The “Emergency law No. 2020-290 dated 23 March 2020 aimed at dealing with the Covid-19 epidemic" was adopted by the French Parliament and published in the French Official Journal on 24 March 2020 (the "Law"). It can be read in full here.

This is an enabling law whose purpose is to authorise the French government, in the current unprecedented context of urgency, to take measures that in principle fall within the scope of the law. Among these measures, some are likely to have a particular impact on the real estate sector, in particular by (i) making it possible to defer, in certain cases, or to stagger the payment of professional and commercial rents, (ii) modifying the provisions of certain private law contracts, and (iii) adapting administrative and judicial deadlines and procedures. The orders issued by the government to detail these measures under the Law were presented yesterday to the Council of Ministers.

1. DEFERRAL OR STAGGERING THE PAYMENT OF PROFESSIONAL AND COMMERCIAL RENTS

1.1. Specific provisions of the Law

The Law provides that:

“[…]

I. Under the conditions laid down in Article 38 of the French Constitution, the government may issue, within three months of the publication of this law, any measure, which may come into force, if necessary, as from 12 March 2020, falling within the scope of the law and that may […]:

g) Allow the full deferral or staggering of the payment of rents, water, gas and electricity bills relating to professional and commercial premises and waive financial penalties and the suspensions, interruptions or reductions in supply that may be applied in the event of non-payment of such bills, for micro-enterprises, within the meaning of Decree No. 2008-1354 of 18 December 2008 relating to the criteria for determining the category to which a company belongs for the purposes of statistical and economic analysis, whose activity is affected by the spread of the epidemic^[1]; […]” .

1.2    Immediate comments

Our immediate comments on these provisions are as follows:

the Law does not provide for mandatory cancellation of rents but only for "deferral" or "staggering" (the terms of which will have to be specified by the government in the corresponding ordinance), nor for provisions relating to the duties chargeable to lessees;

• the only beneficiaries of this provision are “micro-enterprises” whose activity is “affected by the spread of the epidemic”, it being further specified that “micro-enterprises” are defined by decree as being companies that “on the one hand employ under 10 people” and “on the other hand post an annual turnover or a balance sheet total not exceeding 2 million euros”^[2];
   
• the personal situation of lessors is not taken into account by these provisions.

1.3. Private initiative of associations and federations representing lessors

The measures to be taken by the government in this respect must be considered separately from the initiative announced by the associations and federations representing lessors, which are calling on their members to take the following steps in favour of VSEs ("micro-enterprises") and SMEs^[3] , i.e. businesses that "on the one hand employ under 250 people" and "on the other hand post an annual turnover not exceeding 50 million euros or a balance sheet total not exceeding 43 million euros"^[4] :

a.    “as regards VSEs and SMEs belonging to one of the sectors whose activity is stopped pursuant to section I of Article 1 of the Order of 15 March 2020:

• rents and duties will be requested monthly instead of quarterly;
   
• the collection of rents and duties is suspended as of 1 April 2020 and for the subsequent periods of cessation of activity imposed by the Order;
   
• when business resumes, such rents and duties will be subject to deferred or staggered payment without penalty or interest on arrears, and will be adapted to the situation of the companies concerned;
   
• for VSEs/SMEs, these measures will be applied automatically and without taking into account their specific situation.

b.    as regards those companies whose business, while not fully stopped, has been strongly impacted by the health crisis, their situation will be sympathetically analysed on a case-by-case basis, in consideration of their real economic condition^[5]”.

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[1] Article 11 of the Law. Underlining by Gide.
[2] Article 3 of Decree No. 2008-1354 dated 18 December 2008.
[3] Press release published by various French associations and federations (ASPIM, FSIF, Caisse des Dépôts, UNPI, CNCC, AFG) representing lessors pertaining to the measure for the suspension of the payment of rents to benefit VSEs and SMEs, dated 20 March 2020.
[4] Article 3 of Decree no. 2008-1354 dated 18 December 2008.
[5] Press release published by various French associations and federations (ASPIM, FSIF, Caisse des Dépôts, UNPI, CNCC, AFG) representing lessors pertaining to the measure for the suspension of the payment of rents to benefit VSEs and SMEs, dated 20 March 2020.

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The partners of Gide's Real Estate Transactions & Financing practice group are available to answer any questions you may have in this respect. You may also get in touch with your usual contact at the firm.

This legal update is not intended to be and should not be construed as providing legal advice.

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