Reference decision: cc • No. 19-14.388 • 2020-10-07 • See the decision →
Imagine: you have been renting a furnished flat in Biscarrosse for three years. One morning, you receive a letter from the judicial liquidator of your landlord (the person responsible for managing the company's bankruptcy) informing you that the property has been sold and that you must leave within two months. No three-month notice period, no specific reason. Is this legal? The answer from the Court of Cassation is clear: no. And this decision of 7 October 2020 (No. 19-14.388) reminds us that even in the case of judicial liquidation, the rights of the tenant of a furnished property remain inviolable. But what exactly does this change for you? Analysis.
The facts: a story that happens every day
Mrs O... is a tenant of a furnished property owned by a company in Dax (Landes). In 2014, she signs a furnished residential lease. A few years later, the company is placed in judicial liquidation (a collective procedure that ends the company's activity and sells its assets to repay creditors). The liquidator, whose mission is to realise the assets (sell the assets), decides to sell the property with vacant possession. To do this, he sues Mrs O... to terminate the lease and obtain her eviction. He does not serve her a notice to quit for sale (an act by which the landlord notifies the tenant of his intention to sell and gives a notice period). The Court of Appeal of Pau rules in favour of the liquidator: it orders the termination of the lease and eviction. Mrs O... appeals to the Court of Cassation. She argues that the liquidator should have complied with Article 25-8 of the Law of 6 July 1989 (a text that requires a three-month notice to quit for sale of a furnished property). The Court of Cassation rules in her favour: the appeal judgment is set aside.
The reasoning of the court — analysed
The question put to the Court of Cassation was: is the judicial liquidator obliged to comply with the rules of the law on furnished residential leases, in particular Article 25-8 of the Law of 6 July 1989, when he wishes to sell the property? This article provides that, to sell a furnished property, the landlord must give notice to the tenant with a three-month notice period, and this notice must be motivated by the sale, on pain of nullity (invalidity). The liquidator, for his part, relied on Article L. 641-11-1, IV, of the Commercial Code (a text that allows the liquidator to freely transfer the debtor's assets without having to comply with certain lease terms). But the Court of Cassation says: this text does not exclude the application of Article 25-8. In other words, even in liquidation, the liquidator must serve a valid notice. However, note: the Court does not say that the liquidator cannot sell, but that he must follow the procedure. What few people know is that this decision is part of a reinforced protection of the tenant in furnished accommodation, considered more vulnerable because he benefits from a shorter notice period (one month in unfurnished rental, three months in furnished). In short, the Court prioritises the right to housing over the imperatives of liquidation.
What this changes for you — concretely
If you are a tenant of a furnished property: you are protected. Even if your landlord goes bankrupt, the liquidator cannot evict you without respecting the three-month notice period and a motivated notice. Example: in Dax, if you rent a furnished studio and the landlord company is liquidated, the liquidator must give you notice at least three months before the sale. undefined, I have encountered cases where tenants were evicted within two months: this decision would have protected them.
If you are a landlord (or liquidator): you must imperatively serve a compliant notice on pain of nullity. The liquidator cannot simply ask for a judicial termination. He must follow the formalities. In Biscarrosse, a liquidator who sells a furnished property without notice risks having the sale annulled or having to compensate the tenant.
If you are a buyer of a furnished property in liquidation: check that the notice was properly served. Otherwise, you might buy an occupied property and not be able to take possession.
Four tips to avoid this type of dispute
- For the liquidator: as soon as you consider selling a furnished property, serve a notice to quit for sale by bailiff or registered letter with acknowledgement of receipt, respecting the three-month notice period and stating the reason as sale. Do not attempt to circumvent Article 25-8.
- For the tenant: if you receive a request to leave without a formal notice, do not leave. Consult a specialised lawyer to have the notice declared void and to remain in the premises.
- For the buyer: require from the seller (or the liquidator) a copy of the notice served on the tenant. Check the dates. If the notice is irregular, you can refuse to sign the deed or negotiate a price reduction.
- For the struggling landlord: before liquidation, anticipate. If you need to sell, serve notice properly. This will avoid unnecessary legal costs.
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Further analysis: related case law and developments
This decision confirms a protective trend for tenants. Already in 2018 (Civ. 3e, 5 July 2018, No. 17-19.133), the Court had ruled that the liquidator must respect the tenant's right of first refusal (priority purchase right) in case of sale. Here, it extends this protection to the notice. Conversely, some courts of appeal had considered that the lease rules were set aside by liquidation. The Court of Cassation puts an end to these divergences. In the future, one can expect liquidators to be more cautious and to systematise notices. However, this decision only concerns furnished properties: for unfurnished rentals, the notice period is six months (Article 15 of the 1989 Law). But the principle could be transposed.
What you must absolutely remember
FAQ
1. Can a liquidator sell a furnished property without serving notice? No, he must serve a notice to quit for sale with a three-month notice period, on pain of nullity.
2. What to do if I receive a notice of less than three months? Challenge the notice before the judicial court. You can remain in the premises until the outcome of the proceedings.
3. Does the tenant have a right of first refusal in case of sale in liquidation? Yes, previous case law recognises this. The liquidator must offer the property to the tenant first.
4. Does this rule apply to unfurnished rentals? Yes, by analogy, the notice period is six months (Article 15). But the decision specifically concerns furnished properties.
5. What are the risks for the liquidator who does not comply with the rule? Nullity of the notice, impossibility of selling with vacant possession, and damages to the tenant.
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