COVID-19 & Commercial Rent—Exceptional Provisions of the Civil Code: The Defense of Nonperformance

In the face of the COVID-19 pandemic, many residential property owners have stopped paying commercial rent. In this second part, we will focus on the defense of non-performance. Some are invoking this defense of non-performance, provided for in the Civil Code, to stop paying said rent. Clarification is needed based on the Civil Code.

1- What is the defense of non-performance?

Article 1219 of the Civil Code provides that:

“A party may refuse to perform its obligation, even if it is due and payable, if the other party fails to perform its own obligation and if such failure is sufficiently serious.”

Article 1220 supplements this by providing that:

“A party may suspend performance of its obligation once it is clear that the other party will not perform by the due date and that the consequences of such non-performance are sufficiently serious for the party. Such suspension must be notified as soon as possible.”

In summary:

The obligor may refrain from performing its obligations if the other party is in serious breach of its own obligations, provided that the severity of the breach is interpreted very strictly under case law.

2- Does COVID-19 constitute an event capable of triggering the exception for non-performance?

The most authoritative legal scholarship holds that this principle could potentially apply in the event of an administrative closure of commercial premises, which would result in the landlord’s failure to fulfill its obligation to deliver the premises.

3- Can operators of residential facilities (tourism, hotels, business, nursing homes, senior living, student housing, etc.) invoke the exception for non-performance to avoid paying rent?

No, unless the leased premises have been closed by administrative order—a scenario that is, incidentally, quite rare.