COVID-19 and Commercial Rent: What the Order of March 25, 2020, Says

What does the government order on COVID-19 and commercial rents entail? To whom does it apply, and who is eligible for the protective measure granted to tenants?

I. GOVERNMENT MEASURES: SUMMARY OF RELEVANT LEGISLATION

– EMERGENCY ACT TO ADDRESS COVID-19 No. 290-2020 OF MARCH 23, 2020: Declares a public health emergency for two months (renewable) beginning March 12 and ending May 12.

– ORDINANCE No. 316-2020 of March 25, 2020, concerning the payment of rent, water, gas, and electricity bills for business premises of companies whose operations are affected by the spread of the COVID-19 pandemic.

• Eligible recipients: individuals and private-law legal entities engaged in economic activity who are eligible for the Solidarity Fund (as defined by Decree No. 2020-371 of March 30, 2020).

• Purpose of the measure: to waive penalties for non-payment of rent.

– Decree No. 2020-371 of March 30, 2020: beneficiaries of the Solidarity Fund.

– Decree No. 2020-378 of March 31, 2020, amending Order No. 316-2020.

• Specifies the beneficiaries of the measures: natural persons and legal entities under private law who are French tax residents engaged in an economic activity, who meet the conditions and criteria set forth in paragraphs 1 and 3 through 8 of Article 1 and in paragraphs 1 and 2 of Article 2 of the aforementioned Decree No. 2020-371.
• Adds two conditions for eligibility for the measure: the tenant must provide proof of eligibility.

– Decree No. 433 of April 16, 2020, which amends certain conditions for access to the solidarity fund (Decree 371-2020) and, consequently, the beneficiaries eligible for rent-related measures

II. MEASURES IMPLEMENTED REGARDING COMMERCIAL RENTS

1. PROTECTIVE MEASURE GRANTED BY THE GOVERNMENT TO TENANTS: WAIVER OF PENALTIES FOR FAILURE TO PAY RENT OR RENTAL CHARGES DURING THE STATE OF EMERGENCY

Subject to certain time limits and, of course, the nature of the rent and charges, namely that the rent and rental charges:

– relate to business and commercial premises

– are due during the period between the start of the public health emergency and two months following its end (namely March 12, 2020, and, for now, July 12, 2020)

Under these conditions, tenants may not be subject to:

– financial penalties or late payment interest,

– damages,

– daily fines,

– enforcement of a termination clause, a penalty clause, or any clause providing for forfeiture,

– the enforcement of guarantees or security deposits

2. BENEFICIARIES OF THE MEASURE:

Individuals (merchants, self-employed professionals) and legal entities (companies) governed by private law that engage in economic activity, excluding those:

– those in judicial liquidation as of March 1, 2020

OR

– that began operations after March 1, 2020

To be eligible for the measure, these businesses must meet a number of conditions:

First alternative condition regarding the business’s operations:

• either continuing their operations under a safeguard proceeding, judicial reorganization, or judicial liquidation
• or meet the eligibility criteria specified by the decree of March 30, 2020, namely:
• a workforce of 10 employees or fewer; this threshold is calculated in accordance with the provisions of Section I of Article L. 130-1 of the Social Security Code;
• turnover (excluding VAT) for the most recent fiscal year ended at less than €1,000,000; For businesses that have not yet closed a fiscal year, the average monthly revenue for the period between the date the business was established and February 29, 2020, must be less than 83,333 euros
• The business must not be controlled by a commercial company as defined in Article L. 233-3 of the Commercial Code;

Second alternative condition regarding the circumstances faced by the business Tenants must have been subject to:

• a ban on admitting the public

OR

• a loss of revenue of at least 50% in March 2020. The basis for calculating the loss of revenue is specified below:

1. Businesses in existence as of March 1, 2019: Revenue for the month of March 2019 or, alternatively, the monthly average for fiscal year 2019
2. Businesses established after March 1, 2019: Average monthly revenue between the date of establishment and February 29, 2020
3. Entrepreneurs (or companies whose manager) who were on leave due to illness, a work-related accident, or maternity leave in March 2019: Average monthly revenue between April 1, 2019, and February 29, 2020

3. IMPLEMENTATION OF THE PROTECTIVE MEASURE: DOCUMENTATION TO BE SUBMITTED TO THE LANDLORD

To qualify for this measure, the tenant must provide the landlord—who is entitled to request it—with a sworn statement certifying compliance with the conditions set forth in Article 1 of the original Decree No. 2020-371 of March 30, 2020 (summarized above) and the accuracy of the information provided.

AND

• either, the acknowledgment of receipt of their application for eligibility for the solidarity fund
• or, where they have filed a declaration of insolvency or are in financial difficulty within the meaning of Article 2 of Commission Regulation (EU) No. 651/2014 of June 17, 2014, declaring certain categories of aid compatible with the internal market pursuant to Articles 107 and 108 of the Treaty, if applicable, a copy of the filing of the declaration of insolvency or of the court order opening insolvency proceedings.