Introduction: A Sword of Damocles over Acquisition by a Foreign National
Acquiring real property in France as a foreign national (from outside the EU or as a non-resident) may appear straightforward, but the right of pre-emption held by municipalities constitutes an often overlooked obstacle. By means of this tool, a municipality may substitute itself for the purchaser and acquire the property in their stead, subject to certain conditions. The judgment of 9 November 2022 of the third civil chamber of the Court of Cassation (No. 21-17.892) serves as a reminder that this right is not absolute and that the foreign purchaser has legal remedies available.
1. The Right of Pre-emption: Reminder of Principles
Established by the Law of 5 July 1985, the Urban Pre-emption Right (DPU) allows municipalities to become the priority purchaser of a property put up for sale, within areas defined by their Local Urban Plan (PLU). The objective is to control land for projects of general interest (social housing, public facilities, etc.).
The mechanism is simple: the seller must notify the municipality of their intention to sell (Declaration of Intention to Alienate, DIA). The municipality then has a period of two months to exercise its right of pre-emption at the declared price. If it does not respond, the sale may proceed freely.
1.1. The Foreign Purchaser Facing the DPU
The law does not distinguish based on the nationality of the purchaser. In theory, the DPU applies in the same manner to any buyer. However, in practice, municipalities may be tempted to pre-empt a property to prevent it from falling into the hands of a foreign national, particularly in tourist or sensitive areas. The 2022 judgment illustrates this situation: a municipality had pre-empted a property sold to a Swiss national, arguing the necessity of maintaining housing prices for local residents.
2. Analysis of Judgment 21-17.892: The Court of Cassation Restricts the DPU
In this case, the municipality of Saint-Jean-de-Luz had pre-empted a house sold to a non-resident Swiss couple. The purchasers challenged the decision before the courts, arguing that the municipality had not provided a sufficient reason of general interest. The Court of Cassation ruled in their favour, annulling the pre-emption.
The High Court recalled that the right of pre-emption may only be exercised for a clearly identified and proportionate reason of general interest. In this instance, the municipality invoked the "preservation of social mix" and the fight against "property speculation". However, the Court held that these reasons were too general and unsupported by concrete elements (absence of a specific development project).
2.1. Lessons for the Foreign Purchaser
This judgment is a victory for foreign purchasers. It enshrines the principle that a municipality cannot pre-empt a property solely on the ground that the purchaser is a foreign national or non-resident. The decision must be based on a real and documented project. In the absence of such a project, the pre-emption is abusive.
Legal references:
- Articles L. 211-1 et seq. of the Urban Planning Code (DPU)
- Article L. 213-1 of the same Code (time limits and procedure)
- Consistent case law: Cass. 3e civ., 9 Nov. 2022, No. 21-17.892
3. Other Risks for the Foreign Purchaser
Beyond the DPU, the non-resident foreign national must be vigilant on several points:
- Taxation: Capital gains on real property are taxed in France, even for a non-resident. Tax treaties may avoid double taxation (e.g., the Franco-Swiss treaty).
- Private International Law: The matrimonial property regime and succession law may impact the holding of the property. It is advisable to draft a will or choose a corporate structure (SCI).
- Exchange Controls: Fund transfers for the acquisition must be declared (capital transfer declaration).
Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.
4. How Maître Zakine Can Assist You
Faced with these issues, the assistance of a specialised lawyer is crucial. Maître Cécile Zakine, Doctor of Law and Attorney at the Paris Bar, offers you expert knowledge in international real estate law.
4.1. Negotiation and Securing the Sale
Before signing, we verify that the municipality has not exercised its DPU or has done so abusively. In the event of a pre-emption, we challenge the decision before the administrative court, relying on recent case law.
4.2. Tax Optimisation and Structuring
We advise you on the best holding structure (SCI, co-ownership) to minimise tax and facilitate transmission. We analyse the applicable tax treaties.
