The Court of Cassation Rejects the Application of the “Circumstances Affecting the Property” Clause in REA Leases

After two years of legal battles, the cases involving unpaid rent by the company RESIDE ETUDES reached the Court of Cassation, and in two rulings handed down on November 23, 2022, the High Court [1] ruled, in line with its rulings of June 30, 2022, that rent left unpaid by operators during the health crisis is due even if a clause in the lease stipulates that rent need not be paid in the event of “circumstances affecting the property .”

The Court of Cassation thus rejected, one by one, the arguments put forward by the company RESIDE ETUDES APPARTHOTEL, which had criticized the Court of Appeals for having misinterpreted the commercial lease in order to grant the claims for provisional rent payments.

The position of the law firm GOETHE AVOCATS thus convinced the Court of Cassation, which affirmed for the first time that:

  • The standard clause in the RESIDE ETUDES lease—which applies only to situations where the property is unavailable either due to the lessor’s act or fault, or due to defects covered under the ten-year warranty or the occurrence of exceptional circumstances affecting the leased property—does not allow the landlord to avoid paying rent due during the COVID-19 pandemic;
  • This clause applies only to cases where the premises themselves are affected (for example, in the event of a fire);
  • The Court of Cassation concluded that the judge presiding over the summary proceedings, who had not interpreted the lease agreement to exclude the application of the disputed clause, was justified in inferring that the obligation to pay rent was not seriously disputable.

Based on the landmark rulings of June 30 and November 23, 2022, the Court of Cassation outlines its guidelines:

  • Restrictions resulting from legislative and regulatory measures adopted in response to the health crisis cannot be attributed to landlords and do not result in the loss of the leased property;
  • The landlord has not breached its obligation to deliver the premises, since the tenant has not been deprived of either the use of the premises or the ability to conduct its business there;
  • The tenant cannot invoke force majeure;
  • “Force majeure” clauses allowing the tenant to withhold rent in the event of “circumstances affecting the property” do not apply to “COVID-related” rent.

The Court of Cassation’s ruling is a relief for co-owners who are landlords, as they are entitled to demand payment of 100% of the rent due during the health crisis.

[1] Appeals 22-12.753 and 22-13.773