The role of the French rural land agency SAFER has been increased, with new powers of pre-emption given to the agency.
SAFER (Société d'aménagement foncier et d'établissement rural) is a body you will certainly come across if you are seeking to buy property in rural France.
This government agency has the right of first purchase (droit de pre-emption) on a great deal of rural property that comes onto the market in France.
So although you may think you have sealed the deal when you sign the sale contract with your seller, in fact the property is not quite yours until SAFER have had their say.
In the process of purchase of the property, ‘purging’ of the rights of SAFER is carried out by the notaire, whose responsibility it is to write to SAFER asking them if they want to buy the property.
In practice, the vast majority of rural property sales go through without SAFER showing any interest, although those where agricultural interests are clearly involved are closely examined.
That said, if they are interested, they can make life very difficult, sometimes resulting in the withdrawal of the sale from the market, or the seller ultimately ceding to SAFER, who have an automatic right of purchase if they accept to buy on the terms of the sale contract.
As we reported in our Newsletter last year, the way the agency operates came in for substantial criticism from the French National Audit Office, the Cour de Comptes, for the manner in which they exercise their powers, in many cases intervening in a proposed sale to act as an estate agency where such intervention had no objective other than to realise a commission on the sale. Over 75% of SAFER transactions occurred in the manner.
Somewhat shockingly the government have completely failed to act on this key issue identified by the Cour de Comptes.
Instead, they have picked up a range of proposals made by SAFER in 2013 to increase their role and powers, which have now been enacted.
There remains a fair degree of legal uncertainty about aspects of these new powers. In particular, to the publication of relevant decrees that specify the modalities of how they will be implemented. Those of you who consider you are being caught by the new law need to take good quality legal advice.
The main changes are as follows:
i. Reversionary Interest - The first change is to give SAFER increased powers over the transfer of the reversionary interest (nue-propriété) or life interest (usufruit) in property, as this method of transfer is sometimes used to get around SAFER powers of pre-emption.
In future SAFER will have the right to buy such interests in land and property, although only under very specific circumstances, which are set out in the legislation.
The right of pre-emption is specifically excluded where the proposed buyer already holds the life interest or reversionary interest of the property, and they are seeking to acquire the freehold.
The right of pre-emption in such cases is also excluded for gifts and free transfers between family members.
(ED: The Constitutional Court subsequently ruled to narrow the scope of this option).
ii. Company Sales - Secondly, SAFER have also been granted powers to pre-empt on the sale of a property held through a company, again, a method previously also used to get around acquisition by SAFER.
Once again, however, the powers are prescribed, with SAFER only entitled to pre-empt on the shares of a company whose primary purpose is agriculture.
It must also buy the totality of the shares of the company, and pre-emption can only take place where the purpose is to install a farmer on the property. (ED: The constitutional court subsequently ruled to narrow the scope of this option).
iii. Partial Purchase - Thirdly, SAFER are now entitled to buy only part of the property, with no obligation to pre-empt on all of it, as was previously the case.
It is a new power that will enable the agency to limit their intervention to those parts of the property of greatest interest, and, in the case of those being sold at substantial value, will enable them to act where otherwise the sheer cost of the acquisition made this impossible.
The owner can ask that SAFER pre-empts on all the property, failing which they can demand that SAFER compensate them for the loss of value on the remainder of the property.
iv. Sanctions - The penalties have been increased for sales that take place without having been notified to SAFER. The agency have now been given a general right to be informed about rural property sales (as well as those gifted) even though they may not have a right of pre-emption. This requirement has been introduced in order that SAFER can satisfy themselves that no sales are taking place that ought properly to be subject to the right of pre-emption. The penalty includes the right to have the sale annulled.