Skip to content
All about finance. — Investing — Real-estate — Finance — Label

Tenant struggling with debt, leading to non-payment of rent and subsequent loss of property assets.

A small village of Auvergnat origin forfeits over 7,000 euros in unpaid rent, as the tenant of a local municipal dwelling initiated a bankruptcy proceeding, with the termination of his rental arrears among the primary objectives.

,   and  Administrator
3 min read
A small Auvergnat village faced a rental debt of over 7,000 euros from a tenant of a municipal...
A small Auvergnat village faced a rental debt of over 7,000 euros from a tenant of a municipal housing unit. The tenant presented a financial report indicating insolvency, seeking the cancellation of the outstanding rental payments.

Tenant struggling with debt, leading to non-payment of rent and subsequent loss of property assets.

Unpaid Rent and Bankruptcy: Navigating a Tough Situation for Landlords

© our site/Freepik By Christine Lejoux Head of Real Estate Service Published on

    • Copy link Link copied*

Letting Go of Over €7,000: A Harrowing Lesson in Unpaid Rent

When it comes to tackling unpaid rent, most landlords know the drill can get messy, especially when a tenant files for bankruptcy. This Auvergnat mayor, who rented out a communal property, found this out the hard way. "Post-divorce, the tenant moved into the apartment on his own. After a few months, the rent stopped arriving. Grasping his financial situation wasn't perfect, we requested him to cover what he could. The monthly rent was just €450...", the official recounted to our site.

The dialogue didn't get anywhere, and the commune appointed a bailiff to deliver a payment order. But as he continued, "he sought help from a social worker, filing for bankruptcy with the Bank of France". The bankruptcy commission, considering that the man had no prospect of improving his financial situation via property sale or employment, wiped out his rental debt.

Rent Arrears: What Can Landlords Do? # Challenging the Commission's Decision

Unfortunately, the village won't be reimbursed the €7,000 in unpaid rent. As the mayor lamented, "the tenant continues to reside there without paying the rent or the bills. We've renovated a 100 sqm apartment centrally located, with a terrace and garden for him!", he expressed disappointment at the situation. With few communal properties at their disposal, an affordable family-friendly unit is now wasting away. Worse still, the tenant filed a second bankruptcy application to discount his accumulated owings during the first procedure.

The cancellation the second time around was granted by the commission. Feeling helpless and frustrated, the mayor decided to take on the legal challenges, appealing against the decision. "We're a small commune comprising 1,000 inhabitants who can withstand a few months without rent payments, but not years.", the mayor admitted, also voicing concerns over the steep legal costs of such an appeal.

Home Mortgages: Cut Your Interest Rate with This Innovative Offer Read his posts Around this article * Real Estate Investment * Renting * Real Estate Investment * Housing * Rent Arrears

Bankruptcy Basics:Unpaid rent recovery from a bankrupt tenant in France is a complex process, owing to the legal protections afforded to debtors during bankruptcy proceedings. These are some vital steps and considerations for landlords:

Recovery Phase

  1. Communication and Documentation: The landlord should receive notification of the bankruptcy filing and register as a creditor with the relevant court or trustee. Keep documentation of these steps for the ensuing procedures.
  2. Claim Submission: File a claim for the unpaid rent with the bankruptcy administrator. It is essential to submit the claim within the provided timeframe.
  3. Claim Prioritization: In France, some debts are given priority. Understanding the claim hierarchy is crucial to gauge the likelihood of recovery. Generally, secured creditors and those with priority claims are paid first.
  4. Liquidation or Plan: Based on the bankruptcy (e.g., liquidation or rehabilitation), the landlord may recover some or all of the debt. In liquidation, assets are sold to repay creditors. In rehabilitation, the debtor may propose a repayment plan.
  5. Guarantees or Security: If the lease had included guarantees or security (e.g., letters of intent or third-party guarantees), the landlord may recover from these sources.

Legalicularies

  • Bankruptcy Code: Understand the French bankruptcy code (Code de Commerce) and its implications on rental agreements and bankruptcy procedures.
  • Legal Representation: Consider hiring a French attorney to navigate the legal process and negotiate with the tenant or bankruptcy administrator.
  • Legal Proceedings: If necessary, initiate legal proceedings to enforce the lease agreement or French law, but ensure these are in compliance with bankruptcy laws.
  • Prevention Measures: For future leases, ensure that the contract includes sturdy security measures like guarantees or bank guarantees to reduce the risk of non-payment.
  • In the event of a tenant filing for bankruptcy, landlords must follow certain steps to recover unpaid rent, such as registering as a creditor, submitting a claim within the given timeframe, and understanding the claim hierarchy.
  • Landlords facing unpaid rent due to bankrupt tenants in France may find recovery challenging due to legal protections for debtors, but options like guarantees or security in the lease agreement can provide additional recourse.

Read also:

    Related

    Latest