Urban Pre-emption Right: What to Do If the Seller Refuses My Price?

Imagine: you own a small building in Villefranche-sur-Mer, with a view of the bay. You receive a letter from the town hall informing you that it is exercising its right of pre-emption over your property, which you were about to sell to a private individual. So far, nothing unusual: the municipality has the right to pre-empt to carry out a project of general interest. But the price proposed by the local authority seems derisory. What to do? Refuse? Accept under duress?

The question that every owner faced with a pre-emption asks is simple: "Can I challenge the price proposed by the municipality?" The answer, in common law, is yes, but the procedure can be complex. And if the municipality refuses your offer at a higher price, who do you turn to?

This decision of the Court of Cassation, handed down on 1 December 2010, provides a clear answer for the particular case of the archipelago of Saint-Pierre-et-Miquelon, but its reasoning informs all owners and local authorities on the mechanism for judicial determination of the pre-emption price. In other words, when the seller and the pre-emptor cannot agree on the amount, the expropriation judge decides. But beware: this solution is not automatic everywhere, and it all depends on the local planning regulations.

The facts: a story like any other

Mr X, owner of a plot of land in Saint-Pierre-et-Miquelon, decides to sell it. He receives a purchase offer from a private individual. But the municipality, which has a right of pre-emption under the local planning regulations, decides to substitute itself for the buyer and pre-empt the property. In accordance with Article 36 of these regulations, it notifies its price to the seller. Mr X considers this price too low and refuses. The municipality, rather than giving up, applies to the competent court in expropriation matters to set the price.

The seller challenges the jurisdiction of the expropriation judge. He argues that the local planning regulations, which provide in the event of the seller's refusal that "the holder of the pre-emption right shall have the value of the property fixed by the court having jurisdiction in expropriation matters," do not lay down any procedural provisions. However, according to him, the expropriation code does not automatically apply. The case goes up to the Court of Cassation.

The twist? The Court of Cassation rules in favour of the municipality. It holds that, since the local regulations refer to the court having jurisdiction in expropriation matters, the procedural rules of that court apply, in the absence of contrary provisions. In short, the expropriation judge has jurisdiction and must apply his own procedural code.

The reasoning of the court — dissected

The judges' reasoning is both simple and formidable. The Court of Cassation relies on Article 36 of the local planning regulations of Saint-Pierre-et-Miquelon, which provides: "In the event of refusal by the seller of his offer to purchase at the price he determines, the holder of the pre-emption right shall have the value of the property fixed by the court having jurisdiction in expropriation matters."

This text, although local, lays down a general principle: the expropriation judge is the only one competent to set the price in the event of disagreement. But the procedural question remained unresolved: which procedural rules must this judge follow? The expropriation code (which governs expropriations for public utility purposes) or the planning code (which governs pre-emptions)?

The Court of Cassation answers: "in the absence of a contrary provision, [this leads] to the application of the procedure specific to that court resulting from the expropriation code". In other words, the expropriation judge applies his own procedural code, not that of the planning code. This is not a change, but a confirmation of a solution already accepted in common law: when the expropriation judge is seised for a pre-emption price determination, he follows his own procedure.

What few people know is that this solution is not universal. In mainland France, the planning code provides specific rules for determining the pre-emption price (Articles L. 213-1 et seq.). But here, the local regulations derogated from the planning code, which justified the application of the expropriation code. In other words, it all depends on the applicable local regulations.

What this means for you — practically

For owners: if you receive a pre-emption offer at a price you consider insufficient, you can refuse. But beware: generally, you have a period of two months to accept or refuse the proposed price. If you refuse, the local authority seises the expropriation judge (under the conditions provided by the local regulations). You will then have to defend yourself before that judge, with a lawyer. Example: in Antibes, a building plot estimated at €300,000 by the seller, but pre-empted at €200,000 by the municipality. The seller refuses. The municipality seises the expropriation judge. The judge may set the price at €250,000, with legal fees borne by each party.

For local authorities: this decision gives them a clear procedural framework. They can exercise their right of pre-emption safely, knowing that the expropriation judge is competent to set the price in the event of a deadlock. But they must check their local regulations: if they do not expressly refer to the expropriation judge, the procedure will be that of the planning code.

If you are a buyer ousted by the pre-emption, you are not without remedy: you can challenge the pre-emption decision itself (for lack of general interest, for example) before the administrative court. But on the price, you have no say, because the dispute is between the seller and the municipality.

Four tips to avoid this type of dispute

• Read the local planning regulations (PLU or equivalent document) carefully. It often contains specific provisions on the right of pre-emption. If you are an owner, find out before putting your property up for sale. If you are a local authority, ensure your regulations are consistent with the planning code.
• Negotiate before refusing. If the proposed price seems low, contact the town planning department of the municipality. Sometimes a simple discussion can lead to an agreement without going to court. undefined, I have come across cases where an amicable expert appraisal saved time and money.
• Keep all documents. Letters, offers, notifications, property valuations. In case of a dispute, you will need to prove the value of your property. An appraisal by a professional (estate agent, notary) can make a difference.
• Consult a lawyer as soon as you receive the pre-emption offer. Deadlines are short (generally two months to accept or refuse). A lawyer specialising in property law can analyse the legality of the pre-emption and advise you on the strategy to adopt.

Further reading: related case law and developments

This decision is part of a line of consistent case law. The Court of Cassation had already held, in a judgment of 13 December 2005 (No. 04-15.676), that the expropriation judge had jurisdiction to set the pre-emption price when the local regulations so provided. Here, it confirms and clarifies that the applicable procedure is that of the expropriation code.

Conversely, the Conseil d'État, in a decision of 22 June 2009 (No. 305082), recalled that the legality of the pre-emption decision falls within the jurisdiction of the administrative court, while the determination of the price falls within the jurisdiction of the judicial court. This division of jurisdiction is now well established.

For the future, the trend is towards harmonisation of procedures. The planning code has been reformed several times to simplify the right of pre-emption. But overseas local authorities retain specificities, as this case shows. Owners must therefore be vigilant as to the applicable local law.

In practice: what to do

FAQ:

• Can I refuse the price proposed by the municipality? Yes, but only within two months of notification of the offer. After that, you are deemed to have accepted.
• What happens if I refuse? The municipality may seize the expropriation judge to set the price. You will then have to defend yourself before that judge with a lawyer.
• How much does a price determination procedure cost? Legal fees vary depending on complexity. Expect between €2,000 and €5,000 for a simple procedure. Expert appraisal costs (if ordered) are generally borne by the local authority.
• Can I challenge the pre-emption decision itself? Yes, before the administrative court, if you consider that the pre-emption is not justified by a sufficient general interest.
• What is the time limit for action? To challenge the pre-emption decision, you have two months from its notification. For the price determination, the time limit is provided by the local regulations (often two months after the refusal).

Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.

In summary, if you are an owner and receive a pre-emption offer, do not take it lightly. A poorly managed refusal can cost you dearly, but a hasty acceptance can too. Get assistance.

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