Eviction Compensation and Judicial Liquidation: A Claim Must Be Declared Imperatively

Imagine the scene: you are a shopkeeper in Béziers, rue de la République. Your landlord has served you a notice with refusal of renewal, entitling you to eviction compensation (the sum the landlord must pay you to compensate for the loss of your business). You are calmly waiting for the court to determine the amount. But in the meantime, your landlord is placed into judicial liquidation. Disaster! Is your compensation claim, though arising from the notice, lost? And what about your right to remain in the premises?

This question, which hundreds of shopkeepers and landlords ask each year, was decided by the French Supreme Court on 28 June 2000. The answer is final: if you do not declare your eviction compensation claim in the liabilities of the liquidation, even if it is still conditional (i.e., not yet quantified by a judge), it is extinguished. And without a claim, there is no right to remain in the premises!

In this article, I will tell you the story of this case, explain the judges' reasoning, and above all give you practical advice to avoid finding yourself in this situation. Because in Montpellier, Lattes or elsewhere, a notice with refusal of renewal followed by the landlord's judicial liquidation is a dangerous trap.

The facts: a story like many that happen every day

The company Max Tricots, a ready-to-wear clothing brand, was a tenant of commercial premises in Montpellier. Its landlord served it a notice with refusal of renewal on 31 December 1993. In accordance with the status of commercial leases (Articles L. 145-1 et seq. of the Commercial Code), this notice entitled the tenant to eviction compensation — financial compensation for the loss of the business. The amount of this compensation was not yet fixed; it was to be determined by the commercial rent judge.

But fate decided otherwise. On 15 February 1994, six weeks after the notice, the landlord was placed into judicial liquidation. The company Max Tricots did not declare its eviction compensation claim in the liquidation liabilities. Why? Because this claim was conditional: its very existence depended on the judge's decision, and its amount was not yet known. Many tenants mistakenly think they have nothing to declare until the judge has ruled.

The judicial liquidator, responsible for realising the landlord's assets and distributing the proceeds among the creditors, then asked the court to declare that the company Max Tricots no longer had the right to eviction compensation, due to failure to declare. It also sought the tenant's eviction. The company Max Tricots resisted, arguing that its claim arose after the liquidation (it contended that the generating event was the judgment fixing the compensation, not the notice). But the Montpellier Court of Appeal, in a judgment of 18 June 1998, ruled against it. The company then appealed to the French Supreme Court.

The court's reasoning — analysed

The French Supreme Court dismissed the appeal and upheld the Court of Appeal's judgment. To understand its decision, we must return to the basic rule: in the event of judicial liquidation, all creditors of the debtor (the landlord) must declare their claim in the liabilities, on penalty of extinction. This is provided for by Article L. 622-24 of the Commercial Code (formerly Article 50 of the Law of 25 January 1985). But what is a claim? It is a right to demand a sum of money from someone.

The question was therefore: at what point does the eviction compensation claim arise? Is it on the day of the notice with refusal of renewal, or on the day of the judgment fixing its amount?

The French Supreme Court answered: the generating event (the event that gives rise to the claim) is the notice with refusal of renewal. Indeed, it is this notice which, by itself, deprives the tenant of its right to renewal and entitles it to compensation. The judge merely fixes the quantum (the amount); it does not create the right. In other words, as soon as the notice is served, the claim exists in principle, even if its amount is still undetermined.

In this case, the notice was served on 31 December 1993, i.e., before the opening of the judicial liquidation (15 February 1994). The claim therefore arose before the liquidation. It does not matter that it was conditional (subject to judicial quantification): it had to be declared. Failing this, it is extinguished by application of Article L. 622-24.

What few people know is that the tenant who loses its compensation claim also loses its right to remain in the premises. Indeed, the right to remain is the counterpart of the compensation: if the landlord does not pay, the tenant stays. But if the compensation is extinguished, this right disappears. The company Max Tricots therefore became liable to eviction.

What this means for you — practically

If you are a commercial tenant and your landlord is in judicial liquidation, you must declare your eviction compensation claim, even if it is not yet fixed. The declaration deadline is two months from the publication of the opening judgment in the Bodacc (Official Bulletin of Civil and Commercial Notices). In practice, you must write to the judicial representative (the liquidator) indicating the provisional amount of your claim, or failing that, an estimate. If you do not, you lose everything.

For landlord-owners, this decision is a double-edged sword. If you are in liquidation, your tenants must declare their claims. But be careful: you cannot use this rule to escape your obligation to pay eviction compensation if the tenant has properly declared.

Let's take a concrete example in Lattes: a shopkeeper, tenant of a 100 m² premises, receives a notice with refusal of renewal. The eviction compensation is estimated at €80,000 (value of the business). The landlord is placed into judicial liquidation three months later. If the tenant does not declare its claim within two months of the publication of the liquidation, it loses its right to compensation and must leave the premises. A net loss of €80,000, not to mention the commercial prejudice.

undefined, I have come across cases where tenants mistakenly believed that their claim was 'automatic' and that they had nothing to do. Result: eviction, loss of the business, and no compensation. Do not make this mistake.

Four tips to avoid this type of dispute

• Declare your claim as soon as you learn of your landlord's judicial liquidation. Do not delay: the two-month deadline runs from the publication of the opening judgment in the Bodacc. Even if the amount is not yet fixed, you must declare it on a provisional basis.
• Keep all documents relating to your lease and the notice. Lease, notice with refusal of renewal, correspondence with the landlord, expert reports... All this will be useful to justify your claim to the liquidator.
• If you are a landlord-owner, inform your tenants of your situation. In the event of judicial liquidation, the liquidator publishes the opening in the Bodacc, but it is prudent to notify your tenants directly to avoid disputes.
• Consult a specialised lawyer as soon as you receive a notice with refusal of renewal. A professional can anticipate the risks of the landlord's insolvency and advise you on the steps to follow, particularly the declaration of claim in the event of collective proceedings.

Further reading: related case law and developments

This French Supreme Court decision is part of consistent case law. Already, in a judgment of 16 December 1992 (No. 90-21.708), the Court had ruled that eviction compensation arises from the notice and not from the judicial decision fixing its amount. The 2000 judgment confirms and clarifies this rule in the context of judicial liquidation.

Since then, the French Supreme Court has also ruled on similar situations. For example, in a judgment of 13 January 2015 (No. 13-25.567), it held that the eviction compensation claim must be declared even when the notice was served after the opening of the collective proceedings, provided the landlord authorised the notice. The trend is therefore towards enhanced protection of declaring creditors, to the detriment of those who neglect the declaration.

For the future, it is likely that the courts will remain strict on the obligation to declare. The only possible exception would be if the notice was void or if the tenant was not entitled to compensation (for example, in the case of serious fault). But in the vast majority of cases, the declaration is imperative.

What you absolutely must remember

FAQ:

• Q: Must I declare my eviction compensation claim if the amount is not yet fixed by the judge?
  A: Yes, absolutely. The claim arises from the notice, not the judgment. Declare it on a provisional basis.
• Q: What is the deadline for declaring?
  A: Two months from the publication of the judgment opening the judicial liquidation in the Bodacc.
• Q: What happens if I forget to declare?
  A: Your claim is extinguished. You lose the right to eviction compensation and you may be evicted.
• Q: Can I remain in the premises without having declared?
  A: No, the right to remain is linked to the compensation. Without compensation, you must leave the premises.
• Q: What should I do if the liquidator contests my claim?
  A: Apply to the supervising judge of the liquidation to have your claim admitted. A lawyer can assist you.

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 →