Our lawyers assisted a condominium property manager in a dispute regarding the termination of their mandate.
CONTEXT:
Our client is a company specializing in the administration and management of real estate properties. As such, it operates as a condominium property manager.
In this capacity, it held a series of property management mandates for a building located in Paris, uninterrupted for over thirty years.
FACTS:
During the 2017 general assembly concerning this building, the property manager mandate was renewed for a fixed term of 24 months, expiring on December 31, 2018.
In June 2018, during the general assembly of co-owners, the Condominium Association (hereinafter the "CA") proceeded with the mandatory triennial competition of several property management contract proposals, as stipulated by Article 21 of Law No. 65-557 of July 10, 1965.
During this assembly, the CA decided not only to renew the mandate of the property manager's who had been in place for over thirty years and immediately appointed another company as the new property manager for the building.
Given the provisions of Article 18 V of the same law of July 10, 1965, as amended by the ALUR Law of March 24, 2014, this appointment amounted to the dismissal of the existing property manager from the time the new manager took office, which, in this case, was the same day as the general assembly.
It is important to note that the existing property manager's mandate stipulated that the CA could only terminate the contract for "serious and legitimate reason."
Therefore, to compensate for the damage suffered by this termination, the dismissed property manager unilaterally withdrew the management fees due for the third and fourth quarters of 2018.
Dissatisfied with this situation, the CA sued its former property manager to obtain the reimbursement of the amounts withdrawn, along with legal interest and an amount under Article 700 of the Civil Procedure Code.
In its lawsuit, the CA relied on the combination of Articles 18 V and 21 of Law No. 65-557 of July 10, 1965, to claim that in the event of the termination of a property manager’s mandate due to mandatory legal competition, the manager would not be entitled to any compensation resulting from the early nature of this termination.
We argued that these two texts did not exclude compensation for the property manager prematurely dismissed without any reason, and therefore, the dismissed property manager was entitled to receive compensatory damages for the harm suffered as a result of this abrupt and abusive termination, equivalent to the balance of their fees until the end of their mandate.
CONCLUSION:
The court followed our argument and considered that the abusive termination of the contract entitled the dismissed property manager to damages. In case of legal action, it was up to the CA to provide evidence of a serious reason or a breach by the property manager justifying their early termination without compensation.
The CA was dismissed from all of its claims and was also ordered to pay the dismissed property manager compensation under Article 700 of the Civil Procedure Code, along with legal costs.
BIGNON LEBRAY'S OPINION:
Generally, it can be quite risky to "take justice into your own hands" in contractual disputes, as this behaviour is often poorly perceived by the courts.
That being said, given the delays currently faced by litigants in French courts and the cash flow needs of some companies, such a situation can sometimes be useful.
Our role as lawyers is to best assess the reasonable risk faced by the client and to enable them to protect their legal and economic interests.
Moreover, if the CA had voted that the new property manager's appointment would take effect at the end of the existing manager's mandate, this entire dispute could have been avoided.
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