Favourable Regime for Property Dealers: Beware the Pitfalls of Volume Resale

Imagine yourself in Saint-Vincent-de-Tyrosse, owner of a 2,000 m² plot of land that you wish to develop. You have heard about a favourable tax regime for property dealers that would allow you to pay less registration duties (taxes on property transactions) upon acquisition. But how can you be sure to comply with all the conditions to avoid an unpleasant tax surprise several years later?

This is a question I encounter regularly in my Mont-de-Marsan practice. Developers, investors, sometimes even private individuals who want to build several houses on their land, wonder how to optimise their tax position while remaining within the law. The trap is often the same: believing that a technical trick will suffice to circumvent legal obligations.

The decision we analyse today provides a clear answer to this question. It concerns precisely this favourable regime for property dealers and the strict resale conditions attached to it. But what exactly does this change for you who are considering a property transaction in the Landes or elsewhere in France?

The Facts: A Story as Common as Any

The story begins like so many others in our region. A company, which we shall call "Immobilière des Landes", acquires a plot of land in 2007. Like many professionals, it opts for the favourable regime for property dealers, developers, and subdividers. This regime allows it to benefit from a reduced tax rate of 1% on registration duties (taxes paid when acquiring a property), instead of the standard rate which can reach 5% or more depending on the property's value.

But this regime has a crucial counterpart: the purchaser undertakes to resell the property within a four-year period. If this commitment is not respected, they will have to pay the additional duties, i.e., the difference between the reduced rate of 1% and the normal rate, plus an additional penalty of 1%.

Immobilière des Landes thus has a plot of land. It decides to divide it into "volume lots". Concretely, it does not sell plots of land, but volumes in space: imagine imaginary cubes above the ground, corresponding to future buildings to be constructed. These volumes are delimited in depth and height, but they do not include the land itself. The soil remains the property of the company.

Between 2010 and 2011, it sells these volume lots to various purchasers. It thus considers that it has fulfilled its resale obligation within the four-year period. But the tax authorities do not agree. They consider that the company has not actually resold the land, only rights over aerial volumes. They therefore claim the additional duties, amounting to several tens of thousands of euros.

The company contests this before the courts. The court of appeal rules in its favour, considering that the sale of volume lots does indeed amount to a resale within the meaning of the favourable regime. But the authorities do not admit defeat and refer the matter to the Court of Cassation, the highest judicial court in France. And that is where the problem lies for our Landes company.

The Court's Reasoning — Analysed

The Court of Cassation, in its judgment of 9 June 2021, quashes the court of appeal's decision. Its reasoning rests on two fundamental legal pillars.

Firstly, it bases itself on Article Lp 279 of the New Caledonia Tax Code. Why New Caledonia? Because this decision specifically concerns the law applicable in New Caledonia, but the principles are similar in mainland France. This article clearly provides that the favourable regime is only granted on condition that the property is resold within four years. In other words, if you buy land with the reduced rate of 1%, you must resell it entirely, not just in part or in a disguised form.

Secondly, the Court invokes Articles 552 and 553 of the Civil Code, also applicable in New Caledonia. Article 552 states that "ownership of the soil carries with it ownership of what is above and below". In other words, if you own the land, you own everything above and below it, unless there are legal exceptions. Article 553 specifies that "all constructions, plantations, and works on or within land are presumed to have been made by the owner at their expense and to belong to them".

The Court of Cassation applies these principles rigorously. It notes that in this case, the volumes sold corresponded to buildings to be constructed delimited in depth and height, but they did not include any undivided common parts (parts shared between several owners). Worse still, these transfers of volumes did not include the underlying land (the soil on which the buildings were to be constructed), which remained the property of the company.

The reasoning is implacable: selling volumes without selling the land is like selling air without selling the earth. This is not a resale of the acquired property, but a mere division of rights. The company therefore did not fulfil its resale commitment within the four-year period. It must therefore pay the additional duties, calculated at the standard rate, increased by the 1% penalty.

What few people know is that this decision confirms consistent case law. This is not an evolution or a reversal, but a reminder: the favourable regime for property dealers is not a technical game where obligations can be circumvented by complex arrangements. It requires a real and complete resale of the property.

What This Means for You — Concretely

If you are a property dealer, developer, or subdivider, this decision has direct implications. Let's take a concrete example in Mont-de-Marsan. Suppose you buy a plot of land for €300,000 with the favourable regime at 1%. You pay €3,000 in registration duties instead of approximately €15,000 (with a 5% rate). You have four years to resell.

If you decide to divide this land into volumes and sell these volumes without transferring the soil, you might think you have complied with the obligation. But beware: according to this decision, this is not sufficient. The tax authorities can claim the additional duties, i.e., €12,000 (15,000 - 3,000), plus the 1% penalty (€3,000), for a total of €15,000 additional. Your initial saving of €12,000 turns into a loss of €3,000!

If you are a purchaser of a volume lot, this decision also concerns you indirectly. You have bought a right over a volume, but not the land. This can create future complications, particularly for works, easements (rights of way or use), or resale. How to react? Always check what you are buying exactly: a plot of land or merely a volume?

For landlord owners, this decision reminds us of the importance of land ownership. undefined, I have come across cases where co-ownerships were created on volumes without land ownership, creating inextricable situations during foundation works or repairs. If you are in this situation, you should consult a specialised solicitor to clarify your rights.

Finally, for property professionals, this decision means that extreme caution is required in subdivision arrangements. The favourable regime is not a tax loophole to exploit with tricks, but a scheme subject to strict conditions. A mistake can be costly, not only in money but also in procedural time.

Four Tips to Avoid This Type of Dispute

• Tip 1: Always check what you are actually selling. If you opt for the favourable regime, ensure that the resale concerns the land itself, not just derived rights. Use clear notarial deeds that precisely describe the subject of the sale.
• Tip 2: Scrupulously respect the four-year period. This period runs from the acquisition. Plan your operations accordingly and avoid delays. A resale at 4 years and 1 day can call everything into question.
• Tip 3: Consult a specialised solicitor before setting up a complex operation. Do not rely solely on informal advice or arrangements "that worked elsewhere". Each situation is unique and requires in-depth legal analysis.
• Tip 4: Take case law into account in your decisions. This Court of Cassation decision is not isolated. It fits into a consistent line that favours substance over form. Adapt your practices accordingly.

Deep Dive: Related Case Law and Developments

This decision fits into well-established case law. For example, in a judgment of 13 December 2017 (No. 16-20.677), the Court of Cassation had already reminded that the resale must concern the property itself, and not dismembered rights (such as a usufruct / life interest or bare ownership). Similarly, a judgment of 6 July 2016 (No. 15-17.180) had sanctioned a company that had sold shares in an SCI (Société Civile Immobilière) holding the land, rather than the land directly.

The trend of the courts is clear: they refuse artificial arrangements aimed at circumventing the obligations of the favourable regime. They favour a substantive approach: what was actually sold? If it is the land, the regime applies. If it is something else, the regime does not apply and penalties can be triggered.

For the future, this decision means that professionals will need to be even more vigilant. Tax authorities are increasingly attentive to these arrangements, and the courts regularly sanction them. It is likely that we will see a harmonisation of practices, with stricter application of the conditions of the favourable regime.

Frequently Asked Questions

Q: I am a private individual who wants to divide my land to build several houses. Can I benefit from the favourable regime?
R: Yes, but only if you comply with all the conditions. You must resell the divided plots within 4 years, and not retain them or sell them in the form of volumes. Consult a notary or solicitor to adapt your project.

Q: What happens if I resell at 4 years and 1 day?
R: You lose the benefit of the favourable regime. You will have to pay the additional duties at the normal rate, plus the 1% penalty. It is better to anticipate and sell before the deadline.

Q: Does this decision apply in mainland France?
R: Yes, the principles are the same. The favourable regime for property dealers exists in mainland France with similar conditions. This decision, although rendered for New Caledonia, is indicative for mainland courts.

Q: How can I check if my operation is compliant?
R: Have a clear notarial deed drafted, and submit it to a solicitor specialised in property and tax law. Prior verification can save you costly surprises.

Do you find yourself 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 →