Commercial lease and safeguard proceedings: the judicial administrator is not liable for

Imagine: you are the owner of commercial premises in Roye, in the Somme. Your tenant, a small joinery business, is experiencing financial difficulties. It obtains the opening of safeguard proceedings (a kind of judicial "protection" to avoid bankruptcy). For several months, the rent is no longer paid. You wait for the judicial administrator to make a decision: either terminate the lease or continue it. But nothing happens. Months pass, and your arrears accumulate. Who is responsible? The administrator? The company? Yourself, for not having acted? This question, which owners of commercial premises in Abbeville or elsewhere ask themselves every day, was answered by the Cour de cassation on 7 October 2020. And the answer is not what one expected.

In short, for the high court, the judicial administrator, when he has only a supervision mission (and not management), is not required to terminate the lease. He can wait, observe, without incurring liability (the obligation to repair damage caused by his fault). The landlord, for his part, remains free to request termination of the lease from the judge, but must do so quickly. This decision, which may seem unbalanced, is based on a detailed analysis of the texts of the Commercial Code and the Civil Code. Let us break it down together.

What few people know is that safeguard proceedings are designed for companies that are not yet in cessation of payments (i.e., they can still pay their due debts). The objective is to help them reorganise. In this context, the administrator, if he has only a supervision mission, does not have the power to terminate ongoing contracts, including the lease. He must simply prepare an economic assessment and propose a restructuring plan. The lease, for its part, continues by operation of law (automatically) as long as the administrator has not taken a position. But if the landlord suffers arrears, he can act on his own. Be careful, however: if he waits too long, he risks compromising his claim (the amount owed).

The facts: a story like any other

Mr X, owner of commercial premises in Roye, had leased his premises to a joinery company. In 2015, this company encountered difficulties and obtained the opening of safeguard proceedings. A judicial administrator was appointed, with a simple supervision mission. The lease continued, but the rents were no longer paid. Mr X became impatient and, in March 2016, proposed to the administrator to terminate the lease by mutual agreement. The administrator did not respond, or at least did not make a formal decision. Finally, in September 2016, the lease was terminated by the judge-commissioner (the magistrate supervising the proceedings), but the unpaid rents in the meantime amounted to several thousand euros.

Mr X then sued the judicial administrator for liability (Article 1240 of the Civil Code, former 1382), considering that he should have terminated the lease earlier to limit the debt. He criticised him for not having responded to his proposal for an amicable termination and for having allowed the situation to deteriorate. The Commercial Court of Compiègne, then the Court of Appeal of Amiens, ruled against him. Mr X appealed to the Cour de cassation.

Before the Cour de cassation, the administrator argued that he did not have the power to terminate the lease alone, and that his supervision mission did not oblige him to do so. Mr X, for his part, argued that the administrator should have taken a position, even if it meant terminating, and that his inaction was wrongful. But the Cour de cassation dismissed the appeal: the administrator committed no fault. The judges specified that, in the context of a supervision mission, the administrator is not required to ensure the performance or termination of the lease. He can simply prepare the economic assessment and propose a plan. The lease continues by operation of law, and the landlord can always act for termination on his own side.

The reasoning of the court — broken down

To understand this decision, we must go back to the texts. The Cour de cassation combines two articles: Article 1240 of the Civil Code (formerly 1382), which provides that "any act of man which causes damage to another obliges the person by whose fault it occurred to repair it", and Articles L.620-1, L.622-1 and L.622-13 of the Commercial Code. The latter govern safeguard proceedings. Article L.620-1 specifies that safeguard proceedings are intended to facilitate the reorganisation of the company to allow the continuation of economic activity, the maintenance of employment and the discharge of liabilities (repayment of debts). Article L.622-1 defines the missions of the administrator: he may be entrusted with an assistance or supervision mission. In the latter case, he supervises management, but does not manage. Article L.622-13 deals with the continuation of ongoing contracts: the administrator may decide to continue or terminate contracts, but if he has only a supervision mission, this power belongs to the debtor (the company) itself.

In other words, the administrator on a supervision mission does not have the power to terminate the lease. He can only give his opinion or consent. If the landlord proposes an amicable termination, the administrator may respond, but he is not obliged to do so. And even if he agrees, the termination must be formalised by the debtor or by the judge. In the Roye case, the administrator had simply written to Mr X that he was "considering" an amicable termination, but did not implement it. The court considered that this did not constitute a fault, because he had no obligation to do so.

This reasoning is in line with a logic of protecting companies in difficulty. Safeguard proceedings are a flexible procedure, aimed at giving the company a chance to recover. If the administrator had to terminate all leases as soon as rent is unpaid, that would compromise the continuation of the business. But this logic has its limits: the landlord, for his part, suffers the arrears. The Cour de cassation therefore passes the ball back to the landlord: it is up to him to request judicial termination of the lease if he considers that the arrears are too significant. He cannot passively wait for the administrator to act.

This decision is a confirmation of previous case law, in particular a 2015 ruling (Cass. com., 10 March 2015, No. 13-25.140) which had already held that the administrator was not liable for the consequences of the failure to terminate a lease. There is therefore no reversal, but a useful reminder for landlords and practitioners.

What this changes for you — concretely

If you are the owner of commercial premises leased to a company in safeguard proceedings, this decision has important practical consequences. First, you must know that the judicial administrator, unless he has a management mission (which is rare in safeguard proceedings), is not your contact for obtaining termination of the lease. It is up to you to act. How? By applying to the judge-commissioner for termination of the lease for non-payment of rent. You can also, if the lease so provides, invoke the forfeiture clause (clause providing for automatic termination in case of non-payment) and serve a notice to pay (bailiff's act ordering the tenant to pay within a certain period).

Take a concrete example in Abbeville. You rent a 100 m² premises to a hairdresser, with a rent of €1,200 per month. The tenant is placed in safeguard proceedings in January 2023. From February, he no longer pays. You wait until June, hoping that the administrator will act. Nothing. In July, you consult a lawyer and apply to the judge-commissioner. Termination is ordered in September, but in the meantime, you have lost 8 months' rent, i.e., €9,600. If you had acted from February, you would have limited the loss to 2 or 3 months. Inaction is costly.

If you are a tenant (the company in difficulty), this decision is favourable to you: the administrator will not terminate your lease hastily, leaving you a chance to negotiate a restructuring plan. But be careful: the landlord can still request termination. You must therefore, on your side, pay the current rents (those after the opening of safeguard proceedings) or, failing that, ask the judge for a payment deferral. Do not rely on the administrator to protect you indefinitely.

Finally, if you are a real estate professional (agent, notary, property manager), you must inform your landlord clients of this legal framework. Many wrongly believe that the administrator is a "super-manager" who will sort everything out. In reality, on a supervision mission, he is a mere observer. The ball is in the landlord's court.

Four tips to avoid this type of dispute

• Do not passively wait for the administrator's decision. As soon as you become aware of the opening of safeguard proceedings, monitor the payment of rents. At the first non-payment, act: send a formal notice (registered letter with acknowledgment of receipt) and, if necessary, apply to the judge-commissioner.
• Check the administrator's mission. Consult the judgment opening the safeguard proceedings (available at the commercial court registry). If the administrator has a management mission, he has more powers. In that case, you can ask him to terminate the lease or to indicate his intentions.
• Propose an amicable termination in writing. If you want to avoid a trial, write to the administrator (and the debtor) to propose an amicable termination of the lease. Keep a record of your request. If the administrator does not respond, you will be able to demonstrate that you attempted a negotiated solution.
• Consult a lawyer lawyer at the first signs of difficulty. A lawyer will help you assess the risks, draft the documents (notice, summons) and meet deadlines. In insolvency law, every day counts. A quick consultation can save you months of proceedings and financial losses.

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

Further reading: related case law and developments

This decision is part of a consistent line of case law. Already in 2015, the Cour de cassation (Cass. com., 10 March 2015, No. 13-25.140) held that the administrator, on a supervision mission, was not liable for the failure to terminate a lease. More recently, in 2018 (Cass. com., 7 February 2018, No. 16-21.977), the court specified that the administrator was not required to verify the existence of a forfeiture clause in the lease. The trend is therefore clearly protective of administrators, to the detriment of landlords.

But be careful: if the administrator has a management mission, his liability may be incurred. In a 2019 ruling (Cass. com., 27 March 2019, No. 17-28.473), the court held an administrator liable who, on a management mission, had allowed a lease to continue without making a decision, causing loss to the landlord. The distinction is therefore crucial.

For the future, we can expect landlords to become increasingly vigilant and not hesitate to apply to the judge-commissioner quickly. The courts, for their part, will have to strike a balance between protecting companies and the rights of creditors. This 2020 decision is an important milestone, but it does not close the door to an evolution if abuses multiply.

In practice: what to do

FAQ:

1. What should I do if my tenant in safeguard proceedings no longer pays rent?
Answer: Act immediately. Send a formal notice, then, if payment does not occur within 8 days, apply to the judge-commissioner for termination of the lease. Do not wait for the administrator to act.

2. Can I terminate the lease myself without going to court?
Answer: Yes, if your lease contains a forfeiture clause. You must then serve a notice to pay by bailiff, referring to the clause, and allow a period of 30 days (or the period provided in the lease). If the tenant does not pay within that period, termination is automatic. But be careful: during the observation period of safeguard proceedings, the judge-commissioner may suspend the effects of the forfeiture clause. It is better to consult a lawyer.

3. What is the time limit for acting?
Answer: There is no fixed legal time limit, but the longer you wait, the greater your arrears claim. In practice, act within 2 months of the first non-payment. If you let 6 months pass, the judge might consider that you have tacitly accepted the continuation of the lease.

4. Can I claim damages from the administrator?
Answer: In the context of a supervision mission, no, as this decision confirms. But if the administrator has committed a personal fault (for example, if he lied to you about his intentions), you could sue him. This is rare. In practice, rather turn to the debtor (the tenant) to claim unpaid rents.

5. What should I do if the administrator proposes an amicable termination but does not implement it?
Answer: Follow up in writing, then, if nothing happens, apply to the judge-commissioner. Do not rely on a promise not followed by action.

In summary, this decision of the Cour de cassation is a reminder: in safeguard proceedings, the landlord must be active. The administrator is not an insurer against arrears. If you are in a similar situation, do not hesitate to consult a lawyer lawyer to secure your rights.

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