Termination of Lease and Judicial Reorganisation: No Obligation to Notify the Administrator

Imagine: you are the owner of a commercial premises in Colombes, leased to a company that has just been placed in judicial reorganisation (redressement judiciaire). Rent continues to accrue after the opening judgment, but the lessee no longer pays. You serve a payment demand, but you wonder: must I notify the judicial administrator? If I do not, is my lease termination procedure valid?

The French Supreme Court answered this question in a decision of 15 November 2017 (No. 16-13.219). And the answer is clear: no legal provision requires the lessor to notify the judicial administrator of a payment demand relating to rent due after the opening judgment. In other words, the demand served directly on the lessee takes effect, even in the presence of collective proceedings.

This decision reassures lessors, but beware: it only applies to rent due after the opening judgment. For rent due before, the rule is different. Let us analyse this decision and its practical implications.

The Facts: A Common Story

Mr. X, owner of a commercial premises in Aubervilliers, had leased a shop to a company. The company encounters financial difficulties and is placed in judicial reorganisation by judgment of the commercial court. After the opening of the proceedings, the company continues to occupy the premises but stops paying rent. The lessor then serves a payment demand for the unpaid rent due after the opening judgment. This demand is served on the company's manager, but not on the judicial administrator (the creditors' representative).

The company, through its administrator, challenges the validity of the procedure. It argues that the demand should have been notified to the judicial administrator, and that otherwise it is void. The lessor argues that the rent in question accrued after the opening judgment and is not subject to the rules of collective proceedings.

The Court of Appeal rules in favour of the lessor: it declares the action for lease termination admissible and finds the lease terminated. The judicial administrator appeals to the Supreme Court. The Supreme Court dismisses the appeal: it approves the Court of Appeal, holding that a payment demand relating to rent due after the opening judgment does not have to be notified to the judicial administrator.

The Reasoning of the Court — Explained

The Supreme Court relies on the following principle: rent due after the opening judgment of judicial reorganisation is considered a privileged post-commencement claim (Article L. 622-17 of the Commercial Code). These claims are not subject to the filing of claims and must be paid when due. Consequently, the lessor can act directly against the lessee to obtain payment or termination of the lease, without having to go through the judicial administrator.

In short, the payment demand is a mandatory preliminary step to obtain termination of the lease for non-payment (forfeiture clause). The question was whether this document had to be served on the judicial administrator, as is the case for claims arising before the judgment. The Court answers no, because post-commencement rent falls outside the scope of the collective proceedings.

This reasoning confirms earlier case law: the lessor does not have to notify the administrator of acts relating to post-commencement claims. This provides security for owners, who can act quickly without risking the nullity of their procedure.

However, beware: if the payment demand covers both pre- and post-commencement rent, notification to the administrator may be necessary for the pre-commencement part. But in our case, the demand only covered post-commencement rent.

What This Changes for You — Practically

For lessor owners: If your lessee is in judicial reorganisation and does not pay current rent (post-commencement), you can serve a payment demand directly on the lessee, without notifying the administrator. You save time and avoid unnecessary formalities. Concrete example: unpaid rent of €2,000 per month for 3 months, i.e. €6,000. You serve the demand directly on the lessee. If payment is not made within the period (usually 30 days), the forfeiture clause in the lease takes effect and you can obtain eviction.

For lessees in judicial reorganisation: This decision is not favourable to you. You must pay post-commencement rent when due, on pain of losing your lease. The judicial administrator cannot protect you against an action for termination for such rent. If you are in Aubervilliers and face difficulties, it is better to negotiate a payment plan with the lessor before he serves a demand.

For judicial administrators: You must be vigilant: acts relating to post-commencement claims are not notified to you, but you can advise the lessee to regularise quickly to avoid termination.

For buyers of leased property: When you buy a commercial premises with a lessee in difficulty, check whether post-commencement rent is up to date. Collective proceedings do not suspend the obligation to pay current rent.

Four Tips to Avoid This Type of Dispute

• Identify the nature of the unpaid rent: Always distinguish between rent due before the opening judgment (claims subject to filing) and rent due after (privileged claims). A demand covering only post-commencement rent can be served directly on the lessee. If in doubt, seek legal advice.
• Act quickly: As soon as the first post-commencement rent is unpaid, serve a payment demand. Do not wait for arrears to accumulate. A period of one month is often enough to trigger the forfeiture clause. undefined, I have seen lessors lose months of rent by hesitating to act.
• Check the opening judgment: Consult the commercial court judgment for the exact date of opening of the collective proceedings. This will allow you to determine precisely which rent is pre- or post-commencement.
• Inform yourself about the administrator's obligations: Even if you are not required to notify the administrator of the demand, it may be useful to inform him of your action to facilitate an amicable solution. A simple registered letter can avoid litigation.

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Further Details: Related Case Law and Developments

This decision is in line with a consistent line of Supreme Court rulings. In a decision of 26 March 2013 (No. 12-15.025), the Court had already held that the lessor does not have to file a claim for post-commencement rent and can take recovery or termination action without going through the administrator. The 2017 decision confirms and clarifies this point for the payment demand.

In contrast, for pre-commencement rent, the lessor must file his claim with the administrator within the time limit (2 months from publication of the judgment). Failing this, the claim is extinguished. Case law is strict on this point: the Supreme Court has recalled that a payment demand for pre-commencement rent must be notified to the administrator, on pain of inadmissibility of the termination action (Cass. 3e civ., 12 May 2016, No. 15-13.571).

The trend of the courts is therefore clear: a clear distinction between pre-commencement claims (protected by collective proceedings) and post-commencement claims (outside the proceedings). For the future, lessors must be vigilant as to the date the claims arise in order to choose the correct procedure.

Summary and Next Steps

FAQ:

1. Must the payment demand be notified to the judicial administrator? No, if it only covers rent due after the opening judgment. Yes, if it covers rent due before.
2. Can I act directly against the lessee for post-commencement rent? Yes, you can serve a demand, sue for termination and seek eviction without going through the administrator.
3. What if the lessee is in judicial reorganisation and no longer pays? Identify the date of the opening judgment. If the arrears are post-commencement, act quickly: demand, then termination. If some are pre-commencement, file your claim with the administrator.
4. Can the administrator challenge the validity of the demand? He may try, but case law is unfavourable to him for post-commencement rent. The Court of Appeal and the Supreme Court have validated the procedure.
5. What are the risks if I do not notify the demand to the administrator? None, for post-commencement rent. For pre-commencement rent, you risk your action being inadmissible.

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 →