Eviction Compensation in Dismembered Ownership: Only the Usufructuary Lessor Owes It

Picture the scene: in Orange, a trader has run a fruit and vegetable shop for twenty years. One day, he receives a notice with refusal to renew the lease. He claims eviction compensation (sum due to the tenant who must leave the premises) of 134,250 euros. But there is a catch: the property belongs to two people: the usufructuary (the one who has the right to use the property and receive the rents) and the bare owner (the one who owns the walls but cannot enjoy them). Who must pay? The question that every owner in co-ownership or dismemberment asks themselves. The Court of Cassation answered on 19 December 2019: only the usufructuary, as lessor (the one who signed the lease and receives the rents), is liable for the eviction compensation. The bare owner, even if he sells the property and pockets the price, is not concerned. A decision that clarifies a legal point that has long been unclear.

The Facts: A Story That Happens Every Day

Mr and Mrs T. run a greengrocery business in Sorgues, in the Vaucluse, in premises belonging to Mrs D. (usufructuary) and her two children (bare owners). The commercial lease was signed by Mrs D. alone, in her capacity as usufructuary. In 2012, she gave notice to the T. spouses with refusal to renew, which gives rise to a right to eviction compensation (compensation for the loss of the business). The T. spouses then sue Mrs D. and the bare owners for payment of 134,250 euros. But the bare owners object that they are not lessors: they did not sign the lease, do not receive the rents and did not give notice. The Nîmes Court of Appeal agrees with them in 2018, condemning only Mrs D. to pay. The T. spouses appeal to the Court of Cassation, arguing that the bare owner benefits from the eviction since the property is sold free of any tenant, and must therefore contribute to the compensation. The Court of Cassation rejects their appeal: only the usufructuary who has the status of lessor is liable.

The Reasoning of the Court — Analysed

The Court of Cassation relies on Articles 544 and 578 of the Civil Code (defining ownership and usufruct) and Article L.145-14 of the Commercial Code (which provides for eviction compensation in case of refusal to renew a commercial lease). It recalls that the lessor (the one who grants the lease) is the sole debtor of the eviction compensation. However, in a dismemberment, only the usufructuary has the right to grant a lease and receive the rents (Article 595 of the Civil Code). The bare owner does not have this power: he cannot sign a lease, nor collect rents, nor give notice. He therefore does not have the status of lessor. Consequently, he cannot be liable for eviction compensation, even if he indirectly benefits from the vacation of the premises (for example, by selling the property free of occupation). In other words, the Court clearly distinguishes the burden of the compensation (which falls on the one who made the decision to evict) from the economic advantage (which may benefit both). This is not a reversal of precedent: the Court confirms a solution already accepted by the Commercial Chamber (Civ. 3e, 4 May 2011, no. 10-13.561). But it clarifies it by ruling out any joint liability between usufructuary and bare owner.

What This Changes for You — Practically

If you are an owner-lessor (usufructuary): you are solely responsible for the eviction compensation. If you give notice to your commercial tenant, you must budget for the amount of compensation (often several years' rent). Example: in Sorgues, for a rent of €1,500/month, the compensation can reach €100,000. You cannot claim contribution from the bare owner, even if he recovers the vacant premises.

If you are a bare owner: you have nothing to pay if the usufructuary evicts the tenant. But be careful: if you sell the property with the usufructuary, the sale price will be free of occupation, thus higher. You will benefit from the added value without bearing the cost. This is a comfortable situation, but it can create tensions with the usufructuary. Consider anticipating this in the dismemberment agreement (for example, provide for a sharing of the compensation).

If you are a commercial tenant: this decision does not change anything for you: you are entitled to full eviction compensation. But you must know that only the usufructuary is your debtor. In case of insolvency of the usufructuary, you cannot claim against the bare owner. Therefore, check the solvency of your lessor.

If you are a purchaser of a dismembered property: before buying, require the seller (bare owner) to guarantee that the usufructuary has no debts for eviction compensation. Otherwise, you could inherit a dispute.

Four Tips to Avoid This Type of Dispute

• Draft a clear dismemberment agreement: provide who bears the costs related to the lease (eviction compensation, works, etc.) and how the profits are shared.
• If you are a usufructuary, set up a provision: set aside each year a percentage of the rents received (e.g., 10%) to cover any potential eviction compensation.
• If you are a bare owner, negotiate a contribution clause: in the dismemberment deed, provide that the usufructuary must indemnify you if the property is sold vacant after an eviction.
• In case of notice, have an expert assess the compensation: this avoids surprises and allows negotiation of a reasonable amount with the tenant.
• Consult a lawyer lawyer before any eviction decision: a simple letter can engage your financial liability for years.

Further Details: Related Case Law and Developments

The Court of Cassation had already ruled, in a judgment of 4 May 2011 (no. 10-13.561), that the bare owner is not liable for eviction compensation because he does not have the status of lessor. The 2019 decision confirms this line, but strengthens it: it explicitly excludes any direct action by the tenant against the bare owner. However, an earlier judgment (Civ. 3e, 24 January 2007, no. 05-21.640) had admitted that the bare owner could be ordered to contribute if he had personally benefited from the eviction. The current case law therefore seems more protective of the bare owner. Trend: courts are increasingly strict on the distinction of roles. In the future, it is likely that the Court of Cassation will maintain this position, unless the bare owner has signed the lease or interfered in the rental management.

What You Must Absolutely Remember

FAQ

• Who pays the eviction compensation in a dismemberment? Only the usufructuary who granted the lease.
• Can the bare owner be sued by the tenant? No, unless he has personally undertaken.
• What if the usufructuary is insolvent? The tenant can request a guarantee (surety) before signing the lease.
• Can I sell the property vacant after eviction without paying the compensation? Yes, but you must ensure that the usufructuary has the means to pay.
• How to anticipate in a gift with reservation of usufruct? Provide a clause sharing the compensation between usufructuary and bare owner.

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