Commercial lease and judicial liquidation: the liquidator does not pay the rent, the landlord can terminate

Imagine: you own a commercial premises in Panazol, on the outskirts of Limoges. You lease it to a company that runs a shop. One day, you learn that your tenant has been placed in judicial liquidation. The liquidator (the person responsible for managing the assets of the bankrupt company) continues to occupy the premises but no longer pays you the rent. What should you do? Can you terminate the lease and recover your premises? This is exactly the question the Court of Cassation decided in a judgment of 21 February 2012. And the answer is clear: yes, the landlord can act, even if a judgment has already ordered the sale of the business. But be careful: it all depends on when you act. Let's break it down.

The facts: a story that happens every day

Mr and Mrs X, owners of a building in Panazol, granted a commercial lease (a protected lease for traders) to EURL Contreverse, which operated a business (the set of assets and rights necessary for the activity: clientele, equipment, etc.). The lease was signed on 6 July 2007, effective from 4 May 2009. But along the way, EURL Contreverse was placed in judicial liquidation (a collective procedure aimed at realising assets to pay creditors). The liquidator (judicial representative in charge of the liquidation) continued to occupy the premises but stopped paying rent for more than three months.

The landlords then applied to the judge-commissioner (the magistrate who supervises the liquidation) to have the lease terminated (cancelled) for non-payment. But in the meantime, the commercial court had ordered the sale of the business. The liquidator opposed the landlords' application, arguing that the sale of the business made termination of the lease impossible. The landlords insisted, and the case went up to the Court of Cassation. The twist? The sale of the business had not yet taken place at the time the landlords applied to the judge. The business had not been sold, so the lease still existed.

The reasoning of the court — explained

The Court of Cassation ruled in favour of the landlords. Its reasoning is twofold. First, it recalls Article L. 622-14 of the Commercial Code (formerly L. 622-14, but since 2005 it is Article L. 641-12 for judicial liquidation). This provision states that the landlord may request termination of the lease if rents due after the judgment opening the liquidation (rents payable after the liquidation order) are not paid within three months. The law thus protects the landlord: the liquidator must pay the current rents, otherwise the lease is terminated.

Second, the Court examines the liquidator's argument: the sale of the business had been ordered, so the lease could no longer be terminated. The Court dismisses this argument: as long as the sale has not been completed (i.e., the deed of sale has not been signed and the business has not changed owner), the business still belongs to the debtor in liquidation. The judgment ordering the sale does not have the effect of transferring ownership (it does not transfer title). Consequently, the landlord retains the right to seek termination for non-payment. In other words, the mere fact that a court has said 'sell the business' does not block the landlord's right to act. It is only when the sale is effective (the business is sold) that the tenant changes, and termination is no longer possible (because the new owner of the business becomes the tenant).

In short: the Court of Cassation confirms that the landlord's right prevails as long as the business has not been sold. This is a strict application of the law, but also a protection for landlords against the slowness of liquidations. undefined, I have encountered cases where liquidators delay paying rent, hoping that the sale of the business will protect them. This judgment reminds them that this is not a way out.

What this changes for you — practically

For the landlord: you have a powerful lever. If your tenant is in judicial liquidation and the liquidator does not pay the rent for more than three months, you can apply to the judge-commissioner to have the lease terminated. And this is even the case if a sale of the business has been ordered, as long as the sale has not been completed. Concrete example: in Guéret, a landlord of a commercial premises on Rue de la République saw his tenant placed in liquidation in January 2023. The liquidator did not pay the rent from February to May. The landlord was able to obtain termination in June, even though the court had ordered the sale of the business in March. He recovered his premises and re-let them to a new trader.

For the tenant (or its liquidator): be careful not to neglect the payment of post-liquidation rents. The liquidator must prioritise these rents, otherwise the lease may be lost. If the lease is terminated, the business often loses its value (because it no longer has premises). The sale of the business may then fail, to the detriment of creditors (banks, suppliers).

For the potential buyer of the business: check that the rents are up to date before buying. If a termination is in progress, you risk acquiring a business without a lease, which makes it virtually worthless. Do not rely on a sale order: as long as the deed is not signed, the landlord can still terminate.

Four tips to avoid this type of dispute

• Require a substantial security deposit: in the lease, provide for a security deposit of at least six months' rent. In the event of liquidation, this covers you during the three-month period before you can act.
• Monitor payments monthly: at the first non-payment, send a written reminder. If the liquidator does not pay, do not delay in applying to the judge-commissioner. Every month lost is a month of unpaid rent.
• Have the situation recorded by a bailiff: if the premises are vacant or the liquidator refuses to pay, have a report of abandonment or non-payment drawn up. This strengthens your case.
• Consult a lawyer as soon as the liquidation is opened: collective proceedings are complex. A lawyer lawyer will help you act within the deadlines and draft the application to the judge-commissioner. In Limoges, for example, the commercial court handles these cases quickly if the landlord is well advised.

Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.

Further reading: related case law and developments

This 2012 judgment is part of a line of protection for landlords. The Court of Cassation had already held, in a judgment of 9 February 2010 (No. 09-10.489), that the landlord may request termination of the lease after three months of unpaid post-judgment rents, even if the liquidator proposes a plan for the sale of the business. The only condition is that the sale has not yet been completed. More recently, the Commercial Chamber confirmed this solution in a judgment of 12 January 2016 (No. 14-23.506), specifying that the judge-commissioner can only refuse to declare termination if the business was sold before the landlord's application. The trend is therefore consistent: the landlord's right is a priority, because it protects their right of ownership. However, note: if the liquidator pays the rent before the expiry of the three-month period, termination cannot be requested. It is a race against time.

Frequently asked questions

1. My tenant is in judicial liquidation, what should I do first? Check that the liquidator has been appointed and send them a formal notice to pay the rent from the first non-payment. If no payment is made within three months, apply to the judge-commissioner.

2. Can I terminate the lease if the business has already been sold? No, once the sale is completed (deed signed), the new owner of the business becomes the tenant under the lease. You must then turn to them for payment of rent.

3. What are the time limits for acting? You must wait three months from the liquidation judgment to request termination. But you can act from the first day of the fourth month of non-payment.

4. Can the judge-commissioner refuse termination? They can only refuse if the legal conditions are not met (for example, if the rent has been paid or if the business was sold before your application). Otherwise, they are required to declare termination.

5. What is the cost of such a procedure? The application to the judge-commissioner is free (no stamp duty). However, if you need to summon the liquidator to court, the costs of a lawyer and bailiff may vary (expect €500 to €2,000 depending on complexity).

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