Fruit-bearing building: what the Court of Cassation decided in 2009

Imagine: you own a small building in Borgo, which you have rented to a shopkeeper for years. One day, you learn that the business goodwill operated there has been sold without your being consulted, and that the sale price includes, in your view, part of the value of your building. You wonder: who is entitled to the rents? Who can sell the goodwill? And above all, what are your rights over the income generated by your property?

This question, although simple in appearance, divided the courts until the Court of Cassation provided a clear answer in a judgment of 29 April 2009. It ruled: a building capable of being leased or generating income is a fruit-bearing thing by nature. In other words, the rents it generates are fruits that belong to the person entitled to receive them – usually the usufructuary, not the bare owner.

This decision, rendered in a complex case involving judicial liquidation, sale of business goodwill and interpretation of a preliminary contract, has concrete repercussions for all real estate players. Analysis.

The facts: a story like many that happen every day

Mr X, an owner in Borgo, had leased his building to a shopkeeper who operated a business goodwill there. A few years later, the tenant was placed in judicial liquidation. The liquidator then instructed an expert to estimate the value of the goodwill, and sold it at auction. According to Mr X, the sale price included part of the value of the building itself, because the goodwill was inseparable from the premises. Mr X contested the sale and sought annulment of the preliminary contract signed between the liquidator and the buyer.

The commercial court, then the court of appeal, dismissed his claim. They considered that the preliminary contract had been validly confirmed and that there had been no irregular notice to pay. Mr X appealed to the Court of Cassation. He argued that the building, being fruit-bearing (i.e. generating income), the rents belonged to him and that the sale of the goodwill could not be carried out without his consent.

The Court of Cassation quashed the appeal judgment. It held that the lower court judges had not sufficiently examined whether the building was fruit-bearing by nature, which could have changed the distribution of fruits (rents) between the owner and the tenant or the liquidator. The case was remitted to another court of appeal.

The reasoning of the court — broken down

The Court of Cassation relies on Article 547 of the Civil Code, which provides that the fruits of a thing belong to its owner, subject to exceptions. The concept of fruit is central here: a fruit is what a thing produces periodically without its substance being diminished. For a building, rents are civil fruits (as opposed to natural fruits, such as harvests).

The high court specifies that as soon as a building is capable of being leased, it is fruit-bearing by nature, regardless of whether it is actually leased or not. This means that the mere potential for rental is sufficient to qualify it as such. This reasoning is in line with settled case law: the Court of Cassation had already ruled in 2007 that a leased building produces civil fruits (Civ. 3e, 7 March 2007, No. 05-21.809).

In this case, the Court criticises the appeal judges for not having investigated whether Mr X's building was fruit-bearing. If it were, the rents received by the liquidator should have been returned to Mr X, and the sale of the goodwill, which implicitly included the enjoyment of the premises, could have been challenged. The decision is not a reversal, but a confirmation and clarification: the fruit-bearing nature of a building is a question of fact that judges must systematically examine.

What this changes for you — concretely

For the owner landlord: You are entitled to the rents, even if your building is in co-ownership or if a third party manages the property. In the event of a sale of the goodwill, the price must not include the value of the building. If you are a usufructuary, you receive the fruits (rents). If you are a bare owner, you are not entitled to them as long as the usufruct lasts. Example: in Lucciana, an owner of a rental building worth €200,000 receiving €1,200 per month in rents must know that these rents are fruits belonging to him. If the tenant goes bankrupt, the liquidator cannot sell the goodwill including the rental value.

For the tenant or buyer: If you buy a business goodwill, check that the seller holds the right to the lease and that the owner has been informed. Otherwise, you may have to return the rents wrongly received. A recent example: a shopkeeper in Borgo bought a goodwill without checking the lease; he had to pay two years' rent to the owner, i.e. €28,000.

For the co-owner: Lots used for rental are fruit-bearing. In the event of division of ownership (usufruct/bare ownership), the usufructuary is entitled to the rents. If you sell your bare ownership, the price will take account of this absence of fruits.

Four tips to avoid this type of dispute

• Have a written and compliant lease drawn up: A precise rental contract, mentioning the fruit-bearing nature of the building, will protect you in the event of a dispute. Clearly state who receives the rents and under what conditions.
• Check the situation of the goodwill before buying: Consult the trade register, ask the owner for an affidavit of non-opposition to the assignment of the lease. If in doubt, consult a lawyer.
• If your tenant is in judicial liquidation, declare your claim: Unpaid rents are fruits that belong to you. Declare them to the judicial representative within two months of publication of the judgment.
• If you are a usufructuary, demand payment of rents directly: You can ask the tenant to pay you the rents, even if the bare owner previously handled them. If refused, apply to the interim relief judge.

Further analysis: related case law and developments

The 2009 decision is part of a line of judgments that have clarified the concept of real estate fruit. In 2007, the Court of Cassation had already ruled that rents are civil fruits (Civ. 3e, 7 March 2007, No. 05-21.809). More recently, in 2014, it extended this logic to leased parking spaces (Civ. 3e, 12 November 2014, No. 13-24.077).

The trend is therefore towards a broad interpretation of the concept of fruit-bearing thing: any property that can produce rental income is considered as such. This reinforces the protection of owners and usufructuaries. In the future, we can expect courts to systematically examine this characteristic in disputes concerning leased buildings. Real estate professionals (agents, notaries) must therefore be vigilant when selling business goodwill or shares in real estate companies.

Summary and next steps

FAQ:

• What is a fruit-bearing thing? It is a property that produces fruits, such as rents or harvests, without deteriorating.
• Is an empty building fruit-bearing? Yes, if it is capable of being leased (rental potential).
• Who is entitled to the rents? The usufructuary (or the owner if there is no usufruct).
• What can I do if the tenant sells his goodwill without my consent? You can challenge the sale in court and claim damages.
• What is the time limit to act? Generally 5 years from the sale (general limitation period).

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