A tenant farmer has planted, built on or transformed the land they rent, then the lease ends. Are they owed the value they created, or what their works cost? In a reported decision of 6 October 2016, the Cour de cassation (French supreme court for civil and commercial matters), Third Civil Chamber, approved a Court of Appeal for basing an outgoing wine-growing company’s indemnity on the total residual value of the vineyard, not on the added value its plantations had brought to the estate. The outgoing tenant’s indemnity is an amortised cost of works, “whatever the legal basis invoked” (translated from the French), and that cost is what the valuer quantifies.
The facts
By notarial deeds of 26 February 1974 and 5 April 1979, two spouses granted a wine-growing company a long-term lease (bail à long terme, a farm lease under the French statutory regime) over an agricultural estate comprising buildings and plots. Part of the property was later contributed to a groupement foncier agricole (GFA, a French farmland-holding company); on the husband’s death, the wife and her son became respectively usufructuary and bare owner of the other part. By deeds of 6 October 2004, the mother, the son and the GFA served the company notice to quit the whole estate for 31 October 2008.
An expert was appointed in summary proceedings (référé, a fast-track procedure) to assess the indemnity due to the outgoing tenant. The company then applied to the rural lease tribunal (tribunal paritaire des baux ruraux) for compensation of the added value (plus-value) brought to the holding: in its view, the improvements resulting from its works had made it possible to develop a recognised wine estate.
On 12 February 2015 the Bordeaux Court of Appeal dismissed its claims for payment of an added value of the estate and leased buildings, and determined the departure indemnity from the total residual value of the vineyard. According to the company’s arguments before the Cour de cassation, the court-appointed expert had assessed the added value brought to the estate by the plantations at €3,468,183.25, and the Court of Appeal awarded only the residual value of the vineyard, set at €242,942.
The company appealed: it claimed an indemnity equal to the added value brought by its plantations, in its view the ceiling of any compensation, and criticised the Court of Appeal for denying it compensation proportionate to its work and investment.
The decision
The Cour de cassation dismissed the appeal (Cass. 3e civ., 6 October 2016, appeal no. 15-18.796, reported).
According to the Court, the Court of Appeal “rightly held that the provisions of articles L. 411-69 and L. 411-71 of the Rural and Maritime Fishing Code exclude for the outgoing tenant any form of compensation other than the indemnity equal to the cost of the works and improvements valued at the expiry of the lease after deduction of an amortisation per year of use, whatever the legal basis invoked”. The lower court also noted that “the parties had concluded no specific agreement concerning additional compensation for the tenant in respect of the added value brought to the leased holding”. Consequently, the Court of Appeal, “which assessed, within its own power, the calculations of the court-appointed expert and of each party, gave a legal basis to its decision to determine the departure indemnity from the total residual value of the vineyard”.
What this changes for valuation
An amortised cost, not a gain in value. At the end of a farm tenancy (sortie de ferme), the valuer measures not what the estate is worth thanks to the tenant’s works, but what those works cost at the expiry of the lease, less the amortisation accrued. The valuer reconstructs, plantation by plantation and building by building, the date of execution, the extent of the works, the years of use and the corresponding amortisation. The sum of those residual values is the indemnity. Neither comparison with estate sales nor income capitalisation, which measure an added value of the holding, answers that question.
The gap between the two measures can be considerable. In this case, the added value assessed by the expert, according to the company’s arguments before the Court, was more than fourteen times the residual value awarded. In general, part of the value of a recognised estate, reputation or outlets, appears in no cost of works, and old plantations may be largely amortised.
A ceiling is not a measure. For plantations, article L. 411-71 of the Rural and Maritime Fishing Code caps the indemnity at the added value brought to the holding, as the company recalled in its appeal, in which it treated that ceiling as the sum due; the decision retains the amortised cost, without ruling on the ceiling. Where plantations are concerned, the report establishes the amortised cost and, under the statute rather than the decision, checks only that it does not exceed the added value.
A specific agreement changes the subject of the assignment. The decision notes the absence of such an agreement, the only opening towards the added value it mentions. Read a contrario (conversely), if the parties agreed on additional compensation for the added value, that value becomes an object of valuation again, a point the Court did not have to decide: value of the holding with and without the improvements, at the date and on the terms of the agreement. Where the existence or scope of such an agreement is disputed, the valuer presents the amortised cost and the added value separately, and the court decides.
The framework: the end of the tenancy, within the statutory regime. The reported decision of 28 November 2024 (Cass. 3e civ., no. 23-17.036) complements this solution without contradicting it: the tenant’s improvements are assessed only at the end of the tenancy and do not enter the rent of the renewed farm lease, and those made without the necessary authorisation give rise to no indemnity. The farm rent (fermage) is therefore set without the improvements, and the departure indemnity quantifies those lawfully made at amortised cost. Articles L. 411-69 and L. 411-71 govern tenants under a farm lease; neighbours who swap the use of their plots without a lease fall outside them.
Not to be confused with the other values of a farm lease. The departure indemnity is neither the consideration for the elements transferred on a change of farm tenant, nor the value of the farm business entered, apart from the land, in the tenant farmer’s estate.
What the valuer takes from it
- The outgoing tenant’s indemnity is computed exclusively under articles L. 411-69 and L. 411-71: cost of the works and improvements valued at the expiry of the lease, less an amortisation per year of use.
- The added value brought to the holding is not compensated, whatever the legal basis invoked, save a specific agreement on additional compensation.
- The report reconstructs each improvement: date of execution, cost at the expiry of the lease, years of use, amortisation, residual value.
- Farm rent, the end of the tenancy and occupation without a lease follow distinct rules: legal characterisation comes before the figures.
Further reading
The Market value page describes the assignment, its timescale and its fee. The guide How to challenge the court-appointed expert’s report in France and the glossary entries valeur de reconstruction (rebuilding cost), coût de remplacement déprécié (depreciated replacement cost) and date de valeur (valuation date) complement this article. Two other reported farm lease decisions of 2016 are discussed separately: Tenant farmer’s estate: the farm business valued apart from land and Change of farm tenant: know-how can be a transferable asset. On the same theme: Renewed farm rent: the tenant’s unauthorised buildings stay out and Swapping the use of farm plots does not create a farm lease. The decision is available on Légifrance.
What next
A tenant farmer leaving the holding, with plantations or buildings to compensate?
I establish, improvement by improvement, the cost of the works at the expiry of the lease and the amortisation accrued, under articles L. 411-69 and L. 411-71 of the Rural and Maritime Fishing Code, in a report for the landlord, the tenant or the rural lease tribunal.
Free quote, by email or by phone. No commitment before the quote is accepted. Fees are never linked to the value of the property (Charte de l’expertise, Title I, §2.1).
