Asset disposal in liquidation and the pre-emption right of the agricultural tenant

Imagine for a moment: you are a farmer in L'Isle-sur-la-Sorgue. For years, you have rented land from a landlord who, unfortunately, goes bankrupt. The court orders the disposal of his assets, including the land you cultivate. You learn that a buyer is going to acquire them. You think to yourself: "I have a right of pre-emption (priority to buy) over this land, don't I?" Well, this decision of the Court of Cassation answers: no, not in this specific case.

The question is crucial for hundreds of farmers in Vaucluse and elsewhere. When a company is in judicial liquidation, the court may impose a disposal plan. But is this plan a "voluntary sale" that triggers the tenant's right of pre-emption? The Court of Cassation, in this judgment of 1 April 1998, clearly says no. And this changes everything for the rights of agricultural tenants.

So, what should you remember if you are a tenant or landlord? This article breaks down the case, explains the judges' reasoning, and gives you practical tips to avoid pitfalls. Whether you are in Pertuis or elsewhere, these rules apply throughout France.

The facts: a story like those that happen every day

Mr and Mrs X are owners of a farm in L'Isle-sur-la-Sorgue, including land leased to a farmer, Mr Y. But the X couple also run a transport business, which is failing. In 1992, they are placed in judicial reorganisation (a procedure to help a company in difficulty recover). The commercial court of... (in fact, the commercial division of the Tribunal de Grande Instance) must decide the fate of the business.

A disposal plan (forced sale of assets to repay creditors) is proposed by a buyer, Mr Z. This plan includes the agricultural property that is leased. Mr Y, the farmer, believes that this disposal gives him a right of pre-emption: he should be able to buy the land in priority, as provided for in Article L. 461-18 of the Rural Code (right of pre-emption of the tenant in case of voluntary alienation). He takes legal action.

The Court of Appeal of Aix-en-Provence rules against him, and the Court of Cassation confirms in 1998. For the judges, the disposal plan ordered by the court in the context of collective proceedings is not a voluntary alienation (freely consented sale), but a forced sale. However, the right of pre-emption only applies to voluntary sales. The farmer therefore loses his priority right.

The reasoning of the court — broken down

The Court of Cassation relies on Articles 81 et seq. of the Law of 25 January 1985 (now Articles L. 621-1 et seq. of the Commercial Code), which govern disposal plans in collective proceedings. It recalls that the court orders the disposal "on the basis of the offer made to the court": it is the judge who decides, not the owner. There is therefore no free will of the seller.

In rural law, Article L. 461-18 of the Rural Code gives the tenant a right of pre-emption "in the event of an alienation for value" of the leased land. But case law interprets this notion strictly: the alienation must be voluntary. A forced sale, such as a seizure or a judicial disposal plan, does not fall within its scope.

The Court of Appeal had noted that the agricultural property did not constitute an autonomous branch of activity (a set of elements forming an economic unit): the land was leased, thus separate from the landlords' commercial activity. But this point is not decisive. The essential point is the forced nature of the disposal. The magistrates reject the farmer's argument that the disposal is equivalent to a voluntary sale because it is included in a plan accepted by the debtors. No, they say: the court imposes the plan, even if the debtors made an offer.

This decision confirms previous case law (Cass. civ. 3, 17 March 1993, No. 91-14.123) and fits into a logic of protecting collective proceedings: one cannot paralyse the disposal of assets by invoking a right of pre-emption that was not intended for these situations.

What this changes for you — concretely

If you are an agricultural tenant: be careful! In the event of your landlord's judicial liquidation, you cannot exercise your right of pre-emption over the leased land. This means that the buyer appointed by the court may become your new landlord without you being able to buy the land. You keep your lease, but you lose the possibility of becoming the owner. Concrete example: in Pertuis, a farmer was farming 15 hectares of vineyards. The landlord, a trading company, is liquidated. The court disposes of the vineyards to a neighbouring winegrower. The farmer cannot acquire them, even if he had the funds.

If you are a landlord in difficulty: you can include your agricultural land in a disposal plan without fear that your farmer will block the sale by invoking his right of pre-emption. This facilitates the global disposal of your business. But be careful: the farmer remains protected by his lease, which continues with the buyer. You cannot terminate the lease to drive up the price.

If you are a buyer: you can acquire agricultural land under a disposal plan knowing that the tenant cannot buy it instead of you. This is a competitive advantage, but you will have to respect the existing lease. No question of evicting the farmer overnight.

Four tips to avoid this type of dispute

• Check the nature of the disposal: if you are a tenant and you learn that your landlord is in collective proceedings, ask a lawyer whether the disposal plan is voluntary or forced. Only a voluntary sale triggers the right of pre-emption.
• Anticipate in the lease: include a clause giving you a right of first refusal (contractual priority) in case of a forced sale. This is not equivalent to the legal right, but may protect you if the buyer agrees to sell to you.
• Consult a lawyer as soon as the landlord's difficulties arise: in L'Isle-sur-la-Sorgue, a client contacted me too late: the disposal plan had already been approved. He lost any possibility of buying the land.
• As a landlord, inform your farmer of the proceedings: even if the right of pre-emption does not apply, good communication avoids misunderstandings and unnecessary lawsuits.

Further reading: related case law and developments

This decision is part of a consistent line: the Court of Cassation protects the effectiveness of disposal plans. Already in 1993 (Civ. 3, 17 March 1993, No. 91-14.123), it had ruled that a sale by judicial seizure did not trigger the tenant's right of pre-emption. More recently, in a judgment of 22 January 2015 (No. 13-25.652), it extended this reasoning to the disposal of assets under a safeguard plan.

The trend is therefore clear: courts prioritise the continuity of collective proceedings over the individual rights of tenants. However, the legislature strengthened the protection of farmers in 2014 (Future of Agriculture Law) by extending the right of pre-emption to certain transfers of shares. But for forced sales, nothing has changed. In the future, a reform may be necessary to balance interests, but in the meantime, case law is stable.

Checklist before acting

• Do I have a right of pre-emption? Check whether the sale is voluntary or forced. If the landlord is in liquidation, it is forced → no right.
• Can I challenge the disposal plan? Yes, if you believe the buyer is not serious or your lease is threatened. But not on the basis of the right of pre-emption.
• What if I want to buy the land? Make an offer to the court as a buyer, but you will be in competition with others. The court will choose the best offer for the creditors.
• Is my lease protected? Yes, the disposal plan cannot terminate your lease. The buyer becomes your new landlord, and you keep all your rights (duration, rent, etc.).

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 →