Bringing the “unpaid rent” guarantee into play? reminders & questions
Observation: the current health crisis could cause economic difficulties for some tenants, making them unable to pay their rents
Consequences: some landlords, whose financial or co-ownership charges continue to be due, risk finding themselves in difficulty if they no longer collect their rents
Purpose of the “unpaid rent” guarantee: guaranteeing late payment of rent and/or charges and guaranteeing non-payment of rent and/or charges
Question : can a landlord who has taken out an “unpaid rent” guarantee (known as “GLI”) turn to his insurer to claim the benefit of this guarantee if his tenant no longer pays the rent?
Answer : a priori yes, but the adoption of the emergency law in the face of the Covid-19 epidemic could change the situation for owners of professional premises
Situation before the adoption of the emergency law to deal with the Covid-19 epidemic
Operation of the GLI : the insurer guarantees the owner to collect unpaid rents and charges and to cover an unpaid amount at the level of the security deposit (in the event of installment payments)
GLI amount: the amount of reimbursements is generally capped at a monthly amount and a total amount
Duration of the GLI : the guarantee ends in particular on the expiry of the notice, on full repayment of the owner's debt or when the guarantee ceiling is reached
Additional guarantee: generally, the GLI also covers the costs of collection and/or eviction (bailiff, lawyer, locksmith, mover, furniture storage, etc.) incurred by the owner because of his tenant
Situation since the adoption of the emergency law to deal with the Covid-19 epidemic
Reminder of the provisions of the emergency law on rents:
“ the Government is authorized to take by ordinances (…) any measure (…) allowing the full deferral or staggering of the payment of rents relating to professional and commercial premises (…) for the benefit of micro-enterprises (…) whose activity is affected by the spread of the epidemic”
Effects : certain tenants of professional premises could soon benefit from rent deferral mechanisms, authorizing them to suspend payment of their current rent (according to terms which nevertheless remain to be defined)
Problem : Most GLIs terminate if rent payments are suspended as a result of legal or regulatory measures
Consequences: owners of professional premises who have subscribed to a GLI risk losing the benefit of it in cases where the unpaid bills of their tenants are the consequence of the application of the legal mechanisms for future deferral
