Co-ownership and Insolvency Proceedings: A Co-owner May Act Alone on Appeal for the Co-ownership's Claim

Imagine: you own a building in co-ownership with your mother and brother in Brive-la-Gaillarde. You grant a commercial lease for a shop to a company that goes bankrupt. The co-ownership is owed an eviction indemnity, but the judicial receiver rejects the proof of debt. You appeal, but your mother discontinues. Can the case continue for you alone? Until this decision of the Court of Cassation of 14 March 2012, the answer was unclear. Now, Article 815-2 of the Civil Code allows any co-owner to prove a debt of the co-ownership in insolvency proceedings, and Article 400 of the Code of Civil Procedure allows a single co-owner to pursue the appeal if the others discontinue. A breath of fresh air for co-owners!

The facts: a story that happens every day

In 1984, Jacques, Renée and Maître B (the latter being a notary) granted a commercial lease for premises to the company CEA, in Brive-la-Gaillarde. The co-ownership arose from the death of the father. Twenty years later, in 2004, the lessors discovered that the company had irregularly assigned its lease rights without their consent. They then gave notice for failure to approve the assignee and claimed an eviction indemnity. The company CEA, which had been in judicial reorganisation since 2003, contested: it argued that the assignment was regular and that the co-ownership had no standing to sue. The Commercial Court of Limoges rejected the co-ownership's claim. The co-owners, represented by Maître B as administrator of the co-ownership, appealed. However, during the proceedings, Renée discontinued. Jacques and Maître B remained alone. The Limoges Court of Appeal, by a judgment of 2 October 2009, declared the appeal inadmissible on the ground that the co-ownership did not have standing to act alone. The two co-owners appealed to the Court of Cassation.

The reasoning of the court — dissected

The Court of Cassation set aside the appeal judgment. It relied on two legal pillars. First, Article 815-2 of the Civil Code (which lists acts a co-owner may do alone for the preservation of the co-owned property): proving a debt in insolvency proceedings is a preservatory act. Why? Because if the debt is not proved within the time limit, it is extinguished. Each co-owner may therefore, alone, prove the co-ownership's debt. Second, Article 400 of the Code of Civil Procedure (which deals with discontinuance of appeal): when several parties together bring a main appeal, the discontinuance by one does not extinguish the appeal of the others. Here, Renée discontinued, but Jacques and Maître B remain validly appealing. The High Court clarified that the co-owner has standing to pursue the appeal alone, even if the initial action was brought by all the co-owners. This is a confirmation of earlier case law (notably Cass. com., 10 March 2009, No. 08-10.123) which had already accepted that a co-owner may act alone in court for the preservation of the co-owned property. The lower court had considered that the co-ownership, lacking legal personality, could only act through all its members. The Court of Cassation corrected this error.

What this changes for you — concretely

If you are a co-owner: You no longer need the agreement of all co-owners to prove a debt in the insolvency proceedings of a tenant or debtor. Example: in Saint-Junien, you are in co-ownership with two cousins for a warehouse leased to a company that goes bankrupt. You alone can prove the claim for unpaid rent (say €15,000) with the judicial receiver. On appeal, if the others discontinue, you pursue alone. Warning: if you win, the indemnity will be shared among all co-owners, but you avoid being time-barred.

If you are a commercial tenant: This decision does not directly concern you, but it strengthens the right of co-owner lessors to claim eviction indemnities. Be vigilant: a single co-owner can sue you for termination of the lease for failure to approve an assignment.

If you are a buyer of a co-owned property: Before buying, check that all claims relating to the property (rent, indemnities) have been proved in time. A co-owner can do this alone, which protects the co-ownership.

If you are a flat owner in a co-ownership building: The situation is different because the co-ownership is a legal entity. But the principle of preservatory acts also applies: a flat owner can prove a debt of the co-ownership in insolvency proceedings.

Four tips to avoid this type of dispute

• Agree on a mandate among co-owners: Appoint a common representative (for example, the notary or a lawyer) to manage proofs of debt and legal actions. This prevents untimely discontinuances.
• Prove any debt quickly: As soon as you learn of a debtor's insolvency proceedings, prove the co-ownership's debt within 2 months of the publication of the opening judgment in the Bodacc (Official Bulletin of Civil and Commercial Announcements). Delay is fatal.
• Keep evidence of the debt: Leases, rent receipts, demands for payment, any document proving the debt. In case of dispute, you will need to justify the amount.
• Consult a lawyer before any assignment of lease: If you are a lessor, require written approval of the assignee. If you are a lessee, have the assignment notified by a bailiff to avoid any dispute.

Further reading: related case law and developments

This decision is part of a liberal trend of the Court of Cassation since 2009. In the judgment of 10 March 2009 (No. 08-10.123), it had already ruled that a co-owner may alone bring a claim for recovery of a co-ownership debt. Here, it extends this principle to proof of debt in insolvency proceedings. However, note: the decision only concerns preservatory acts. For acts of administration (renewing a lease) or disposition (selling property), unanimity or judicial authorisation is required. Since 2012, several courts of appeal have applied this solution. For example, the Court of Appeal of Saint-Étienne in 2015 accepted that a co-owner could alone contest the statement of claims. The trend is therefore clear: co-ownership is not an obstacle to the defence of collective interests. For the future, it would be desirable for the legislature to clarify the role of the co-owner in insolvency proceedings, perhaps by creating a legal representation.

What you absolutely must remember

FAQ:

1. Can I, alone, prove a debt of the co-ownership? Yes, it is a preservatory act (Article 815-2 of the Civil Code). You must act within 2 months of the publication of the opening judgment.

2. What if the other co-owners do not want to act? You can act alone. If you win, the proceeds will be shared among all.

3. What if the other co-owners discontinue on appeal? The appeal continues for you alone (Article 400 of the Code of Civil Procedure).

4. Can I also alone contest the rejection of the debt? Yes, as confirmed by this judgment.

5. What are the risks? If you act alone, you bind the co-ownership. In case of an order for costs against you, you could be personally liable if the co-ownership has no funds. Better to inform the co-owners in writing.

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