COVID-19 and Commercial Rent—Exception Provisions in the Civil Code (Part 1): Force Majeure

In the face of the COVID-19 pandemic, many operators of vacation rentals have stopped paying commercial rent. Some (many) are invoking force majeure to stop paying said rent. What is the situation?

1- What is force majeure?

Article 1218 of the Civil Code provides that:

“Force majeure exists in contractual matters when an event beyond the debtor’s control—which could not reasonably have been foreseen at the time the contract was entered into and whose effects cannot be avoided by appropriate measures—prevents the debtor from performing its obligation. If the impediment is temporary, performance of the obligation is suspended unless the resulting delay justifies termination of the contract. If the impediment is permanent, the contract is automatically terminated, and the parties are released from their obligations under the conditions set forth in Articles 1351 and 1351-1.”

In summary:

Force majeure is determined by two criteria:

– The event must have been unforeseeable at the time the contract was entered into,

– The event must be unavoidable.

Force majeure prevents the debtor from performing its obligation either temporarily (suspension of the obligation) or permanently (termination of the contract).

2- Is COVID-19 an event that can be characterized as force majeure?

– From the perspective of unpredictability: possible for contracts entered into before the virus emerged in China. Impossible for others.

– From the perspective of insurmountability: The legal standard is extremely strict:

At a minimum: it must be demonstrated that the non-payment of rent is inevitable and has insurmountable consequences, which significantly limits the cases in which force majeure would apply.

Two court decisions that reinforce and support this analysis:

• In the case of a rural lease, the Toulouse Court of Appeal ruled that the avian flu epidemic and the lockdown measures implemented did not constitute an irresistible force capable of amounting to a case of force majeure (Toulouse Court of Appeal, October 3, 2019, No. 19/01579)

• The Court of Cassation has already clarified that a debtor who has failed to fulfill an obligation to pay a sum of money cannot be exempted from this obligation by invoking a case of force majeure (Court of Cassation, September 16, 2014, No. 13-20.306)

3- In conclusion, does force majeure allow residence operators to avoid paying rent?

Force majeure is highly unlikely to apply in favor of the operators.

In short, since operators do not benefit from special provisions (Ordinance of March 25, 2020), they cannot, in our view, invoke force majeure to avoid paying commercial rent in managed residences (tourist residences, hotels, business properties, nursing homes, senior living facilities, student housing, etc.).