Property law: what does the law say?

Imagine: you own a fishing boat in Biscarrosse, and you decide to sell your shares to another sailor. The price seems low, very low. Yet the vessel is old, operating costs are heavy, and the accounts are in the red. Can you ask for the sale to be annulled for 'undervalue' (derisory price)? The question is delicate, and the Court of Cassation has just ruled: it is not enough to look at operating losses to conclude that the price is fair. You must also take into account the market value of the vessel, i.e. what it would be worth on the market. This decision of 25 October 2017 (no. 15-24.219) sheds light on a often overlooked point of the law on co-ownership of ships. But what does this actually change for you, as an owner in Dax or elsewhere? Let's dive into this case.

The facts: a story like many others

The case begins with a fishing vessel owned by a co-ownership (several people own shares). In 2002, the liquidator of the co-ownership sold the shares of a co-owner, Mr X, to another co-owner, Mr Y, for a price of €4,649. But Mr X considers this price to be derisory: according to him, the vessel was worth much more. He takes legal action to obtain the annulment of the sale on the basis of Article 1591 of the Civil Code (which requires that the sale price be serious and determined) and Article L. 5114-3 of the Transport Code (relating to co-ownership of ships).

At first instance, the court rejects his claim. The Court of Appeal confirms: it relies on the operating accounts of the vessel, which show recurring losses, and deduces that the price was not an undervalue. But Mr X does not give up. He appeals to the Court of Cassation. The Court of Cassation rules in his favour: the Court of Appeal violated the texts by not taking into account the market value of the vessel. The case is referred back to another Court of Appeal. This twist shows that the mere fact that a property is loss-making does not justify a knockdown price: you still have to assess what it is actually worth on the market.

The reasoning of the court — dissected

The Court of Cassation relies on two fundamental texts. Article 1591 of the Civil Code provides that 'the price of the sale must be determined and designated by the parties'. Case law has specified that the price must be 'serious', i.e. not derisory. An undervalue (or derisory) price can lead to the nullity of the sale. Article L. 5114-3 of the Transport Code governs the co-ownership of ships: in the event of a sale of shares, the same rules apply.

In this case, the Court of Appeal had examined the operating results: the vessel generated losses, so the sale price (€4,649) was not derisory in its view. But the Court of Cassation censures this reasoning: 'Whereas in so deciding, without investigating, as it was requested to do, what the market value of the vessel was, the Court of Appeal deprived its decision of a legal basis'. In other words, the lower courts should have compared the sale price to the value of the property on the market, and not just to the accounting results. A vessel can be loss-making while having a high market value (for example, if it is well maintained or located in a sought-after area). Conversely, a profitable vessel may be worth little. What matters is the actual market price.

This decision confirms consistent case law: the undervalue nature of the price is assessed objectively, in relation to the market value, and not subjectively (in relation to the financial situation of the seller). However, caution: the burden of proof lies with the person seeking annulment (the seller or the dissatisfied co-owner). He must demonstrate that the price was manifestly lower than the real value.

undefined, I have come across cases where owners in Dax or Mont-de-Marsan sold real estate at a price below market value, thinking that high rental charges justified the reduction. But case law is clear: the price must reflect the market value, not profitability.

What this changes for you — concretely

If you are a co-owner of a vessel, this decision protects you: you cannot be forced to accept a knockdown price on the pretext that the boat is loss-making. Before buying or selling shares, have the vessel valued by an expert. For example, a pleasure sailboat in Biscarrosse may be worth €50,000 on the market even if it generates €5,000 in annual losses. If you are offered €10,000, you can ask for nullity.

For landlord owners (standard real estate), the reasoning is similar: the sale of a rented flat at a price below market value is not justified by unpaid rent. You must prove that the price was an undervalue in relation to the market value.

Purchasers, on the other hand, must be careful: a very low price can be annulled years later. If you buy a property at an undervalue, you risk losing ownership. It is better to make an offer close to the real value.

Finally, for property professionals (agents, notaries), this decision reminds of the importance of valuation. A sale deed must mention the price and, if possible, a reference to the market value. In case of doubt, have an expert appraisal carried out.

Four tips to avoid this type of dispute

• Have the property valued by an expert before any sale. Whether it is a vessel or a building, a professional valuation protects you. In Dax, a property expert can provide you with a price range.
• Keep all accounting and maintenance documents. They help to justify the market value. For example, recent repair invoices increase the value.
• Avoid abnormally low prices, even in case of personal difficulties. An undervalue can be annulled, and you will have to repay the difference.
• Consult a lawyer before signing a promise of sale. A legal eye can detect a risk of nullity. Maître Zakine, a lawyer in Mont-de-Marsan, can advise you.

Further reading: related case law and developments

This decision is part of a consistent line. For example, the Court of Cassation has already ruled (Civ. 3e, 12 July 2000, no. 98-18.801) that the sale price of a building must be serious, without connection to the seller's debts. More recently, in 2021, it recalled that the market value is assessed at the date of the sale (Civ. 3e, 10 June 2021, no. 20-14.605).

The trend is therefore towards increased protection of the seller against derisory prices. However, caution: if the property is sold at public auction, the rules are different (the price can be free). But in the context of a private sale, the price must be in line with the real value.

For the future, expect the courts to be increasingly demanding on the reasoning of decisions: judges will systematically have to compare the price to the market value, on pain of cassation.

In practice: what to do

FAQ: frequently asked questions

• Can I annul a sale that I have already signed if the price was too low? Yes, if you prove that the price was an undervalue (manifestly lower than the market value). Time limit: 5 years from the sale (art. 2224 of the Civil Code).
• How to prove the market value? By a judicial or expert appraisal, advertisements for similar properties, recent sale deeds. Keep everything.
• What if the buyer refuses to renegotiate? Apply to the judicial court. You can ask for nullity or compensation. A consultation with Maître Zakine (€45) can guide you.
• Does this rule apply to real estate? Yes, Article 1591 is general. Any sale of a property (vessel, building, business) can be annulled for undervalue.
• Can the seller be ordered to pay damages? Yes, if the buyer has suffered harm (e.g. expert fees). But the main remedy is nullity.

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