Rural Pre-Emption Right: Acquiring a Farm in the Name of an Adult Child

You are a farmer in Bayonne, tenant of a rural farm for years. The owner tells you he is going to sell to a third party. You have a pre-emption right (priority to buy) to acquire the property. But you want your adult son, who wishes to set up as a farmer, to become the owner. Question : can you use your pre-emption right to buy directly in your child’s name, while benefiting from the tax exemption (tax reduction) provided for by Article 1373-sexies-C of the General Tax Code ? Until this 1971 decision of the French Supreme Court, doubt remained. The judges ruled in favour of the farmer, subject to conditions. Explanations.

The Facts : A Common Story

Mr. Dupont, a farmer in Bayonne, is a sitting tenant (lessee) of a rural farm – that is, he rents land with equipment and buildings. The owner, Mr. Martin, decides to sell the farm. Mr. Dupont then exercises his pre-emption right, a legal right allowing the tenant to buy the farm he farms as a priority. But Mr. Dupont wants to set up his adult son, Pierre, as farmer. Rather than buying himself and then reselling or giving, he acquires the farm directly in Pierre’s name. The tax authority then refuses the exemption from registration duties (sale taxes) provided for by Article 1373-sexies-C of the General Tax Code for acquisitions made under the pre-emption right. Why ? Because, in its view, the exemption only benefits the tenant farmer who buys for himself, not for a third party, even his child. Mr. Dupont challenges this. The case goes up to the French Supreme Court.

The Reasoning of the Court — Analysed

The French Supreme Court, in its judgment of 4 January 1971, rules in favour of Mr. Dupont. It interprets Article 1373-sexies-C of the General Tax Code (which provides for a tax exemption for the acquisition of a rural farm by the sitting tenant exercising his pre-emption right). This text imposes only one condition : the undertaking to farm the farm for at least five years. It does not say that the purchase must be made in the tenant’s own name. In other words, the legislator intended to promote the setting up of young farmers, whether the tenant or his adult child. The Court states that “the tax exemption granted to the tenant farmer who exercises his pre-emption right, either for personal farming or to set up an adult child, is only subject to the condition of the undertaking to farm the farm for a minimum period of five years and no legal provision prohibits the tenant exercising his right from proceeding by direct purchase on behalf of his adult son whom he is setting up.” In clear terms, the tenant can act as intermediary for his child, as long as the latter undertakes to farm. This is a teleological (based on the legislator’s intention) rather than literal interpretation. The judges refuse to add a condition that the text does not contain.

What This Changes for You — Concretely

For landlord owners : you cannot oppose the tenant using his pre-emption right to acquire in the name of his adult child. The sale is on the same terms. For tenant farmers : you can pass the farm on to your adult child without losing the tax advantage. Beware however : the child must undertake to farm personally for five years. If not, the exemption is revoked. Worked example : in Tarbes, a rural farm worth €200,000. Registration duties would be about €10,000 (5 %). Thanks to the exemption, you save this sum. For purchasers : if you are the child, you must be of age and capable of farming. But what exactly does this change ? It means you do not need to already be an owner to benefit from the favourable regime. Your parent’s pre-emption right benefits you directly.

Four Tips to Avoid This Type of Dispute

• Formalise the farming undertaking in writing : The adult child must sign a deed of undertaking to farm the farm for at least five years, to be annexed to the sale deed. This avoids any dispute with the tax authority.
• Check the status of sitting tenant : Only the tenant farmer can exercise the pre-emption right. Ensure the lease is current and that you are actually farming.
• Respect the pre-emption deadlines : The tenant has a period of two months from notification of the sale project to exercise his right. After this period, he loses priority.
• Consult a lawyer notary : Each region (Pyrénées-Atlantiques, Landes) may have local specificities. A professional will save you procedural errors.

In-Depth : Related Case Law and Developments

This 1971 decision is part of a line favourable to the setting up of young farmers. It was confirmed by later judgments, such as that of the French Supreme Court of 12 June 1973 (no. 71-14.210) which extends the same reasoning to the case where the tenant buys on behalf of an emancipated minor child. The trend of the courts is therefore liberal : the pre-emption right is a tool serving family farming. What few people know is that this case law influenced the legislator during the reform of the agricultural tenancy status in 2014, which relaxed the conditions for transfer. For the future, we can expect judges to continue to favour the setting up of young farmers, even if the tenant does not buy in his own name.

Summary and Next Steps

Here are the key points to remember :

• The sitting tenant can exercise his pre-emption right to buy a rural farm directly in the name of his adult child.
• The tax exemption (Article 1373-sexies-C of the General Tax Code) is preserved if the child undertakes to farm for five years.
• This solution has been validated by the French Supreme Court since 1971.

If you are in this situation : 1) Check your pre-emption right. 2) Have your child sign a farming undertaking. 3) Notify your intention to the owner within the deadlines. 4) Draft the sale deed with a notary mentioning the exemption. 5) Keep all supporting documents for the tax authority.

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