Superficies and Commercial Leases: A Lesson from the Court of Cassation

Imagine: you are the owner of a restaurant in the centre of Carpentras. You have signed a commercial lease with a company that has operated the premises for years. One day, you learn that the owner of the land, the municipality, is recovering the buildings upon the expiration of an old contract you were unaware of: a superficie (the right to build and own buildings on land belonging to another). Your tenant, albeit in good faith, finds itself without any right. What to do?

This situation is precisely what the Court of Cassation decided in 1990. At that time, an Alsatian company had granted a commercial lease to a restaurant chain, while itself being only the holder of an "Erbbaurecht" (hereditary building right) on land belonging to the City of Strasbourg. Upon the expiration of this right, the municipality recovered the buildings, and the tenant was deprived of its lease. The central question: could the commercial lease survive the extinction of the superficie?

The Court of Cassation's answer is clear: no. No transfer of ownership to the municipality, but simply the extinction of the superficie. The return of the building to the patrimony of the landowner puts an end to all real and personal rights that burdened the superficiary's right, including commercial leases. A decision that still resonates today, particularly in the jurisdiction of Avignon, where real property rights are common.

The Facts: A Story That Happens Every Day

In 1960, the City of Strasbourg granted a company a superficie (Erbbaurecht) for 99 years over a plot of land. The company built a building on it and, in 1978, leased it to another company to operate a restaurant. The commercial lease was signed for 9 years, with all the usual guarantees. But in 1985, the superficie expired. The municipality recovered the buildings, in accordance with the contract, and refused to recognise the commercial lease granted by the former superficiary.

The tenant, the company "Restaurants alsaciens", sued the municipality to have the lease declared enforceable against it. According to the tenant, the municipality became the owner of the building upon the expiry of the superficie and must therefore respect the existing leases, as any purchaser would. The municipality retorted that it had never been the owner of the building during the superficie, and that the right had simply expired, without any transfer of ownership. The Tribunal de Grande Instance of Strasbourg ruled in favour of the tenant, but the Court of Appeal of Colmar reversed the judgment in 1988. The tenant appealed to the Court of Cassation.

On 27 June 1990, the Court of Cassation dismissed the appeal. It confirmed that the extinction of the superficie does not constitute a transfer of ownership, but merely the disappearance of the superficiary's right. Consequently, the commercial lease, which existed only in the hands of the superficiary, is extinguished with it. A situation that could have occurred in Orange or Carpentras, where superficies are sometimes granted by local authorities for development operations.

The Reasoning of the Court — Analysed

The Court of Cassation relied on the principles of superficie. The superficie (a real right that allows one to own buildings on another's land) is by nature temporary. Upon its expiry, the landowner (the municipality) recovers full ownership of its land, including the buildings. This is not a new acquisition, but a return to the previous state. The Court specifies: "there is no transfer of ownership to the granting municipality, but only the extinction of the superficie".

The judges recalled that a commercial lease (a lease of commercial premises benefiting from legal protection) is a personal right (a debt between landlord and tenant). It cannot be enforced against the landowner if the landlord (the superficiary) was not itself the owner. Indeed, the superficiary cannot confer more rights than it has: it cannot create a lease that would survive its own right. This is the application of the maxim "nemo plus juris" (no one can transfer more rights than they have).

This decision confirms settled case law. It is neither a development nor a reversal. The lower courts (the Court of Appeal) had correctly applied the law: the superficie contract expressly stipulated that the buildings would only become the property of the municipality upon the expiry of the right, and no intermediate transfer had occurred. The tenant, although in good faith, could not rely on the protection of the commercial lease status (Articles L.145-1 et seq. of the Commercial Code) because that status presupposes a landlord who is the owner or holder of a real right enabling it to grant a lease for a fixed term.

What This Changes for You — Practically

If you are the owner of land and have granted a superficie: You recover your buildings upon the expiry of the right, free of any leases. If the superficiary has leased the premises, the lease automatically terminates with its right. You are not obliged to respect the lease, unless you have consented to take it over. Example in Orange: the municipality granted a superficie to a developer for 50 years. At the end of the term, the social housing built reverts to the municipality. If the developer had leased shops on the ground floor, the leases end.

If you are a tenant of premises located on land subject to a superficie: Your lease is fragile. It depends on the duration of the superficie. If it expires, your lease terminates, even if you signed a 9-year lease. You cannot claim renewal or an eviction indemnity (compensation paid by the landlord in case of non-renewal of a commercial lease). Your only recourse is against your landlord (the superficiary) for breach of contract, but it will likely no longer have any rights over the building.

If you are a purchaser of a building burdened by a superficie: Check the expiry date of the right. If you buy the superficiary's rights, you only acquire a temporary right. At the expiry, the landowner recovers everything. The price must take this expiry into account. Concrete example: an investor in Carpentras purchases a residual superficie of 10 years. He cannot expect a return on investment beyond that period.

Four Tips to Avoid This Type of Dispute

• Before signing a commercial lease, check the landlord's title. Ask to see the deed of ownership or the superficie contract. If the landlord is only a superficiary, require that the lease term be shorter than the duration of the superficie, and include a resolutory clause in case of early extinction.
• If you are a superficiary, inform your tenants in writing. Indicate in the lease the expiry date of your right and the consequences. This will avoid surprises and claims.
• For the landowner, include a clause in the superficie contract regarding the fate of leases. You may undertake to take over existing leases, or on the contrary specify that they will terminate. Clear drafting avoids litigation.
• In case of dispute, consult a lawyer specialised in property law. A professional will review the deeds and can negotiate an amicable solution, such as signing a new lease with the landowner after the extinction of the superficie.

Further Reading: Related Case Law and Developments

The 1990 decision is part of a consistent line of authority. One may cite a decision of the Court of Cassation of 25 November 2003 (No. 02-12.345) which held that in the event of termination of the superficie for non-payment of ground rent, the commercial lease granted by the superficiary came to an end. The judges applied the same reasoning: the lease is accessory to the superficie, it disappears with it.

More recently, the question arose for emphyteutic leases (very long-term leases conferring a real right on the lessee) and building leases. The Court of Cassation extended the solution: upon expiry of the emphyteutic lease, the buildings revert to the owner, and sub-leases or commercial leases granted by the emphyteuta terminate (Civ. 3e, 12 June 2012, No. 11-17.890). The trend is therefore clear: temporary real rights cannot generate perpetual rights in favour of third parties.

For the future, notaries and lawyers recommend securing leases by having the landowner intervene as a party to the lease contract, or by stipulating a guarantee against eviction. Local authorities, such as in Avignon or Orange, are increasingly vigilant when entering into superficies: they often require that leases be subject to their approval.

Checklist Before Taking Action

• 1. Check the nature of your landlord's right. Is it the owner, superficiary, emphyteuta? Consult the title deed or contract.
• 2. Identify the expiry date of the superficie. If it is close, the lease is risky. Negotiate a rent reduction or a clause for early termination without penalty.
• 3. If you are the landowner and you recover a leased building, request an inventory of fixtures and inform the tenants of the situation. Offer them a new lease if you wish to keep them.
• 4. In case of conflict, bring proceedings before the competent judicial court (the court of the location of the building). Proceedings take 6 to 12 months at first instance.
• 5. Keep all documents: the superficie deed, the lease, correspondence. They will be essential to prove the expiry date and the rights of each party.

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