Right of Pre-emption and Estate Agency Commission: Who Pays When the Local Authority Steps into the Buyer's Shoes?

Imagine: you own a flat in Villeneuve-d'Ascq, you put it up for sale through an estate agency. A buyer comes forward, you sign a preliminary contract, everything is fine. But then the municipality of Villeneuve-d'Ascq decides to exercise its urban pre-emption right: it steps into the buyer's shoes to acquire the property. The question that then arises is simple: who pays the agency commission? You? The municipality? And if the agency has done a poor job, can the judge reduce its fee?

This is exactly what the French Supreme Court had to decide in a case that pitted a property company against the local land development authority. A question that may seem technical, but has very concrete consequences for your wallet. Because in these situations, every euro counts.

In this article, I will explain this decision of 14 December 2017 (No. 16-20.150) clearly, without unnecessary jargon. You will understand who must pay the commission, and above all, what you can do if you face a similar dispute. So, ready to dive into the behind-the-scenes of planning law?

The facts: a story that happens every day

Mr. X, owner of a property in Comines, in the Nord region, decides to sell his property. He signs a sole agency agreement with an estate agency, which quickly finds a buyer. A preliminary contract is signed, including a clause providing that the agency commission (€10,000) will be payable by the buyer. But the municipality of Comines, which has an urban pre-emption right in the area, decides to exercise this right: it steps into the shoes of the initial buyer.

Problem: the municipality refuses to pay the agency commission, arguing that it is excessive and that the agency did not properly fulfil its mission. The agency then sues the municipality before the expropriation judge to obtain payment of its commission. The municipality, for its part, asks the judge to reduce the commission due to faults committed by the agency.

The Lille High Court (as the expropriation judge is a specialised judge) rules in favour of the municipality and reduces the commission to €5,000. The agency appeals. The Douai Court of Appeal upholds the reduction. The agency then appeals to the Supreme Court. The question put to the Supreme Court is twofold: is the expropriation judge competent to determine whether the municipality is liable to pay the commission? And can it reduce this commission because of faults by the agency?

A real judicial saga that lasted several years, and finally reached its conclusion on 14 December 2017.

The reasoning of the court — broken down

The Supreme Court, in its judgment of 14 December 2017, gave a nuanced but clear answer. It first recalled the principle: when the body exercising its right of pre-emption steps into the buyer's shoes, it is liable to pay the estate agent's fee. Why? Because the municipality or public body takes over the rights and obligations of the buyer, as they result from the preliminary contract. Article L. 213-2 of the French Planning Code (the text governing the right of pre-emption) provides that the holder of the right of pre-emption 'is subrogated to all the rights and obligations of the buyer'.

But the Court goes further: it specifies that the expropriation judge is competent to determine, based on the information contained in the parties' undertaking and in the declaration of intention to alienate, whether the body is liable to pay the commission. However, it is not competent to reduce or cancel this fee having regard to faults that the agency may have committed in the performance of its mission. Why? Because the expropriation judge is a specialist judge in fixing expropriation compensation, not a contract judge. Any faults of the agency fall under general contract law and must be brought before the ordinary civil judge (judicial court, civil chamber).

In this case, the Court of Appeal had erred in reducing the commission for fault of the agency. The Supreme Court therefore quashes the judgment on this point, but confirms that the municipality is indeed liable to pay the commission, unless it can show that the agency did not comply with its contractual obligations. Caution: the Court does not say that the agency did a good job; it simply says that it is not for the expropriation judge to decide this.

This decision is a confirmation of previous case law (notably a judgment of 9 June 2016, No. 15-18.376). It does not create a reversal, but it clarifies the limits of the expropriation judge's jurisdiction.

What this changes for you — concretely

Concretely, this decision has implications for several actors:

• For the seller-owner: you are not directly concerned by the payment of the commission, since it is the buyer (or the municipality that steps in) who pays it. But caution: if the municipality refuses to pay, the agency could turn against you, because you are bound by the agency agreement. Check that your agency agreement clearly states that the commission is payable by the buyer, and that you have no obligation to pay it in the event of pre-emption.
• For the buyer (or the municipality that pre-empts): you must pay the agency commission if it was provided for in the preliminary contract. You cannot ask the expropriation judge to reduce it, even if the agency was negligent. To challenge the commission, you must bring an action before the judicial court (civil judge) for contractual liability. Deadline: 5 years from the signing of the preliminary contract.
• For the estate agency: you have the guarantee that the municipality must pay the commission if it steps into the buyer's shoes. But caution: if you commit a fault (e.g., failure to inform, negligence in viewings), the municipality can sue you before the civil judge for damages, which could amount to a reduction in commission.

A concrete example: in Comines, if the agreed commission is €8,000 for a property sold for €200,000, the municipality will have to pay these €8,000, even if the agency forgot to mention an apparent defect in the property. To obtain a reduction, the municipality must prove the agency's fault and the loss suffered (e.g., a decrease in the property's value).

Four tips to avoid this type of dispute

• Draft a precise agency agreement: clearly state that the agency commission is payable by the buyer, and specify the amount and payment terms. This will avoid any ambiguity in the event of pre-emption.
• Keep all documents relating to the sale: preliminary contract, agency agreement, declaration of intention to alienate, exchanged correspondence. In the event of a dispute, these documents will be essential to determine who should pay what.
• If you are a local authority that pre-empts, do not refuse to pay the commission without a solid reason: you risk being ordered to pay, with late payment interest. If you believe the agency has committed a fault, bring a separate action before the judicial court.
• If you are a property owner in Villeneuve-d'Ascq and you are selling through an agency, find out about the pre-emption right applicable in your municipality: some municipalities have specific rules. Ask the planning department.

Further reading: related case law and developments

This decision is part of a consistent line of case law. Already, in a judgment of 9 June 2016 (No. 15-18.376), the Supreme Court had ruled that the expropriation judge was competent to assess the existence of the obligation to pay the commission, but not to reduce its amount due to faults. More recently, a judgment of 12 July 2018 (No. 17-20.724) confirmed this position, even specifying that the expropriation judge cannot modulate the commission based on the actual usefulness of the service provided.

The trend is therefore clear: the expropriation judge is a compensation judge, not a contract judge. The separation of jurisdictions is strict. This means that local authorities cannot hope to obtain a reduction in commission before this judge, even if the agency did a poor job. They must bring a separate procedure, which lengthens delays and costs.

For the future, we can expect estate agencies to be more vigilant in the performance of their mission, as they know they risk liability if they commit a fault. But in the meantime, the rule is clear: the commission owed by the buyer (or the pre-emptor) cannot be challenged before the expropriation judge.

Checklist before acting

• You are a seller-owner: check that your agency agreement stipulates that the commission is payable by the buyer. If not, renegotiate with the agency.
• You are a body that pre-empts: before signing the conveyance deed, check the preliminary contract for the amount of the agency commission. If you consider it excessive, you can try to negotiate with the agency, but know that if you refuse to pay, you risk a lawsuit.
• You are an estate agency: if the municipality pre-empts and refuses to pay your commission, apply to the expropriation judge for payment. Do not wait: the limitation period is 5 years from the signing of the preliminary contract.
• In case of fault by the agency: if you believe the agency did a poor job, do not ask the expropriation judge to reduce the commission. Bring an action before the judicial court for damages. Caution: you must prove the fault and the loss.

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