Two rulings of 2022 say how the pollution of a site weighs on its value, and on whom. In the first, an industrial owner of a former foundry site, burdened by prefectoral order with public utility easements for pollution, claims compensation for its loss of market value from the last operator; the Cour de cassation (the French supreme court for civil matters), on 14 December 2022, holds that the loss is assessed by reference to “the possible use of the property […] one year before” the consultation of the owners, which here rules out a loss linked to the ban on residential use, but quashes the rejection of the claim based on operating constraints, access to monitoring wells, groundwater, pipes, excavations, because requiring the owner to prove it intended to sell or let is “an inoperative ground”. In the second, on 29 June 2022, it holds that where the last operator has restored the site for the future use agreed with the mayor, “the additional decontamination cost resulting from a change of use by the buyer is borne by the latter”, and that the time limit for a hidden defect claim runs from knowledge of the pollution, not of its cost. For the valuer, these two rulings fix the date, the basis and the debtor of the loss of value of polluted land.
The facts
In the first case, a prefectoral order of 22 September 2015 institutes public utility easements on a site formerly operated as a foundry, polluted with hydrocarbons, metals and chlorinated solvents, belonging to a company that runs a plastics processing activity there. Article 2 prohibits residential uses; article 3 imposes easements on the use of the groundwater, drinking water pipes, excavation works and the integrity of surface coverings. The owner claims from the last operator of the foundry, under article L. 515-11 of the Environmental Code, compensation for its loss of market value and for a rent-free period it would have to grant. The Lyon court of appeal, on 6 July 2021, rejects everything.
In the second, a company that ran a paint factory sells the business, the activity being transferred elsewhere, obtains in 2009 a building permit for a conversion into offices and workshops, a future use validated by the town hall, and sells the buildings in 2011 with a clause assuming decontamination costs above 200,000 euros. After a new planning scheme allowing housing, the buyers resell to a property company planning 84 dwellings, which sues the former operator for refusing to decontaminate, and its sellers for hidden defects. The Paris court of appeal, on 2 April 2021, rejects the claims.
The decision
In the first case, the third civil chamber dismisses the appeal on the use restrictions of article 2 but quashes on the easements of article 3 (Cass. 3e civ., 14 December 2022, no. 21-23.129, reported). “For the assessment of the loss, only the possible use of the property and property rights one year before the date of opening of the public inquiry, or, where no such inquiry is held, before the date of consultation of the owners, is taken into consideration”; at that date, 14 January 2014, conversion to housing was not possible and the industrial activity could continue, hence no indemnity for the residential ban. By contrast, rejecting the claim based on operating constraints on the ground that the owner “does not prove that it had contemplated selling its industrial holding or letting it” is “an inoperative ground for excluding any loss of the owner on that account”. Remittal to the Lyon court of appeal, differently composed.
In the second, it dismisses the appeal (Cass. 3e civ., 29 June 2022, no. 21-17.502, reported). Under article R. 512-39-4 of the Environmental Code, “in the event of a later change in the use of the site, the operator cannot be required to take additional measures induced by that new use, unless it is itself the initiator of that change of use”; hence, “if the last operator has fulfilled the restoration obligation incumbent on it […], the additional decontamination cost resulting from a change of use by the buyer is borne by the latter”. As for the sellers, the hidden defect claim was time-barred: the 2011 surveys had revealed the extent of the pollution, and “knowledge of the defect is not conditional on knowledge of the cost of the works needed to remedy it”.
What this changes for valuation
The loss of value from an easement is measured on the possible use at the reference date. As in expropriation, an owner burdened by pollution easements is compensated only for the loss of a use it could actually give its property one year before the consultation of the owners. A built industrial site, in a zone where housing was not possible without prior demolition and decontamination, loses nothing from the residential ban. The valuer therefore establishes, at the reference date, the zoning, the condition of the site and the uses actually possible, before quantifying a gap in value; a hypothetical use does not enter the computation. The article on building land and permanent restrictions applies the same discipline.
Operating constraints are worth an indemnity, without any plan to sell. The easements of article 3, access for inspectors, ban on using the groundwater, control of excavations, maintenance of surface coverings, weigh on an owner who stays put. Their loss does not depend on its intention to sell or let: it translates into a loss of enjoyment and a loss of value of the property, which a buyer or tenant would pass on. The report quantifies them item by item, extra cost of future works, operating constraints, market discount measured on comparable properties without easements, and presents the total as compensation for a “direct, material and certain” loss. The glossary recalls what a moins-value is.
The decontamination cost follows the intended use, and falls on whoever changes it. A site restored for an industrial or office use, validated by the municipality, complies with the operator’s obligations. Whoever buys it to build housing bears the additional decontamination that use requires. For the valuation of such a site, value is therefore computed by the residual method: value of the achievable scheme, less costs, including decontamination for the intended use, less margin; and that decontamination cannot be claimed from anyone else. The article on decontamination costs and eviction compensation shows the same principle on the tenant’s side.
The time limit runs from knowledge of the pollution. A buyer who commissioned a detailed survey before buying knows the defect from that report, even if it only prices the cost later; the time limit to sue its sellers runs from there. The valuer instructed on a pollution file checks the dates of the surveys and flags them, because a loss-of-value assessment is of use only if the action is still possible.
A valuation at several dates and several uses. These files require the report to distinguish: the value at the reference date according to the use then possible, for the easement indemnity; the current value according to the intended use, decontamination deducted, for the transaction; and the value without pollution, to measure the gap. Presenting those three figures, with their dates and assumptions, avoids the confusions that defeated the claimants in these two cases.
What the valuer takes from it
- The loss caused by public utility easements for pollution is assessed by reference to the possible use of the property at the reference date, one year before the consultation of the owners.
- A use that was not possible at that date founds no loss of value; operating constraints, by contrast, are compensated without the owner having to prove a plan to sell or let.
- The additional decontamination cost resulting from a change of use is borne by the buyer who decides that change.
- The time limit for a hidden defect claim runs from knowledge of the pollution, not of its cost.
- The report distinguishes the value at the reference date, the value for the intended use and the value without pollution.
Further reading
The Property loss of value page describes the assignment, its timescale and its fee. The guide My business premises are compulsorily purchased and the glossary entries moins-value, date de référence and bilan promoteur complement this article. On the same theme: Decontamination costs and eviction compensation: the 2022 ruling and Expropriated building land: only permanent restrictions count. The decisions are available on Légifrance: no. 21-23.129 and no. 21-17.502.
What next
Business land burdened by pollution easements, or an industrial site to convert, and a value to establish?
I value the land by its possible use at the reference date, quantify the loss of value and loss of enjoyment caused by the easements, and integrate the decontamination cost for the intended use, for the buyer, the owner or the expropriation judge.
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