Is it possible to cancel, suspend or modify the Lease Agreements conditions due to the COVID-19 crisis?
Regardless of the provisions applicable during the legally protected period (see § 1), the landlord and the tenant must respect the terms and conditions of the lease agreement, unless they can invoke one of the following right.
First, it is tempting for a tenant to invoke force majeure to suspend the payment of their rent. Subject to a contractual definition, the event invoked as force majeure must be beyond the control of the party invoking it and must be (reasonably) unpredictable on the day of conclusion of the contract. It must also be irresistible and, as such, directly and genuinely prevents the performance of the obligation. French law adds that the event must have effects that cannot be avoided by appropriate measures.
Furthermore, with regard to the payment of the rent itself, the Court of Cassation held that the debtor of a contractual obligation of paying a sum of money cannot be relieved of this obligation by invoking a case of force majeure. Therefore, even if the tenant has suffered the immediate aftermath of the Covid 19 crisis and has no cash, he will not be able to invoke this crisis, as force majeure, to suspend the payment of his rent.
Second, tenant could rather seek through the Covid19 crisis a default by his own landlord, authorizing him, in turn, not to pay his rent. He could then invoke an exception for non-performance which must be temporary and proportionate to the non-performance of the other party. However, it must characterize the failure of the landlord with regard to its essential obligations which are on the one hand the obligation to deliver the premises and on the other hand the guarantee of the peaceful enjoyment of the latter. It must be noted, however, that the closure of shops or the prohibition to accommodate the public ordered by public authorities does not constitute a violation of either the obligation to deliver or to the guarantee of peaceful enjoyment.
On the one hand, the obligation to deliver is not an absolute obligation; it means the delivery of premises which must, materially, allow the exercise of the activity for which the rental is intended. In this case the premises are still present and in good condition. The obligation of delivery relates more to maintenance defects or an inadequacy of the premises rented for the activity envisaged contractually. On the other hand, with regard to the guarantee of peaceful enjoyment, case law traditionally retains that the landlord guarantees the tenant only against his personal act and not against the acts of third parties such as neighbors or demonstrators. In other words, a decision to close made by a public authority could only authorize a tenant to suspend the payment of their rents if this decision is based on a default by the landlord.
Third, the unforeseeability allows, under certain conditions, one of the parties to request from the other party and then to ask the judge, the readjustment of the contract in the event of financial imbalance.
However, the legal conditions for establishing this unforeseen event are strict: on the one hand, there must be an unforeseeable change in circumstances, on the other hand, this change must make the performance of the contract excessively onerous for one of the parties and finally this party must not have agreed to assume such a financial risk.
It is in the interest of one of the parties to invoke unforeseen circumstances to be able to place themselves within a legal process providing for three stages. First, one of the parties may request the renegotiation of the contract from the other party (however, the party must continue to perform the contract during the renegotiation phase). Then if the renegotiation fails to rebalance the contract, the parties can agree to the amicable resolution of the lease. Finally, in the absence of agreement, each party may refer the matter to the judge in order to ask him either to revise the contract or to terminate it.
It is very likely that for many operators of commercial premises, the lockdown and more generally the Covid19 crisis constitute an unpredictable change making the performance of the lease excessively expensive, since the lessee would have to pay the rents without being able to exploit his shop. Though the path is narrow, invoking unforeseeability should force both parties to come together to understand their respective problems and constraints.