Agricultural Lease: Making the Property Available to a Company Without Active Participation Constitutes a Prohibited Assignment

You are the owner of a agricultural plot in Mérignac, and you have granted a lease to a couple of farmers. One day, you learn that the tenants have formed a company and that it is now employees who work the land. The tenants themselves no longer get their hands dirty. What can you do? This decision of the Court of Cassation of 12 October 2023 (No. 21-20.212) provides a clear answer: if the tenant (or all tenants in the case of joint tenancy) abandons the enjoyment of the property to a company without actively participating in it, this constitutes a prohibited assignment of the lease. The landlord can then demand termination of the lease without having to prove damage. A decision that shakes up overly flimsy legal structures.

The question is simple: how far can the making available of rural property to a company go without constituting a disguised assignment? The answer of the High Court is equally simple: if the tenant no longer participates in the work effectively and permanently, according to the customs of the region and the size of the holding, there is a prohibited assignment. And this is so even if the company's articles of association provide for participation. The judges look at the reality on the ground, not the paperwork.

This case, which came from the Rennes Court of Appeal, will be of interest to all owners of agricultural land, tenants, but also notaries and advisers who structure land groupings. One misstep and the lease is terminated. Full analysis.

The Facts: A Story That Happens Every Day

Mr. X and Ms. Y are tenants of an agricultural lease on land located in Ille-et-Vilaine. In 2010, they formed a civil agricultural holding company (SCEA) to which they contributed the enjoyment of the leased property. In practice, the SCEA operates the land, employs staff, and the couple merely receives income from the company. On 16 November 2015, the tenant asked the landlord for permission to assign the lease to his daughter. The landlord refused and, by way of counterclaim, sought termination of the lease for prohibited assignment.

The Rennes Court of Appeal, in a judgment of 27 May 2021, ruled in favour of the landlord: it found that the tenants no longer participated in the work effectively and permanently, and that the making available to the SCEA constituted a prohibited assignment of the lease. The tenants appealed to the Court of Cassation, but the Court of Cassation dismissed their appeal on 12 October 2023. It confirmed that, as soon as the tenants abandon the enjoyment to the company without actively participating in it, the landlord can obtain termination without having to demonstrate damage.

What is striking in this case is the gap between the reality of the farming operation and the legal structures. The couple were still officially holders of the lease, but they no longer worked the land. For the Court, it does not matter that the company was properly formed: what matters is the effective participation of the tenant. A salutary reminder for all those who thought they could rely on a corporate structure.

The Reasoning of the Court — Analysed

The legal basis of the decision is Article L. 411-31, II, 1° of the Rural and Maritime Fisheries Code, which allows the landlord to demand termination of the lease in the event of a prohibited assignment of the lease. The Court recalls that making the leased property available to a company constitutes a prohibited assignment if the tenant or, in the case of joint tenancy, all the tenants no longer participate in the work effectively and permanently, according to the customs of the region and depending on the size of the holding.

In clear language: if you are a tenant of an agricultural lease and you create a company to operate the land, you must continue to work on the farm yourself. If you merely remain a member without getting your hands dirty, you abandon the enjoyment of the property to the company, and this is a prohibited assignment. The Court further specifies that the landlord does not have to prove damage: the mere finding of the prohibited assignment is sufficient to justify termination.

This decision confirms consistent case law: the courts are very vigilant about corporate structures that circumvent the agricultural tenancy status. The agricultural lease is a personal right, attached to the person of the tenant. Transferring it to a company without the landlord's consent is a serious fault. Here, the tenants argued that the SCEA was merely a tool, but the Court looked at reality: they no longer worked. A lesson for advisers who draft overly 'light' articles of association.

What This Changes for You — Practically

For the Landlord: you can now act quickly if you find that your tenant has made the land available to a company and no longer works. No need to wait for financial damage: the mere violation of the prohibition on assignment suffices. For example, in Le Bouscat, an owner of 5 hectares of vineyards could obtain termination of the lease if the tenant, after forming an EARL, no longer participates in the grape harvest and pruning. However, be careful: you must prove the lack of effective participation. A bailiff's report, witness statements, or photographs can be useful.

For the Tenant Farmer: if you have formed a company, make sure you continue to work on the farm effectively and permanently. The Court of Cassation requires participation 'according to the customs of the region and the size of the holding'. In practice, if the farm requires full-time work, you must be present. If there are several tenants, all must participate. A single inactive tenant can bring down the lease.

For the Professional (Notary, Lawyer, Agricultural Adviser): review your model articles of association. It is not enough to provide that the tenant is a member and manager: there must be a clause describing his effective activity on the farm. Also provide for monitoring mechanisms to prevent the tenant from becoming a mere rentier. This decision is a strong signal: the courts penalise purely tax or estate planning structures that strip the lease of its substance.

Four Tips to Avoid This Type of Dispute

• Draft a clause on effective participation in the lease or the company's articles of association. Specify that the tenant undertakes to work personally on the farm, with objective criteria (number of hours per week, specific tasks). This will facilitate proof in the event of a check.
• Conduct an annual review of the tenant's activity. If you are a landlord, ask each year for a sworn statement of effective participation, or even a statement of accounts from the MSA (Social Security for Agriculture) proving the tenant's affiliation as a farmer.
• Avoid structures where the tenant is merely a passive member. If you form a company, the tenant must be a working member, i.e., work on the farm. A contribution of enjoyment without work is risky. Consult a specialist lawyer before signing.
• When in doubt, seek the landlord's written consent. If you wish to make the property available to a company, ask the landlord's permission by registered letter with acknowledgement of receipt, detailing everyone's role. Better to have prior consent than litigation.

Further Reading: Related Case Law and Developments

This decision is part of a strict line of the Court of Cassation. In a judgment of 28 March 2019 (No. 18-11.111), the Court had already held that making the property available to a company without the tenant's personal participation constitutes a prohibited assignment. The novelty in 2023 is the affirmation that the landlord does not have to prove damage. Previously, some courts required proof of harm. Now, the violation alone suffices.

However, case law remains nuanced when the tenant participates even partially. For example, if the tenant is elderly and reduces his activity, but remains present on the farm, the courts may consider that there is no total abandonment. It is all a matter of proportion: the larger the farm, the higher the required participation. The trend is clear: the courts want concrete action, not empty shells.

In the future, we can expect landlords to use this decision to challenge leases granted to companies that do not actually work. The courts will need to clarify the criteria for effective participation. In the meantime, caution: if you are a tenant and no longer work, you risk termination.

In Practice: What to Do

1. Check your situation: if you are a tenant, list the tasks you personally perform on the farm. If you are a landlord, ask your tenant for a detailed statement of his activity.
2. Consult a lawyer: before forming a company or changing the farming structure, seek advice. A lawyer specialising in agricultural law will help you secure the structure.
3. In case of dispute, act quickly: if you find a prohibited assignment, you can bring the matter before the agricultural lease tribunal. Termination can be sought without notice, but you must prove the lack of participation.
4. Document: keep all documents proving effective participation: pay slips if you are an employee of the company, MSA records, photographs, neighbour statements.
5. Negotiate if possible: before going to court, try to regularise the situation. For example, the tenant can undertake to resume effective activity. If the landlord agrees, an amendment to the lease can save the situation.

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 →