A company sells to the Bordeaux urban community three plots needed to extend a tramway line, after the declaration of public utility (déclaration d’utilité publique, the administrative decision that authorises compulsory purchase). The public body discovers industrial pollution of the soil and claims compensation, on the grounds of fraud, delivery, hidden defects and the Environmental Code. The court of appeal dismisses the claim: an amicable transfer after the declaration of public utility “produces the same effects as the expropriation order”, so the rules of sale do not apply. The Cour de cassation (the French supreme court for civil matters), on 23 September 2020, in a reported decision, quashed: such a transfer “nevertheless remains a private law contract”, “capable of giving rise to an action based on the hidden defects warranty or on the breach of the seller’s statutory obligations”. For the valuer, the ruling recalls that an amicable transfer price is a sale price: what it includes, what it ignores, and what may be claimed afterwards.
The facts
By deed of 27 and 29 November 2012, the company Établissements A. Gré et Cie sells to the Bordeaux urban community three plots needed for the works extending a tramway line, previously declared of public utility. Complaining of industrial pollution of the soil, the public body, after an expert appraisal, sues the seller for compensation under articles 1116, 1603 and 1641 of the Civil Code and articles L. 125-7 and L. 514-20 of the Environmental Code. Bordeaux Métropole succeeds to the urban community.
The Bordeaux court of appeal, on 4 April 2019, dismisses the claims: an amicable transfer made after the declaration of public utility produces the same effects as the expropriation order, so that the rules of sale do not apply and the public body cannot rely on the hidden defects warranty, on the duties of information and conforming delivery, or on article L. 514-20 of the Environmental Code.
The decision
The third civil chamber quashed in full, under former article 1134 of the Civil Code (Cass. 3e civ., 23 September 2020, no. 19-18.031, reported). “While an amicable transfer agreed after a declaration of public utility produces, under article L. 222-2 of the Expropriation Code, effects identical to those of the expropriation order and extinguishes, by itself and at its date, any right in rem or in personam existing over the property transferred, it nevertheless remains a private law contract”, in line with a 1971 ruling which it cites.
“In so ruling, whereas the transfer agreed after a declaration of public utility by the company Établissements A. Gré et Cie was a private law contract of sale, capable of giving rise to an action based on the hidden defects warranty or on the breach of the statutory obligations binding on the seller, the court of appeal breached the above provision.” Remittal to the Bordeaux court of appeal, differently composed.
What this changes for valuation
The amicable price is a sale price. When the expropriated owner and the expropriating body agree after the declaration of public utility, the deed transfers ownership as the order would and clears third parties’ rights, but it remains a sale: the seller must deliver a conforming property, warrants hidden defects, and owes the information on classified installations required by article L. 514-20 of the Environmental Code. The valuer assisting a seller in the amicable negotiation knows it: the agreed price does not exhaust the obligations, and undisclosed polluted soil can bring the seller back before the courts years later. The glossary defines the vice caché and the déclaration d’utilité publique.
The expropriation indemnity, by contrast, is not corrected this way. Had the expropriation judge set the indemnity, the public body would have had no hidden defects action: the indemnity is judicial, not contractual, and the pollution would have had to be argued before that judge, as a remediation deduction in the valuation. The difference in regime bears on the negotiation: the expropriating body that accepts an amicable deal keeps the warranties of a sale; the expropriated owner who accepts it takes the risk of a later action which the expropriation judge would not have opened. In an amicable negotiation, the valuer’s report therefore documents the condition of the soil and has it recorded in the deed, in the interest of both parties.
The measure of the loss follows the basis. Under the hidden defects warranty, the public body may seek a price reduction, measured by the difference between the value of clean land and that of polluted land at the date of sale, or, if the seller knew of the pollution, damages covering the remediation needed for the project. Under article L. 514-20, where the seller operated a classified installation and did not inform the buyer of pollution resulting from that operation, the buyer may seek rescission, refund of part of the price or rehabilitation of the site at the seller’s expense, if its cost is not disproportionate to the price. The report quantifies those three heads: loss of value, cost of remediation for the intended use, and the ratio of that cost to the sale price. The article on unbuildable polluted land details the choice between hidden defect and delivery.
A particular public use. The land was intended for a tramway track, not for housing. The remediation required depends on the use: soil under a rail platform does not call for the same works as soil under a school. The property valuer quantifies the effect on value from the cost established by a consultancy for that precise use, as shown in the article on decontamination costs after a change of use, which places that cost on whoever changes the use.
Two dates, again. The value of the clean land is taken at the date of sale, with the planning rules and use of that date; the pollution is assessed as it existed at the sale, even if discovered later. The report reconstructs both elements from the deed, the survey and the history of activities on the site.
The duty to disclose classified installations requires an installation on the land sold. In a reported ruling of 22 November 2018 (Cass. 3e civ., no. 17-26.209), the Court held that article L. 514-20 of the Environmental Code “requires, for its application, that a classified installation was located, in whole or in part, on the land sold”; land forming part of an industrial site but on which no classified installation was located therefore does not open that action. A report relying on that basis checks the exact footprint of the installations from the authorisation orders.
Evicted occupiers are compensated, sub-tenant included. The extinguishing effect of the amicable transfer has a counterpart for occupiers. In a reported ruling of 16 June 2016 (Cass. 3e civ., no. 15-18.143), the Court quashed the ruling that refused any eviction compensation to the sub-tenant of a property transferred amicably for a project declared of public utility, on the grounds that the transfer had extinguished its rights and that the developer’s knowledge of the sub-lease was not established: the extinction of the rights in rem and in personam existing over the property transferred “gives the holders of those rights a right to compensation”. The price agreed with the owner therefore does not settle the position of the occupiers, whose compensation is quantified separately, from their title and their accounts. The article on the sub-tenant’s compensation after an amicable sale details that quantification.
What the valuer takes from it
- An amicable transfer agreed after the declaration of public utility produces the effects of the expropriation order, but remains a private law contract of sale.
- The public buyer may therefore sue under the hidden defects warranty, for conforming delivery and on the basis of the seller’s duties of information, in particular article L. 514-20 of the Environmental Code.
- In an amicable negotiation, the condition of the soil must be documented and recorded in the deed, in the interest of both parties.
- The loss is measured by the loss of value at the date of sale or by the cost of remediation for the intended use, set against the price.
- An indemnity set by the expropriation judge does not open the same actions: pollution is argued there before the indemnity is fixed.
Further reading
The Compulsory purchase and pre-emption page describes the assignment, its timescale and its fee. The guide Public bodies and pre-emption: setting a defensible price and the glossary entries déclaration d’utilité publique, vice caché and moins-value complement this article. On the same theme: Polluted, unbuildable land: a hidden defect, not non-conformity, Decontamination for a new use: the extra cost falls on the buyer and Easements on polluted land: compensation follows the possible use. The decision is available on Légifrance.
What next
Land transferred amicably to a public body, pollution found afterwards, and a loss or a value to establish?
I value the land as it was sold and as it should have been, the cost of remediation for the intended use and the effect on the price, for the seller, the public body or the court.
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