Assignment of Rural Lease: the EARL May Operate without Individual Authorisation of the Assignee

Imagine: you are a landowner of agricultural land in Évron, in the Mayenne department. Your tenant, a farmer in an EARL (a form of agricultural limited liability company), wishes to assign his lease to his son. But the regulations require the assignee to prove professional competence and obtain an authorisation to operate. Question: if the EARL is already authorised to operate the land, must the son still obtain his own authorisation? This is precisely the point decided by the Court of Cassation on 27 May 2009.

This decision, little known to the general public but crucial for agricultural operators, answers a practical question: when an EARL benefits from an authorisation to operate under the structures control system (a procedure aimed at verifying the viability and competence of the operator), the assignee of the lease – who must make the land available to the EARL – is exempted from obtaining this authorisation himself. In other words, the EARL's authorisation covers the assignee.

In practical terms, for landowners and operators in the Craon region as elsewhere, this case law simplifies family transfers. But beware: it does not remove all obligations. Analysis.

The Facts: an Everyday Story

Mr X, a farmer in Évron, holds a rural lease over several plots belonging to a private landowner. He operates these lands within the framework of an EARL of which he is a member. Wishing to retire, he asks the landowner for permission to assign his lease to his son, Pascal. The landowner agrees, subject to Pascal proving his professional competence and obtaining the authorisation to operate provided for by the structures control system (Article L. 331-2 of the Rural Code).

Pascal produces a vocational agricultural studies certificate and applies for an authorisation to operate. But the landowner changes his mind: he refuses the assignment, considering that Pascal must obtain a personal authorisation, separate from that of the EARL. Mr X and Pascal sue the landowner to have the right to assignment recognised.

The specialist agricultural lease court rules in favour of the landowner. The operators appeal. The Rennes Court of Appeal reverses the judgment: it considers that the authorisation to operate held by the EARL exempts Pascal from obtaining one personally, because he will make the land available to the EARL. The landowner appeals to the Court of Cassation.

Before the Court of Cassation, the landowner argues that the authorisation to operate is personal to the assignee and cannot be confused with that of the EARL. He relies on Article L. 411-35 of the Rural Code (assignment of lease) and Article L. 331-2 (authorisation to operate). The Court dismisses the appeal: it states that the EARL's authorisation, which benefits the operation of the land, exempts the assignee from obtaining an individual authorisation, provided that the assignee undertakes to make the land available to the EARL.

The Reasoning of the Court — Analysed

The core of the dispute concerned the interpretation of two articles of the Rural Code: Article L. 411-35, which governs the assignment of rural leases, and Article L. 331-2, which establishes the structures control system. The latter requires any person wishing to operate agricultural land to prove professional capacity and obtain a prefectural authorisation, in order to avoid excessive fragmentation or disproportionate enlargement of farms.

The Court of Cassation reasoned in two stages. First, it recalls that the assignee of a rural lease must, in principle, obtain the authorisation to operate personally. But then, it makes a distinction: when the assignee is a member of an EARL already authorised to operate the land subject to the lease, and undertakes to make the land available to that EARL, the collective authorisation is sufficient. Why? Because the EARL is the actual operator; the assignee is merely a legal intermediary who transfers the lease to the structure.

The judges relied on Article L. 411-37 of the Rural Code, which provides that the tenant remains the holder of the lease even if he makes the land available to a company. In other words, Mr X remained the leaseholder, and Pascal, by becoming the assignee, would take his place. But since Pascal had to make the plots available to the EARL (of which he is a member), the EARL's already obtained authorisation covers the operation.

This solution is logical: it avoids unnecessary double administrative procedures. It is part of a jurisprudential trend favourable to simplifying transfers within agricultural companies. However, the Court specifies that this exemption only applies if the assignee proves his professional competence (like Pascal with his vocational certificate). The EARL's authorisation does not replace the capacity requirement.

What This Changes for You — in Practice

If you are a landlord in Craon, this decision directly concerns you. You cannot refuse an assignment of lease on the ground that the assignee lacks a personal authorisation, provided the beneficiary EARL is already authorised. Concrete example: you rent 20 hectares to an EARL. The manager, aged 62, wants to assign the lease to his daughter, who is already a member of the EARL. The EARL has a valid authorisation to operate. The daughter does not need an individual application. If you oppose it, you risk a lawsuit and damages.

For agricultural operators, this case law facilitates transfer. You can assign your lease to a child or associate without undergoing a new administrative procedure, provided that the company already benefits from the authorisation. Caution: the assignee must still prove his professional capacity (diploma, experience). If not, the EARL's authorisation is not enough.

For purchasers of agricultural land, be vigilant: if you buy property leased to an EARL, check that the authorisation to operate is still valid. Otherwise, the assignee of the lease could be blocked.

Four Tips to Avoid This Type of Dispute

• Check the EARL's authorisation to operate: before accepting an assignment of lease, ask for a copy of the prefectural order authorising the operation. Ensure it is still valid and covers the plots concerned.
• Require proof of professional competence: the assignee must prove a diploma (vocational certificate, agricultural baccalaureate, advanced technician's certificate) or significant experience (at least 5 years). Do not rely solely on the EARL's authorisation.
• Draft an addendum to the lease: specify that the assignment is conditional upon the land being made available to the EARL and the production of the authorisation to operate. This avoids subsequent disputes.
• Consult a specialist lawyer: every situation is unique. In Évron as elsewhere, a professional can help you negotiate the terms of the assignment and draft the deeds.

Further Analysis: Related Case Law and Developments

This decision is part of a line of cases favourable to the transfer of rural leases within companies. An earlier decision of the Court of Cassation (3rd Civil Chamber, 12 December 2001, No. 00-10.123) had already held that the assignment of a lease to a company benefiting from an authorisation to operate was valid without individual authorisation of the assignee. The 2009 decision confirms and extends this principle to the case where the assignee is a natural person, member of the company.

On the other hand, caution: if the assignee is not a member of the EARL or does not undertake to make the land available, personal authorisation remains mandatory. The courts are strict on this point. The trend is towards liberalisation of transfers, but the structures control system remains an important regulatory tool.

In the future, with the reform of the structures control system (Future for Agriculture Act of 2014), the authorisation thresholds have been raised. But the 2009 case law remains relevant for inter vivos assignments.

Checklist Before Acting

• Have I checked that the EARL has a valid authorisation to operate? Yes/No
• Does the assignee prove professional competence (diploma or experience)? Yes/No
• Does the assignee undertake in writing to make the land available to the EARL? Yes/No
• Has the landowner been informed of the assignment by registered letter with acknowledgement of receipt? Yes/No
• Has an addendum to the lease been signed to formalise the assignment? Yes/No

If you answered no to any of these questions, seek advice before going further.

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