Irregular Assignment of Lease by Liquidator: What Remedy for the Landlord?

Imagine: you are the owner of commercial premises in Charleville-Mézières, rue de la République. Your tenant, a furniture sales company, has been placed into bankruptcy proceedings (a collective procedure aimed at realising assets to pay creditors). The liquidator (the representative in charge of managing the liquidation) assigns the lease to a third party without your consent, as if nothing had happened. You discover this afterwards and wish to terminate the lease for irregular assignment. But a question bothers you: is the action for termination limited to a three-month period provided for by Article 52 of the Law of 13 July 1967 for actions arising from the bankruptcy? Is your right to sue already time-barred?

This is precisely the question that the French Supreme Court decided in a judgment of 7 February 1984 (No. 82-11.948). And its answer is clear: the irregular assignment of the lease by the liquidator, after the judgment of liquidation, does not constitute a cause of termination arising from the bankruptcy proceedings. Consequently, the landlord's action for termination is not subject to the time limit of Article 52. In other words, the owner retains the right to sue without being confined to the three-month period running from the judgment of liquidation.

This decision, though old, remains relevant after the evolution of insolvency law (notably the Law of 26 July 2005 and the Commercial Code), offering valuable protection to landlords. So, how should you react if you are in this situation? What are your remedies? Let us analyse this judgment and its practical implications.

The facts: a story like any other

Mr X, owner of a building in Charleville-Mézières, had granted a commercial lease to company Y. The latter encountered financial difficulties and was placed into bankruptcy by judgment of the Commercial Court of Charleville-Mézières. The appointed liquidator, without informing the owner and without obtaining his consent, assigned the lease to a third party, company Z. This assignment was irregular as it had not been authorised by the landlord, constituting a breach of the lease terms.

When Mr X learned of this, he sued the liquidator and the assignee before the High Court of Charleville-Mézières to seek a declaration of termination of the lease and the eviction of the occupant. The liquidator, for his part, had applied to the same court to have the lease terminated as necessary. The central question was whether the landlord's action for termination was admissible, given the three-month time limit provided for by Article 52 of the Law of 13 July 1967.

The Court of Appeal of Reims, in a judgment of 9 February 1982, declared the action inadmissible, holding that the irregular assignment was a cause of termination arising from the bankruptcy proceedings and that the owner had not acted within the three-month period. Mr X then appealed to the Supreme Court. The Supreme Court quashed the appeal judgment, ruling that the irregular assignment of the lease by the liquidator, after the judgment of liquidation, was not a cause of termination arising from the bankruptcy. Consequently, the action for termination was not subject to the time limit of Article 52. The case was remitted to the Court of Appeal of Amiens.

The reasoning of the court — explained

The Supreme Court relies on Article 52 of the Law of 13 July 1967, now codified in Articles L. 622-21 of the Commercial Code (for safeguard and administration proceedings) and L. 641-3 (for liquidation). This provision states: 'The opening judgment suspends any action by any creditor whose claim is not mentioned in I of Article L. 622-17, seeking the termination of an ongoing contract for non-payment of a sum of money, until the judgment ruling on the opening of the judicial administration or liquidation proceedings.' In essence, the idea is to protect the company in difficulty by temporarily freezing termination actions. But this freeze only concerns causes of termination arising before the opening judgment. For subsequent causes, the three-month time limit does not apply.

The high court distinguishes here: the irregular assignment of the lease by the liquidator is a fact occurring after the judgment of liquidation. It does not originate from the liquidation itself (as would, for example, non-payment of previous rent). Therefore, the landlord is not bound by the time limit of Article 52. He may sue at any time, subject to the ordinary limitation period (5 years for lease termination, subject to contractual stipulations).

This reasoning is logical: the liquidator is supposed to manage the debtor's assets in the interest of creditors, but cannot violate the landlord's rights. If the lease prohibits assignment without the owner's consent, the liquidator must respect that clause. Failing that, the landlord can demand termination. What few people know is that the liquidator incurs personal liability in the event of an irregular assignment (Article 1240 of the Civil Code, which requires compensation for damage caused by his fault).

In short, the Supreme Court protects the landlord against actions of the liquidator acting outside his powers. However, note that if the assignment had been authorised by the supervising judge or the landlord, it would be regular and the landlord could not oppose it. But in the absence of authorisation, the assignment is void and the landlord can seek termination.

What this means for you — practically

If you are a landlord, this decision gives you an important lever in the event of your tenant's liquidation. You are not obliged to accept an imposed assignment without your consent. You can sue for termination of the lease, even after the three-month period following the liquidation judgment. undefined, I have encountered cases where the liquidator assigned the lease to a relative of the director at a derisory price, thus depriving the landlord of a proper rent. Thanks to this case law, the landlord was able to obtain the eviction of the assignee and recover his premises.

Let us take a concrete example in Vitry-le-François. You rent commercial premises to a bakery. The tenant is liquidated. The liquidator assigns the lease to a fast-food company, without your consent. You discover the situation six months later. You can sue the liquidator and the assignee in court to have the assignment declared void and the lease terminated. The three-month time limit does not apply to you. You can also claim damages from the liquidator for breaching the lease terms.

If you are the tenant assignee (the one who took over the lease), you risk eviction if the assignment is annulled. You will then have to seek compensation from the liquidator. In practice, it is prudent, before accepting an assignment of lease during liquidation, to verify that the landlord has given written consent.

Finally, for real estate professionals (agents, notaries, property managers), this decision reminds us of the importance of securing lease assignments in insolvency proceedings. A simple oversight can lead to years of litigation.

Four tips to avoid this type of dispute

• Check the lease terms: before any assignment, re-read the lease contract. Most commercial leases contain a clause prohibiting assignment without the landlord's written consent. In liquidation, this clause remains applicable.
• Require the landlord's written authorisation: if you are a liquidator or assignee, obtain express consent from the owner before concluding the assignment. A simple email or registered letter with acknowledgement of receipt suffices.
• Consult a lawyer lawyer: in insolvency matters, the rules are complex. A lawyer will help you meet deadlines and avoid nullities.
• Act quickly: even if the three-month time limit does not apply, the ordinary limitation period runs. Do not delay in acting once you learn of the irregular assignment.

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Further reading: related case law and developments

This 1984 decision fits into a line of cases protecting landlords. One can cite a Supreme Court judgment of 10 July 1991 (No. 89-15.842) which held that the time limit of Article 52 does not apply to actions for termination based on breaches occurring after the opening judgment. More recently, the Commercial Chamber recalled in a judgment of 15 May 2019 (No. 17-21.324) that an assignment of lease granted by the liquidator without the landlord's authorisation is unenforceable against the latter. The trend is therefore consistent: the landlord retains his rights despite the liquidation.

However, note that since the Law of 26 July 2005, insolvency law has evolved. The three-month time limit of Article 52 has been replaced by a mechanism suspending termination actions during the observation period (Article L. 622-21 of the Commercial Code). For liquidations, Article L. 641-3 provides specific rules. But the principle remains: causes of termination arising after the opening judgment are not subject to this time limit.

Frequently asked questions

Can I terminate the lease if the liquidator assigned my premises without my consent?
Yes, the irregular assignment is a cause of termination. You can sue, even after the liquidation judgment, without being limited by the three-month time limit.

What are the risks for the assignee?
The assignee may be evicted if the assignment is annulled. He may also be ordered to pay damages to the landlord. It is advisable to verify the landlord's consent before taking possession of the premises.

Can I claim damages from the liquidator?
Yes, if the liquidator assigned the lease in breach of contractual terms, he incurs personal liability under Article 1240 of the Civil Code. You can claim compensation for the loss suffered (lost rent, legal costs, etc.).

Is the time limit for suing unlimited?
No, the ordinary limitation period is 5 years from the knowledge of the irregular assignment. Do not delay in consulting a lawyer.

Is this case law still applicable today?
Yes, although the Law of 13 July 1967 has been repealed, the principles established by the Supreme Court remain valid under the current Commercial Code.

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