Lessee's Pre-emption Right v. Right of First Refusal: The Cour de Cassation Protects Public Policy

Imagine you are a landowner in Saint-Paul-lès-Dax. You own an agricultural plot leased to a farmer (agricultural tenant). A developer offers you a right of first refusal: you promise to offer the land to them first if you decide to sell. But the farmer has a statutory pre-emption right (priority to buy) under the Rural Code. What happens if you eventually sell to the farmer without respecting the right of first refusal? Can the developer demand annulment of the sale?

The Cour de cassation ruled on 11 January 2024: the farmer's pre-emption right is a matter of public policy (mandatory, cannot be contracted out). It prevails over any right of first refusal. The beneficiary of the right of first refusal can only obtain annulment of the sale if they prove a collusive arrangement between the seller and the farmer, i.e., a deliberate agreement to circumvent the right. The farmer's mere knowledge of the right of first refusal is not enough.

This decision clarifies a frequent conflict between contractual and statutory rights. It protects farmers, who are often in a weaker position, and prevents rights of first refusal from becoming blocking tools. But note: the aggrieved beneficiary can still claim damages. Let's examine the facts, the judges' reasoning, and what this means for you.

The facts: an everyday story

In 2014, a company, Castellamare, owner of several agricultural plots in Saint-Paul-lès-Dax, granted a right of first refusal to a property developer, Immobilière A. The agreement provided that if Castellamare decided to sell, it would first offer the plots to Immobilière A at a fixed price.

At the same time, these same plots were leased under an agricultural lease to a SCEA (agricultural business company), which farmed them. The SCEA was therefore a farmer (agricultural tenant) with a statutory pre-emption right under Articles L. 412-1 and following of the Rural and Maritime Fishing Code.

In August 2014, Castellamare sold the plots directly to the SCEA, without offering them to Immobilière A. The latter, furious, sued Castellamare and the SCEA to annul the sale and be substituted as buyer.

The lower court (court of appeal) ruled in favour of the developer: it annulled the sale, holding that the SCEA knew of the right of first refusal and the developer's intention to rely on it. In its view, this knowledge was sufficient to establish fraud. The SCEA and Castellamare appealed to the Cour de cassation.

On 11 January 2024, the Cour de cassation overturned the appeal decision. It recalled that the farmer's pre-emption right is a matter of public policy and prevails over the right of first refusal. Annulment of the sale can only be ordered if the beneficiary of the right of first refusal proves a collusive arrangement between the seller and the farmer, i.e., an agreement whose sole purpose was to defeat the right of first refusal. Mere knowledge of the right is not enough.

The court's reasoning — explained

The Cour de cassation relied on Articles L. 412-1 and L. 412-4 of the Rural and Maritime Fishing Code. Article L. 412-1 provides that the lessee (farmer) has a pre-emption right when rural property is put up for sale. Article L. 412-4 specifies that this right is a matter of public policy: it cannot be waived in advance by contract. In other words, the legislature intended to protect the farmer who works the land by giving them an absolute priority to buy, subject to limited exceptions.

On the other hand, a right of first refusal is a private contract by which one person promises another to offer them the first opportunity to buy. In principle, if the promisor sells to a third party in breach of the right of first refusal, the beneficiary can seek annulment of the sale or substitution (Article 1123 of the Civil Code). But this right is not absolute: it yields to public policy rights, such as the farmer's pre-emption right.

The Cour de cassation here strikes a clear balance. It says: the farmer's pre-emption right prevails. For the beneficiary of the right of first refusal to obtain annulment of the sale, they must prove a collusive arrangement, i.e., an agreement between the seller and the farmer to harm the beneficiary. This arrangement must be the sole reason for the sale. The farmer's mere knowledge of the right of first refusal is insufficient, otherwise the pre-emption right would be stripped of its public policy character.

This decision confirms earlier case law (e.g., Civ. 3e, 3 May 2018, No. 17-12.885): statutory pre-emption rights prevail over contractual rights. But it goes further by requiring a collusive arrangement, not mere knowledge. In doing so, it protects farmers against abusive claims by beneficiaries of rights of first refusal.

Note, however: the lower court was censured for requiring a collusive arrangement without actually finding one. The Cour de cassation remanded the case to another court of appeal, which must re-examine whether such an arrangement existed. But the message is clear: fraud must be proved, not presumed.

What this means for you — practical consequences

If you are a landlord in Saint-Paul-lès-Dax or Mimizan: you can sell to your farmer without fear of automatic annulment, even if you have signed a right of first refusal. But beware: if you collude with the farmer to circumvent the right of first refusal, you risk damages. Concrete example: you promised a developer you would sell them a 5-hectare plot in Mimizan for €150,000. Your farmer exercises their pre-emption right at the same price. You sell to the farmer. The developer cannot annul the sale unless they prove you and the farmer concocted a scheme to exclude them. In practice, this is very difficult to prove.

If you are a farmer (agricultural tenant): you are protected. You can exercise your pre-emption right without fear that the beneficiary of a right of first refusal will have the sale annulled, unless you participated in fraud. Few people know: your pre-emption right must be exercised within two months of receiving notice of the sale. If the landlord does not notify you, you can seek nullity.

If you are the beneficiary of a right of first refusal: you cannot rely on annulment of the sale if the farmer pre-empts. However, you can claim damages from the seller for breach of the right of first refusal (e.g., loss of a chance to make a profit). In a recent case, a developer obtained €20,000 in damages for breach of a right of first refusal but could not recover the land.

If you are a property professional (notary, agent): you must inform your clients of the risks. When agricultural land is leased, the farmer's pre-emption right prevails. If a right of first refusal exists, it cannot be enforced against the farmer. It is better to advise the beneficiary of the right of first refusal to negotiate a break fee or to acquire the property at the time of signing the right of first refusal, if possible.

Four tips to avoid this type of dispute

• Tip 1: Before signing a right of first refusal on agricultural land, check whether there is an agricultural lease. The farmer's pre-emption right will make the right of first refusal virtually unenforceable. If the land is leased, consider a conditional promise to sell subject to the farmer's waiver.
• Tip 2: If you are a landlord and wish to sell to a third party, first notify your farmer of your intention to sell, with the price and conditions. This triggers their pre-emption right. If they waive it, you are free. Otherwise, the sale to a third party will be void.
• Tip 3: As a beneficiary of a right of first refusal, if you learn that the landlord is selling to the farmer, do not rush to seek annulment. Current case law requires a collusive arrangement. Focus on proving collusion (exchanges, witness statements, documents). Otherwise, claim damages.
• Tip 4: Draft the right of first refusal with a deterrent penalty clause. For example, a lump sum indemnity equal to 10% of the price in case of breach. This will encourage the seller to respect the right of first refusal, even if annulment is excluded.

Further reading: related case law and developments

This decision is consistent with a steady line of case law from the Cour de cassation. Earlier, in a judgment of 3 May 2018 (No. 17-12.885), it held that the farmer's pre-emption right prevails over a right of first refusal. However, the Court then required the beneficiary to prove an intention to harm on the part of the seller and the farmer. In 2024, it clarifies that this intention must manifest as a collusive arrangement, a more stringent concept.

In contrast, in the context of residential leases, the Cour de cassation takes a different approach: the tenant's pre-emption right (Law of 6 July 1989) is not a matter of public policy and can be excluded by a right of first refusal (Civ. 3e, 12 February 2020, No. 18-26.224). This highlights the specificity of agricultural law, where farmer protection is stronger.

Looking ahead, we can expect beneficiaries of rights of first refusal to try to prove collusive arrangements more systematically. Courts will need to examine indicators of collusion on a case-by-case basis. Notaries must be vigilant when selling agricultural land.

Key takeaways

FAQ: 5 questions and answers

• Q: Can the farmer exercise their pre-emption right even if a right of first refusal exists? A: Yes, because their right is a matter of public policy and prevails.
• Q: Can the beneficiary of the right of first refusal annul the sale? A: Only if they prove a collusive arrangement between seller and farmer. The farmer's mere knowledge of the right of first refusal is insufficient.
• Q: What can the beneficiary of the right of first refusal obtain? A: Damages for breach of the right of first refusal, but not annulment of the sale or substitution.
• Q: How can a collusive arrangement be proved? A: By evidence of collusion: written exchanges, witness statements, suspicious timing. Example: the seller and farmer met just before the sale to arrange the exclusion of the beneficiary.
• Q: What should I do if I am a beneficiary of a right of first refusal and learn of an imminent sale to the farmer? A: Apply for interim measures (freezing injunction) and bring a claim for damages. Consult a lawyer without delay.

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