COVID-19: Consequences for the real estate world of Ordinance No. 2020-306 as amended by Ordinance No. 2020-427 of 15 April 2020 on the extension of deadlines

21 April 2020

In view of the latest government measures, this article provides insight into the impact of Ordinance No. 2020-306 of 25 March 2020 as amended by Ordinance No. 2020-427 of 15 April 2020, regarding the extension of deadlines during the period of health emergency and the adaptation of procedures during the same period (as amended, "Ordinance No. 2020-306").



Ordinance No. 2020-306 essentially affects the deadlines expiring between 12 March 2020 and one month after the date that the state of health emergency ends. This is expected to end two months after 24 March 2020 unless postponed (this will be referred to, for our purposes, as the "Emergency Period Increased by One Month").

For a general overview of Ordinance No. 2020-306, we refer you to the Linkedin alert of our "Commercial" team (https://www.linkedin.com/posts/gowling-wlg-france_gowling-wlg-covid-19-ordonnance-du-15-activity-6657995414484189184-0xoF).

It should be pointed out that Ordinance No. 2020-306 is a different ordinance from ordinance No. 2020-316, which targets microenterprises eligible for the solidarity fund, whose eligibility conditions exclude a number of professionals ( excluded from the scheme are: businesses with more than ten employees, having achieved a turnover exceeding 1,000,000 euros and a benefit exceeding 60,000 euros during the last fiscal year, or controlled by a commercial company within the meaning of Article L. 233-3 of the French Commercial Code). If the latter do not pay their rent and rental charges due between 12 March 2020 and the expiration of a period of not one but two months after the date of cessation of the state of health emergency, they "may not incur financial penalties or interest for late payment, damages, astreinte, the enforcement of a termination clause, liquidated damage clause or any acceleration clause, or the enforcement of guarantees or sureties".

The following rules stemming from Ordinance No. 2020-306 are of particular interest to real estate investors, lenders, managers and others:

Automatic renewal of civil leases, mandates and other contracts with a tacit renewal clause

The period during which either party may notify the other of the non-renewal of the contract, if this period expires during the Emergency Period Increased by One Month, is extended by two months after the end of this period (article 5 of Ordinance No. 2020-306). If the date of automatic renewal occurs before the expiry of the period of notice of non-renewal being extended, will the contract be automatically renewed on that date subject to condition subsequent that no notice of non-renewal be made during the extended notice period? This could be a possible interpretation. Commercial leases that are tacitly extended (and not renewed) at their contractual expiry date do not seem to be concerned.

Non-application of astreinte, liquidated damage clauses, termination clauses and other acceleration clauses

Let's consider a lessee (other than a microenterprise benefiting from the rent deferral measures of Ordinance No. 2020-316) who, without having the right to do so, ceases to pay rent due during the Emergency Period Increased by One Month. Such a lessee could argue that the date on which the liquidated damage clause and the termination clause of the lease will produce their effects is postponed by a period, starting from the end of the Emergency Period Increased by One Month, equal to the time elapsed between (i) 12 March 2020 or, if it is later, the date on which the obligation is "borne" and (ii) its due date, according to the new wording of Article 4 of Ordinance No. 2020-306 resulting from Ordinance No. 2020-427 of 15 April 2020. It should be noted that case law considers that a rent receivable is "borne" on the date of execution of the contract and not on its due date.

Similarly, a borrower who, without having the right to do so, does not pay a credit facility instalment that is due during the Emergency Period Increased by One Month, may argue that the date on which the acceleration clause of the credit facility would become effective is postponed by a period starting from the end of the Emergency Period Increased by One Month, equal to the time elapsed between (i) 12 March 2020 or, if it is later, the date on which the obligation is "borne" and (ii) the due date, without prejudice to the other clauses of the finance documents activated by the occurrence of an event of default that are short of liquidated damage clauses or acceleration clauses. It should be noted that a default interest clause is a liquidated damage clause according to the French Supreme Court (Com. 5 Apr. 2016, no. 14-20.169 P: D. 2016. 2244).

Ordinance No. 2020-427 of 15 April 2020 added that, for non-monetary obligations, this mechanism applies even if the relevant obligation is to be performed after the Emergency Period Increased by One Month. Consequently, a company that must perform certain work within a certain time period expiring after the Emergency Period Increased by One Month would be able to argue that the date on which the liquidated damage and the termination clauses take effect is postponed by a period equal to the time elapsed between (i) 12 March 2020 or, if it is later, the date on which the obligation is "borne" and (ii) the end of the Emergency Period Increased by One Month.

We would like to point out that we have been informed that enforcement procedures as well as seizures are currently frozen on the instruction of the National Chamber of Bailiffs.

Building permits

Examination of building permit applications

Ordinance No. 2020-427 of 15 April 2020 added an Article 12 ter to Ordinance No. 2020-306 specifying that the time period to process applications for planning authorisations and certificates, as well as prior declarations provided for in Book IV of the Planning Code and for the verification of work procedures provided for in Article L. 462-2 of the same Code, are suspended as of 12 March 2020 if they had not expired before. They will resume as of the end of the period of health emergency. In line with this, the starting point of time periods that should have started between 12 March 2020 and the end of the period of health emergency is postponed until the end of that period. The same rules apply to the time limits within which local and regional authorities and their public establishments, departments, authorities or commissions must issue a statement or give consent in connection with the processing of such application or prior declaration.

Time limits for third-party recourses against building permits

Ordinance No. 2020-427 of 15 April 2020 added an Article 12 bis to Ordinance No. 2020-306. This specifies that the time periods applicable for filing a recourse or a prefectural application for judicial review against a decision not to oppose a prior declaration or to grant a building permit, a development permit or a demolition permit, are suspended as of 12 March 2020 if they have not expired before that date. They will resume as of the end of the period of health emergency (two months from 24 March 2020 unless postponed), without the remaining period being less than seven days. In line with this, the starting point of time periods that should have started between 12 March 2020 and the end of the period of health emergency is postponed until the end of that period.

Validity period of building permits

Any building permit due to expire during the Emergency Period Increased by One Month will be automatically extended until the end of a period of two months from the end of the Emergency Period Increased by One Month (article 3 of the Ordinance No. 2020-306), i.e. three months after the end of the state of health emergency.

Purging of the urban pre-emption right

Ordinance No. 2020-427 of 15 April 2020 added an article 12 quater to Ordinance No. 2020-306. This specifies that the time periods pertaining to pre-emption procedures set in Title I of Book II of the Planning Code and Chapter III of Title IV of Book I of the Agriculture and Fishing Code, within which a decision, an agreement or an opinion may or must be made or is deemed made, are suspended as of 12 March 2020 if they have not expired before that date. They will resume at the end of the health emergency period. In line with this, the starting point of time periods that should have started between 12 March 2020 and the end of the period of health emergency is postponed until the end of that period.

The completion date set out in pre-sale agreements will therefore have to be postponed unless the competent territorial authority expressly waives its pre-emption right, and an extension amendment may be necessary.

Absence of extension of the purchaser's withdrawal period

Ordinance No. 2020-427 of 15 April 2020 amended Article 2 of Ordinance No. 2020-306 in order for "reflection, withdrawal and renunciation periods provided for by law or regulation", like the periods within which money must be reimbursed further to the exercise of such rights, not to be extended.


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