Municipal pre-emption right and simultaneous sale of land and a building lease

Imagine: you are the owner of a plot of land in Fleury-les-Aubrais, and you have granted a building lease to a company. Today, you want to sell the land, and the lessee wants to sell its lease. But the municipality wants to pre-empt. Can it also interfere with the lease? A crucial question for any seller or buyer.

The Court of Cassation has ruled: the municipal pre-emption right (the right for the municipality to buy a property first when it is put up for sale) cannot extend to a building lease. Even if the sale of the land and the lease is simultaneous, the municipality cannot pre-empt the lease. And the notary does not have to include a clause of joint and several liability between the sellers if it is unenforceable against the municipality.

A decision that secures complex property transactions, but requires careful drafting of deeds. Analysis.

The facts: a story that happens every day

A professional civil company (the SCP) owns several plots of land, notably in Montargis. On one of them, another company, the Compagnie industrielle et électronique du Nord (CIEN), holds a building lease. A building lease is a contract by which the lessee (the tenant) undertakes to build on the land and to lease it for a long term (often 18 to 99 years). Here, both companies wish to sell their rights: the SCP sells the land, and the CIEN assigns its building lease. Both simultaneously, i.e., at the same time.

But the municipality of Montargis decides to exercise its urban pre-emption right (DPU) over the land. The DPU allows the municipality to buy a property put up for sale in priority, to carry out development or public interest operations. The municipality notifies its decision to the notary in charge of the sale. But it cannot pre-empt the building lease, because the DPU only applies to land, not to personal rights such as a lease. As a result, the sale of the lease must be done separately, without the municipality's involvement.

Problem: the two sellers wanted a "linked" sale, i.e., the buyer had to purchase both the land and the lease. But the municipality, by pre-empting the land, thwarts this intention. The initial buyer ends up with the lease alone, without the land. He sues the sellers and the notary, claiming they failed to provide a clause of joint and several liability that would have obliged the municipality to pre-empt the whole. The Court of Appeal of Saint-Denis-de-la-Réunion dismisses the buyer, and the Court of Cassation confirms.

The reasoning of the court — analysed

The Court of Cassation relies on Article L. 213-1 of the Planning Code (in its version then in force), which defines the scope of the pre-emption right. This article provides that the DPU applies to "immovable property" and "immovable rights". However, a building lease is not an immovable right within the meaning of this text, but a personal right (a contract). The Court concludes that the municipality cannot pre-empt the lease, even if the sale of the land and the lease is simultaneous. In other words, the DPU cannot extend to what is not immovable property.

But then, what about the sellers' intention to sell together? The Court answers that this intention is unenforceable against the municipality: the municipality does not have to respect a condition of "joint and several liability" that the sellers have agreed between themselves. The notary, responsible for drafting the deeds, therefore does not have to include this condition in the declaration of intention to alienate (DIA) sent to the municipality. If the municipality pre-empts the land, the seller of the lease is free to sell it to another buyer.

The Court specifies that the notary did not commit any fault by not mentioning the joint and several liability. Indeed, such a mention would have been useless, even misleading, since the municipality could not have pre-empted the lease. The judges therefore reject the claim for damages by the evicted buyer.

This decision confirms previous case law (e.g., Civ. 3e, 19 March 1997, No. 95-15.875) according to which the pre-emption right can only apply to real immovable rights, not to personal rights. It is therefore not a revolution, but it clarifies the fate of "linked" sales.

What this changes for you — practically

For owner-lessors: if you own land subject to a building lease, and you wish to sell the land, know that the municipality can pre-empt the land without touching the lease. But be careful: if the lessee also wants to sell its lease, it can do so freely, even if the municipality pre-empts. You are not obliged to sell together, but if you want to do so, you must draft a clause of joint and several liability in the promise to sell, specifying that it only applies in the absence of pre-emption. Advice: provide for a resolutory condition (cancellation of the sale if the lease is not assigned at the same time).

For building lease holders: if you hold a building lease and wish to assign your right, you can do so without fear of municipal pre-emption. But check that the lease contract does not include an approval clause (owner's consent) or a pre-emption right in favour of the owner.

For buyers: if you want to buy both a plot of land and a building lease, ensure that the promise to sell includes a suspensive condition: the sale of the land must be completed for the assignment of the lease to be effective. Otherwise, you risk ending up with a lease on land you do not own. Example with figures: in Montargis, a 500 m² plot with a 20-year building lease may be worth €100,000 for the land and €30,000 for the leasehold right. If the municipality pre-empts the land, you lose the land but still have to pay €30,000 for the lease? Don't panic: a good clause protects you.

For notaries: this decision confirms that you do not have to include a condition of joint and several liability in the DIA if it is unenforceable against the municipality. But you must inform your clients of the risks and offer them appropriate clauses.

Four tips to avoid this type of dispute

• Draft a promise to sell with suspensive conditions. If you want to sell or buy a package of land + lease, provide that the sale of the land and the assignment of the lease are interdependent. For example: "This sale is concluded under the suspensive condition of the completion of the assignment of the building lease to the buyer." If the municipality pre-empts the land, the condition is not fulfilled and the sale of the lease is cancelled.
• Do not include joint and several liability in the DIA. The declaration of intention to alienate sent to the municipality should only mention the property subject to pre-emption (the land). Do not mention the lease, as this could create confusion and suggest that the municipality can pre-empt the lease.
• Check the content of the building lease. Some leases contain a pre-emption clause in favour of the owner or an approval clause. If you are a lessee and want to assign your lease, check these clauses. If you are the owner, you can negotiate such a clause to control the assignment.
• Consult a specialist lawyer before any transaction. Sales involving building leases are complex. A lawyer will help you draft the deeds and anticipate the municipality's reactions. Do not neglect this step, especially if the land is in an area where the municipality is active (such as Fleury-les-Aubrais, where the DPU is often used).

Further reading: related case law and developments

The Court of Cassation has already ruled on pre-emption rights and leases. In a judgment of 19 March 1997 (No. 95-15.875), it held that the pre-emption right cannot be exercised over a commercial lease, because it is a personal right. The same logic applies here to building leases. This case law is consistent: only real immovable rights (ownership, usufruct, easement) are subject to pre-emption.

More recently, the ALUR law of 2014 extended the scope of the DPU to certain emphyteutic leases (very long leases of 18 to 99 years) under specific conditions. However, building leases are not affected. Therefore, the solution remains valid today.

However, note: if the building lease is registered in the land registry (it can be published), could it be considered an immovable right? No, the case law distinguishes: land registration does not make it a real right. The building lease remains a personal right, even if published.

For the future, courts may need to clarify the concept of "linked sale." If sellers draft a very clear joint and several liability clause (e.g., "the sale of the land and the assignment of the lease are indivisible"), could the municipality be forced to pre-empt the whole? Probably not, because the DPU is a matter of public policy and cannot be circumvented by a contractual clause. But the question remains open.

In practice: what to do

FAQ: 5 practical questions

• Can I sell my land with a building lease without the municipality pre-empting the lease? Yes, the municipality can only pre-empt the land. The lease can be assigned separately.
• What if I want to buy both the land and the lease together? Demand a promise to sell with a suspensive condition: the purchase of the land is linked to the assignment of the lease. If the municipality pre-empts the land, the sale of the lease is cancelled.
• Does the notary have to mention the lease in the DIA? No, unless the lease is an immovable right (which it is not). Only mention the land.
• What are the time limits? The municipality has 2 months from receipt of the DIA to exercise its pre-emption right. After that period, the sale is free.
• What is the cost of a lawyer consultation? An initial analysis of your situation may cost between €150 and €300. But it can save you a dispute worth several thousand euros.

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