this type of dispute

• Insert a clear approval clause in your commercial lease. Specify that any assignment, even in the event of judicial liquidation, is subject to your prior written consent. Example: "The tenant may not assign the lease without the express and written consent of the landlord, which may be refused without cause."
• Draft an addendum if your current lease does not contain this clause. Propose it to your tenant in exchange for a consideration (e.g., a rent reduction).
• Monitor your tenants' insolvency proceedings. Subscribe to legal announcements (BODACC) to be quickly informed of an opening judgment. In Besançon, the commercial court registry publishes this information.
• Consult a lawyer as soon as you receive a request for approval. A poorly justified refusal may be challenged. We verify that your refusal is legitimate (e.g., insolvency of the transferee, non-compliance with the permitted use of the premises).

Further analysis: related case law and developments

This decision confirms an already initiated line of case law. For example, in a judgment of 9 December 2020 (no. 19-16.256), the Court of Cassation had already held that the approval clause must be respected in the case of an assignment of a lease under a transfer plan (judicial reorganisation). Here, it extends the principle to judicial liquidation, which is logical since the texts are similar.

However, an earlier decision (Cass. com., 8 November 2017, no. 16-15.419) had seemed more flexible by considering that the supervising judge could override if the approval clause was "abusive". But in the 2023 judgment, the Court does not retain this exception. The trend is therefore towards strengthening the landlord's rights.

For the future, liquidators will have to be more careful. They will have to seek the owner's consent before any assignment, on pain of nullity. This could slow down assignments in liquidation, but protects the landlord's interests.

In practice: what to do

FAQ:

My tenant is in liquidation, the liquidator wants to assign the lease without my consent. What should I do? Reply in writing that you oppose the assignment, referring to the approval clause. Apply to the supervising judge to have the non-compliance with the clause noted. If the assignment has already taken place, sue for annulment before the judicial court.

Can I refuse without giving a reason? If your lease so provides, yes. Otherwise, your refusal must be based on a serious and legitimate reason (e.g., the transferee is insolvent, its activity is not compliant).

Can the liquidator override if I refuse? No. The decision of the Court of Cassation is clear: he must respect the clause. If he overrides, you can obtain annulment of the assignment in court.

What are the time limits for action? As soon as you learn of the assignment (by notification or by chance), you have 5 years to bring an action for annulment (general limitation period). But it is better to act quickly to prevent the transferee from settling in.

How much does a court action cost? Lawyer's fees vary depending on complexity. A 30-minute consultation with me costs €45. An interim proceedings (urgent) can cost between €1,500 and €3,000, a full proceedings between €3,000 and €8,000. But once you win, costs (court fees) are borne by the losing party.

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