Preferential Allotment: Which Value Applies When a Lease Is in Place

Can an heir be made to pay for a property as though it were vacant, when it remains let to a farming company after the estate division? That, in essence, is the question resolved by the Cour de cassation in a judgment handed down on 10 December 2025, on appeal against a judgment of the Paris Court of Appeal of 25 January 2023. The case concerns an estate division involving a farming business, and more specifically the mechanism of preferential allotment (the right of an heir already operating a property to have it allotted to them in priority on division, in exchange for compensating the other heirs).

Every co-owner in undivided ownership, every heir called to a division, asks themselves the same question one day: at what value should a property that is to come to them be assessed, particularly where that property is let? The answer is not neutral: it determines the amount of the equalisation payment, that is, the financial compensation the allottee must pay the other co-dividers to rebalance the division.

The Cour de cassation answers here in two stages. First, it restates a valuation rule set out in Articles 832-4, first paragraph, and 829 of the French Civil Code. Second — and this is the most interesting contribution of the judgment — it clarifies what happens where the allotted property is let to a company in which the allottee is themselves a member, sometimes even the majority shareholder. The solution adopted will have concrete repercussions for all farmers operating through a company and, more broadly, for anyone inheriting property occupied by a third party.

The facts: a story that happens every day

The dispute originated in an estate division concerning a farming business. A co-divider, a member of a company holding an agricultural tenancy (the contract allowing a farmer to lease agricultural land or buildings, generally for a long term) over that same farming business, applied for preferential allotment of the property. This mechanism, provided for under the Civil Code, allows an heir who already participates in operating an agricultural, commercial or other property to have it allotted to them in priority, provided they compensate the other heirs in proportion to their share.

The dispute between the parties to the proceedings concerned the method for valuing the allotted property. Should it be valued as a vacant property, free of any occupation — which would have inflated its value and, consequently, the equalisation payment due to the other co-dividers? Or should account instead be taken of the fact that the company holding the agricultural tenancy continued to farm the land, which mechanically reduces the market value of an occupied property compared with a vacant one?

The Paris Court of Appeal, in its judgment of 25 January 2023, had ruled in a manner contested before the Cour de cassation. The appeal, registered under number U 23-13.978, raised five separate grounds. The Cour de cassation dismissed the first, second, fourth and fifth grounds, but upheld the reasoning concerning the method of valuing the allotted property, leading to a partial quashing of the Paris judgment. The case illustrates a situation common in the farming world: an operator who has structured their business as a company and who, at the time of the family division, faces the question of whether their status as a member changes the nature of the property's occupation.

The court's reasoning — unpacked

The reasoning of the judges of the Cour de cassation rests on two combined provisions. Article 832-4, first paragraph, of the Civil Code lays down the principle that property allotted on a preferential basis is valued as at the date on which separate enjoyment takes effect, that is, the moment at which the division actually takes effect and the allottee begins to enjoy full use of the property. Article 829 of the same Code specifies that this valuation must take into account, where applicable, any encumbrances affecting the property. Put differently: a let property is not sold at the price of a vacant one.

This is where the Cour de cassation provides its most decisive clarification. Where the farming business is allotted preferentially to a co-divider who is themselves a member of the company holding the agricultural tenancy, that allotment does not result in the allottee combining, in their own person, the capacities of both owner and tenant. In other words, becoming the owner of the property does not extinguish the tenancy held by the company, even if the allottee is the majority shareholder in that company. Why does this distinction matter so much? Because in law, a company has a legal personality distinct from its members: even if the allottee holds a majority of the shares, the company remains a legal entity in its own right, and a tenant in its own right.

The logical consequence follows: since the company remains the holder of the agricultural tenancy, the farming business cannot be valued as free of any occupation. The appellate judges had, it seems, reasoned as though the allotment extinguished the tenancy once the allottee controlled the operating company. The Cour de cassation corrects this approach: only a genuine merger of the capacities of landlord and tenant — which presupposes that the tenancy is legally extinguished — would have permitted such a valuation. Yet the company's separate legal personality stands in the way. This solution follows on from, rather than reverses, case law protective of the statutory agricultural tenancy regime: it reaffirms the autonomy of the tenant company vis-à-vis its member who has become the owner of the freehold.

What this means for you — in practice

If you are an heir seeking preferential allotment of a farming property operated through a company, this decision concerns you directly. You should expect the property to be allotted to you at its occupied value, not its vacant value — generally 20 to 30% lower depending on local practice, sometimes more for long-term agricultural tenancies. A property that would be worth €500,000 vacant might be valued at only €350,000 to €400,000 given the occupation, correspondingly reducing the equalisation payment owed to co-heirs.

For the other co-dividers, the reverse applies: they should be aware that their share of the equalisation payment will be calculated on a reduced basis for as long as the agricultural tenancy subsists, regardless of whether the allottee becomes the majority shareholder in the operating company. If they believe the corporate structure was set up artificially to depress the property's value at the time of division, that is a different ground of challenge — fraud or sham arrangements — which should then be explored with a lawyer, including before a court such as that of Paris if the dispute is located there.

For practitioners of agricultural law throughout France, this decision is a reminder to systematically verify the exact holder of the tenancy before any valuation: is the tenant an individual or a company? That verification determines the entire calculation of the division.

Four tips to avoid this type of dispute

• Before applying for preferential allotment, have an adversarial valuation of the property carried out by an accredited agricultural valuer, expressly taking the ongoing agricultural tenancy into account.
• Systematically check who holds the agricultural tenancy — the operating company or the member personally — as this distinction radically changes the valuation method.
• Anticipate the equalisation payment question by requesting, as soon as the estate is opened, a costed simulation incorporating the discount linked to occupation.
• If you are a non-farming co-heir, seek the assistance of a lawyer specialising in agricultural law to check that the corporate structure has not been used to artificially depress the value of the shared property.
• Keep written evidence of the exact date on which separate enjoyment took effect, as it is that precise date — not the date of death nor the date of judgment — at which the property's value must be fixed.

Going further: related case law and developments

This decision forms part of a consistent line of case law from the Third Civil Chamber, which has jurisdiction over agricultural tenancies and has consistently sought to preserve the integrity of the protective statutory regime attached to such tenancies against family or corporate arrangements. The Court had already had occasion to note, in earlier cases concerning farming co-ownerships, that merely holding a majority shareholding in a tenant company is not enough to extinguish the tenancy in favour of the owner of the freehold. The judgment of 10 December 2025 thus confirms this approach, while applying it explicitly to the specific context of preferential allotment on an estate division, where the financial stakes — calculation of the equalisation payment — made the question particularly sensitive. The lower courts, including the Paris Court of Appeal to which the case has been remitted pursuant to Article 1015 of the Code of Civil Procedure, can be expected henceforth to apply this analytical framework systematically in cases combining agricultural law and succession law.

Key takeaways

• What is the reference date for valuing property allotted on a preferential basis? The date on which separate enjoyment takes effect, that is, the moment the division takes effect, not the date of death.
• Must the agricultural tenancy be taken into account in the valuation? Yes, systematically, provided the tenancy still legally subsists at the time of valuation.
• Does the allottee becoming the owner extinguish the tenancy if they are the majority shareholder in the tenant company? No, for as long as the company retains its separate legal personality and remains the holder of the tenancy.
• What is the risk of mis-valuing the property? The decision may be quashed if the valuation fails to comply with Articles 832-4 and 829 of the Civil Code, with the case remitted to another Court of Appeal.

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