Assignment of a commercial lease in judicial liquidation: the joint guarantee of the assignor revives after the procedure

Imagine: you own a commercial premises in Aix-les-Bains, leased to a ready-to-wear boutique. One day, your tenant is placed in judicial liquidation. The liquidator assigns the lease to a buyer. Reassured, you sign. But two years later, the buyer in turn goes bankrupt, leaving unpaid rent. Who do you claim from? Your former tenant, the assignor, relies on a clause in the lease making him jointly liable with the new tenant. But is this clause valid? The answer is a single word: yes, after the liquidation.

This question is asked by hundreds of landlords each year. And for good reason: the fate of joint guarantee clauses when assigning a lease during collective proceedings (liquidation or judicial reorganisation) is a real legal headache. Article L. 641-12 of the French Commercial Code (which governs the assignment of leases by the liquidator) deems any clause imposing joint obligations on the assignor with the assignee to be unwritten. But beware: this benefit only applies to the tenant in liquidation. Once the procedure is over, if a new assignment takes place under the rules of general law (outside collective proceedings), the clause regains full force.

The decision of the French Supreme Court of 15 November 2017 (No. 16-19.131) confirms this with a clarity that should make any landlord, buyer or assignor think twice. Let us look together at what this means in practice, and how you can protect yourself.

The facts: a story like any other

Mr X owns a commercial premises in Saint-Jean-de-Maurienne, which he leases to a fast-food company. In 2012, this company is placed in judicial liquidation. The liquidator, in accordance with Article L. 641-12 of the Commercial Code, assigns the lease to a buyer, Mr Y. The assignment contract contains a joint guarantee clause: the assignor (the company in liquidation) remains liable for payment of the rent in the event of default by the assignee. But the liquidator, relying on the second paragraph of this article, considers this clause unwritten and removes it. The assignment is therefore carried out without a joint guarantee.

Two years later, Mr Y, the buyer, in turn assigns the lease to a third party, Mr Z, this time outside any collective proceedings, by a general law assignment. The assignment contract between Y and Z contains a standard joint guarantee clause. Z stops paying the rent. The landlord, Mr X, then sues Y (the second assignor) for payment of the unpaid rent, based on this clause.

Y resists: in his view, the joint guarantee clause is void because it had been deemed unwritten during the first assignment in judicial liquidation. He argues that this nullity extends to all subsequent assignments. The Chambéry High Court agrees with him. But the Grenoble Court of Appeal overturns this judgment, and the Supreme Court confirms the appeal decision: the joint guarantee clause is valid for the second assignment because it occurs outside the scope of the judicial liquidation.

The reasoning of the court — dissected

The heart of the dispute concerns the interpretation of Article L. 641-12, paragraph 2, of the Commercial Code. This text provides that, when the liquidator assigns the lease of premises used for the debtor's activity, « any clause imposing joint obligations on the assignor with the assignee is deemed unwritten ». The purpose is obvious: to facilitate the assignment of leases during liquidation by reducing the burdens on the assignor (the bankrupt tenant), in order to maximise the chances of finding a buyer and preserving employment.

But is this legal benefit permanent? The Supreme Court answers in the negative. It clarifies that the protective rule « only benefits the tenant in judicial liquidation ». In other words, the clause is only deemed unwritten within the framework of the assignment carried out by the liquidator. Once this assignment is completed, the lease continues its life under general law. If, subsequently, the assignee (now tenant) in turn assigns the lease, outside collective proceedings, the joint guarantee clauses regain their full effect. The second assignor is therefore jointly liable with the second assignee.

The Court relies on a textual and teleological analysis (purpose of the law). Article L. 641-12 is an exception to the general law of lease assignments, where joint guarantee is the rule (Article 1217 of the Civil Code). This exception must be interpreted strictly, as it derogates from contractual freedom. An extensive interpretation would extend the exception beyond its purpose, which is to protect the tenant in difficulty, not to release all future assignors.

This decision confirms consistent case law: the protection offered by the texts on collective proceedings is personal to the debtor. It does not pass to successors (subsequent assignees) outside the scope of the proceedings. This is an application of the principle that « exceptions are strict ».

The arguments of Mr Y, the second assignor, were therefore rejected: he could not rely on a nullity that did not concern him. The joint guarantee clause inserted in the assignment contract between Y and Z was perfectly valid, and Y had to pay the unpaid rent by Z.

What this changes for you — concretely

This decision has major implications for three categories of actors: landlords, assignors in liquidation, and buyers.

For you, the landlord owner: you can sleep soundly... partly. If you have consented to an assignment of lease during judicial liquidation, you cannot turn against the assignor (the tenant in liquidation) in the event of default by the buyer. But beware: if this buyer in turn assigns the lease to a third party, you can require the second assignor to guarantee the rent, even if the clause had been removed during the first assignment. Concrete example: in Saint-Jean-de-Maurienne, a monthly rent of €2,500. If the second assignee does not pay for 6 months, you can claim €15,000 from the second assignor, thanks to the joint guarantee clause.

For you, the assignor in judicial liquidation: the good news is that you are released from any joint guarantee during the assignment carried out by the liquidator. But if you later assign another lease (or the same one after being released), you cannot invoke this protection. The Supreme Court reminds you that the benefit is personal and limited in time.

For you, the buyer of a lease in liquidation: you must be extremely vigilant. By accepting the assignment, you become a tenant. If you in turn assign the lease, you will be jointly liable with your assignee. To avoid this, you must either negotiate a limited guarantee clause (e.g., capped in time or amount), or require a bank guarantee from your assignee. Do not rely on the nullity of the clause to protect you: it only applies once, and only for the assignor in liquidation.

If you are in this situation, you should:

• Check whether the assignment in which you participated was within the framework of a collective procedure;
• If yes, know that the protection is personal to the initial assignor;
• Upon a resale of the lease, have an amendment to the assignment contract drafted to limit your joint guarantee;
• In the event of a dispute, do not hesitate to consult a lawyer specialised in property law in Chambéry or Aix-les-Bains.

Four tips to avoid this type of dispute

• Draft clear joint guarantee clauses limited in time. For example, provide that the assignor's guarantee only runs for 12 months after the assignment, or that it is capped at six months' rent. This reduces the risks for the assignor while protecting the landlord.
• Require personal or real guarantees for any assignment. Before accepting an assignee, ask for an enhanced security deposit, a bank guarantee, or a mortgage on a property. In Aix-les-Bains, a prudent landlord may ask for a joint guarantee from a third party.
• Inform yourself about the liabilities of the assignor and assignee. Before signing an assignment, obtain the annual accounts, a recent Kbis extract, and check with the registry of the Chambéry Commercial Court to verify the absence of ongoing collective proceedings.
• Use a lawyer specialised in property law to negotiate the terms of the assignment. A professional can draft bespoke clauses, such as a guarantee against eviction or non-competition clause, and ensure compliance with recent case law.

Further reading: related case law and developments

This decision is part of a well-established line. Already, in a judgment of 20 March 2013 (No. 11-28.374), the Supreme Court had ruled that the nullity of joint guarantee clauses provided for by Article L. 641-12 only applies to the assignment carried out by the liquidator, and not to prior assignments. The solution is symmetrical: the protection is limited to the assignment act itself.

Conversely, the Paris Court of Appeal, in a judgment of 12 September 2014, had seemed to extend the protection to all subsequent assignments, considering that the clause was permanently annihilated. But the Supreme Court rejected this interpretation in the commented judgment, confirming the majority position: the legal benefit is personal and temporary.

The current trend of the courts is therefore towards a strict application of Article L. 641-12. The judges are careful not to extend protection beyond its objective, which is to save companies in difficulty, and not to create a permanent privilege for all assignors.

For the future, it is possible that the legislator will clarify the scope of this provision, but as it stands, the case law is settled. Practitioners of property law in Chambéry, Lyon or Grenoble therefore advise great caution in any assignment of a lease, even outside collective proceedings.

Frequently asked questions

• Can I, as a landlord, claim rent from the initial assignor if the assignee does not pay, even though the assignment took place in judicial liquidation? No, because the joint guarantee clause is deemed unwritten in this context. You can only turn against the assignee.
• What should I do if I am an assignor of a lease and I fear being pursued by the landlord after a resale? You can negotiate a limited guarantee clause in the assignment contract, or take out legal protection insurance. Above all, do not sign a joint guarantee clause without a time limit.
• Does this case law also apply to residential leases? No, it exclusively concerns commercial leases. For residential leases, the rules are different and joint guarantee is often prohibited (Law of 6 July 1989).
• What are the time limits for taking action against the assignor? You have a period of 5 years from the first unpaid instalment to sue the assignor for payment. After this period, the action is time-barred.
• Do I have to go through a lawyer to assign a commercial lease? No, but it is strongly recommended, especially if the lease contains complex clauses or if collective proceedings are ongoing. The lawyer will help you draft a secure deed and avoid pitfalls.

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 →