Urgent measures related to Covid-19: rents, water, gas and electricity invoices

March 27th 2020

Last Monday March 16, 2020, the French President announced the “suspension of water, gas or electricity invoices and rents” in order to provide support to small firms.

The health emergency law was immediately drafted and enacted on March 23, 2020.

Accordingly, Article 11 of the health emergency law to counteract the Covid-19 epidemic sets forth the following:

Under the conditions provided in Article 38 of the Constitution, the Government is authorized to take any measure, by order, within a period of three months as from the publication hereof, which may enter into force, as necessary, as from March 12, 2020, in accordance with the law and, as the case maybe, to extend and adapt the latter to the communities mentioned in Article 72-3 of the Constitution:

1° In order to meet the economic, financial and social consequences of the contamination from the Covid-19 epidemic and the measures taken to limit the transmission of the virus, and in particular, to prevent and limit the cessation of activity for individuals and legal entities carrying out an economic activity and associations and its impact on employment, taking all the measures :                                                                                                                                                                                                                                                                                                                              […]                                                                                                                                                                                                                                                                                                                                                                                                                                                  g) Enabling the integral defferal or progressive payment of the rents, and the water, gas and electricity invoices related to the business and commercial premises and to waive the financial penalties and suspensions, interruptions or reductions of supplies likely to the applied in the event of the non-payment of these invoices, for the benefit of micro-enterprises, within the meaning of the decree no. 2008-1354 dated December 18, 2008 relating to the criteria enabling the company category to be identified for the purposes of statistical and economic analysis, whose activity is affected by the contamination from the epidemic. »

 

25 orders were taken by the government for the application of this law and were published on the March 25. Concerning leases, the order no.2020-316 dated March 25, 2020 was enacted relating to the payment of rents, water, gas and electricity invoices related to the business premises, the activity of which is affected by the contamination from the Covid-19 epidemic.

The order provides in its Article 1:

The individuals and legal entities carrying out an economic activity which is likely to provide entitlement to the solidarity fund mentioned in Article 1 of the Order no.2020-317 dated March 25, 2020 mentioned above may benefit from the provisions of Articles 2 to 4. Those continuing their activity in the context of a safeguard procedure, legal redress or compulsory liquidation may also benefit from these provisions upon the communication of a certificate from the court representatives designated in the judgment which opened this procedure.

The eligibility criteria for the aforementioned provisions mentioned are specified by decree, which defines, in particular, the numbers and turnover for the persons in question and the threshold for the loss of turnover acknowledged as a result of the health crisis”.

Article 1 provides that the persons likely to benefit from the solidarity fund are those “carrying out an economic activity that is particularly affected by the economic, financial and social consequences of the contamination of Covid-19 and the measures taken to limit the contamination”.

Article 4 of the order sets forth:

The persons mentioned in Article 1 may not be subject to financial or late payment penalties, damages, daily penalties, performance of the termination clause, penalty clause or any clause providing for a forfeiture or activation of the guarantees or sureties, due to a lack of payment of rents or rental charges related to their professional or business premises, notwithstanding any contractual stipulation and the provisions of Articles L.622-14 and L.641-12 of the French Commercial Code.

The aforementioned provisions apply to rents and rental charges for which the payment is due between March 12,2020 and the expiry of a period of two months after the cessation date of the health emergency status declared by Article 4 of the aforementioned law dated March 23, 2020”.

In other words, to provide support to small firms, the government provided for a deferral and not a suspension of the payment of the rents and gas, water and electricity invoices, exhaustively listed, for which the due date is scheduled after March 12, 2020.

 

Enforceability conditions

Only the micro-enterprises defined by decree dated December 18th, 2008 are eligible for this suspension of payments, and those for which:

  • The number of employees is less than 10 persons
  • Having an annual turnover less than 2 million euros.

In addition, it must be proven that the micro-enterprise’s activity is affected by the contamination due to the epidemic.

Only the companies which have been subject to closure by a decision rendered by the administration or which have suffered a significant loss of turnover since the March 16 may benefit from this measure.

Accordingly, the following may request the deferral of a payment of rents or water, gas and electricity invoices:

  • The lessee of a commercial or business lease,
  • That employs less than 10 employees and makes a turnover that does not exceed 2 million euros,
  • That has suffered a significant loss in turnover since the start of the confinement.

These conditions are cumulative.

In all the other cases, the rents must be paid in accordance with the lease, on their due date as well as the water and electricity invoices.

BE CAREFUL

A decree shall be enacted to detail the eligible individuals and legal entities.

In order to limit these deferrals to a maximum and their economic consequences, the Government has intended to restrict the conditions to micro-enterprises of less than 10 employees with a turnover of less than 1 million and suffering a loss of less than 70% of their turnover.

We shall publish another news you as soon as the decree is  published.

 

Consistency of the measures

The payments are only deferred or phased out, but the debts are not cancelled.

The invoices, like the rents, will subsequently have to be paid.

 

Alternative in the event of financial difficulties without being eligible for statutory deferrals

If

  • as Lessee to the lease you are suffering genuine financial difficulties as a result of the measures set by the government whereas you do not fall within the statutory conditions,
  • as Lessor, you intend to participate in the national solidarity effort and protect your contractual relations with your lessee,

a discussion must be undertaken with the other party to the lease agreement to envisage a contractual amendment that may be made by amendment.

No provision provides for the possibility to defer the payment of invoices other than those expressly mentioned.

With regard to the other suppliers, in the event of difficulties, the latter should be contacted to envisage on a case by case basis the payment schedule, suspension of the agreement or the renegotiation of the commercial conditions.

We remain at your disposal to assist you in these procedures.

 

Valérie Nicod, Cindy Richard.