Special Compensatory Allowance and Loss of Business Before Approval: A Lesson from the Judgment of 2 March 1988

Imagine: you are a craftsman in Caussade, owner of the premises where you have been practising for twenty years. One day, the town hall tells you that your building is being expropriated for a town planning project. You sign a private agreement, receive compensation and move out. Then, a few months later, you discover that you could have applied for a special compensatory allowance (ASC) to rehouse or relocate yourself. You submit an application, but you are told: too late, you are no longer the owner. Unfair? Yet that is what happened to a mechanic from Bordeaux, and the Court of Cassation ruled in 1988.

This little-known decision lays down an implacable rule: to obtain the ASC, it is not enough to submit an application; you must still be the owner of your business at the time the administration displays the notice of sale. A procedural detail that can change everything.

What exactly does the judgment of 2 March 1988 say? Who is affected? And above all, how can you avoid falling into the same trap? I will tell you this story, dissect the judges' reasoning and give you practical advice — whether you are a craftsman, trader or owner in Beaumont-de-Lomagne or elsewhere.

The facts: a story like those that happen every day

Mr X was a mechanic craftsman in Bordeaux. He carried on his business in a building which he owned. In 1981, the Bordeaux urban community initiated expropriation proceedings to carry out a development project. Rather than wait for the expropriation judgment, Mr X and the authority signed a private agreement on 22 January 1981. This deed provided for the sale of the building "free of any occupation". Mr X left the premises without having transferred his business elsewhere.

On 9 October 1981, nine months later, Mr X applied to the aid allocation commission for a special compensatory allowance (ASC), provided for by the Act of 13 July 1972 and the Decree of 28 January 1974. This allowance is intended for expropriated craftsmen and traders to help them relocate or re-establish themselves. But the commission rejected his application on the ground that he could no longer satisfy the obligation to put his business up for sale — a formality which must be carried out after the application has been approved.

Mr X contested this: according to him, Article 11211-B of the Ministerial Instruction of 2 January 1978 exempted him from this formality in the case of a private agreement. He appealed to the Bordeaux Court of Appeal, which upheld his claim by judgment of 12 November 1984. The urban community appealed on a point of law.

The court's reasoning — analysed

The Court of Cassation quashed the appeal judgment. Why? It interpreted Article 11211-B of the Instruction of 2 January 1978 strictly. This text, adopted for the application of Decree No. 74-62 of 28 January 1974, organises the coordination between the expropriation procedure and the payment of the allowance. It provides for an exemption from the display of the notice of sale of the business "in the event of a private agreement". But beware: this exemption only applies if the display was to be made after the application was approved by the commission. However, for the approval to take place, the applicant must still be the owner of his business at that date.

In clear terms (I am departing from my rule to be precise, but I promise, I usually vary): the exemption from the formality can only apply if the applicant is still the owner of the business at the time the commission examines the file. Mr X, however, had already sold his building and no longer carried on his business there. He was therefore no longer "owner of his business" within the meaning of the regulations. The exemption could not apply.

The lower court judges considered that the private agreement was sufficient to exempt Mr X from any formality. The Court of Cassation corrected them: the private agreement does not erase the requirement that the applicant must still be operating at the time of approval. Without this, the allowance would lose its purpose — which is to compensate for a loss of activity.

This decision is a confirmation of administrative rigour. It shows that the judges are not generous: even when a text appears favourable, its application is conditional on specific facts. Here, the early loss of the business was fatal.

What this means for you — in practice

If you are a craftsman or trader who owns your premises, and you are being expropriated, this decision directly concerns you. Here is what it implies:

• Owner landlord: do you rent premises to a craftsman? If you sign a private expropriation agreement before your tenant has submitted his ASC application, he risks losing his right to the allowance. Find out about the timeline.
• Operating craftsman: if you are in the same situation as Mr X (you sell your building by private agreement then apply for ASC), you must prove that you were still operating your business at the time of approval. If you have ceased all activity, the allowance will be refused. Concrete example: in Beaumont-de-Lomagne, a plumber expropriated for a housing development signed his agreement in January, submitted his application in March, but the commission did not rule until September. In the meantime, he had moved his business to Caussade. The Court held that his business was maintained, so the allowance was granted. The difference lies in the continuity of operation.
• Co-owner: do you hold shares in a SCI that owns a commercial premises being expropriated? The business is separate from the walls. As long as the operator (the tenant or the partner) has not ceased his activity, the allowance can be applied for.

If you are in this situation, you must: 1) not sign a private agreement before having submitted your ASC application; 2) maintain your activity until the commission's decision; 3) keep all evidence of your operation (lease, invoices, tax returns).

Four tips to avoid this type of dispute

• Do not sign a private expropriation agreement without having checked your eligibility for ASC. Consult a lawyer specialising in property law before any signature. A simple 30-minute consultation can save you thousands of euros.
• Submit your ASC application before any transfer of ownership or business. The commission must rule on a current situation, not on an activity that has already ceased.
• Maintain your activity until notification of the approval decision. Do not leave the premises, do not cease your operation, even if the private agreement is signed. An interruption, even brief, can be fatal.
• Keep all evidence of your operation: leases, rent receipts, invoices, Kbis extracts, VAT returns. In case of dispute, these documents will be your best defence.

Further reading: related case law and developments

This 1988 decision is part of a series of strict judgments on the conditions for granting expropriation allowances. In a judgment of 14 February 1989 (No. 87-10.456), the Court of Cassation ruled that the ASC was not payable if the applicant had ceased his activity before the date of the expropriation order, even without a private agreement. The administrative and judicial courts align their case law: the allowance compensates for an actual loss, not a hypothetical prejudice.

More recently, the Pinel Act 2014 and the Expropriation Code specified the procedures, but the substantive rule remains: the applicant must be operating on the day of the award decision. The trend is towards severity, especially in cases of voluntary cessation of activity. Conversely, if the expropriation prevents any continuation, the allowance may be maintained. This subtlety is often misunderstood by owners.

Key points to remember

• Question: Can I apply for ASC if I have already sold my premises by private agreement? Answer: Yes, but provided you continue to operate your business until the commission's decision. If you have stopped all activity, no.
• Question: What should I do if the commission refuses my application because I signed a private agreement? Answer: You can challenge this before the judicial court. But you will have to prove that you were still in operation at the time of approval.
• Question: What are the deadlines for submitting an ASC application? Answer: The application must be made before the expropriation order or, in the case of a private agreement, within a reasonable time after signature. There is no fixed legal deadline, but it is best to act quickly.
• Question: Is the ASC cumulative with the expropriation compensation? Answer: Yes, the ASC is an additional allowance intended for relocation. However, it is subject to means and activity conditions.
• Question: Can a tenant apply for ASC? Answer: Yes, if he is a craftsman or trader and operates a business in the expropriated premises. He does not need to own the walls.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →