A former petrol station site is transferred by exchange, with a “pollution clause” and a remediation report attached, then sold on two months later to a company that lets it out for car parks, shops and offices to be built. Three years later, at the first scoop of the digger, oily sheens and a smell of hydrocarbons: the works stop for six months. The Cour de cassation (the French supreme court for civil matters), on 30 September 2021, in a reported decision, held the oil company liable for breach of its duty to deliver what was promised, because the attached report “gave credence to the idea of a complete remediation of the site”, and because the sub-purchaser has a direct contractual action against it. But it quashed the order against the intermediate seller: the pollution clause not having been carried into the second sale, “the unbuildable state of the land was not a non-conformity but a hidden defect of the thing sold”. For the valuer, the ruling says on what basis the loss is quantified, and against whom.
The facts
On 29 March 2010, Total Mayotte exchanges with the company Nel a plot on which it ran a petrol station from 2004 to 2010. The deed contains a “pollution clause” by which the acquirer, informed of the past activity and of a remediation campaign, waives any claim relating to the condition of the soil and subsoil; a remediation summary report dated 8 April 2008 is attached. On 31 May 2010, Nel sells the plot on to Station Kaweni, which lets it to Sodifram for car parks, shops and offices to be built. In October 2013, earthworks reveal hydrocarbon pollution; the project manager suspends the works. A prefectoral order of 24 December 2013 requires Total Mayotte to restore the site.
The owner and its tenant sue the successive sellers. The Saint-Denis court of appeal, Mamoudzou appeal chamber, on 4 February 2020, orders Total Mayotte and Nel to pay jointly: the land was unbuildable for six months and was therefore not delivered “usable and thus in keeping with its purpose, in particular its buildability”.
The decision
The third civil chamber dismissed Total Mayotte’s appeal (Cass. 3e civ., 30 September 2021, nos. 20-15.354 and 20-16.156, reported). The court of appeal “rightly stated that the sub-purchaser enjoys all the rights and actions attached to the thing which belonged to its predecessor and has for that purpose, against the original seller, a direct contractual action based on the non-conformity of the thing delivered”. It found that the pollution appeared “at the first scoop of the digger”, a sign of “remediation work that was superficial to say the least”. “Not having found that the acquirer accepted a known risk of residual pollution, but having held that the technical report attached to the deed of exchange gave credence to the idea of a complete remediation of the site, which was far from being the case”, it could deduce that the property did not conform to that characteristic and that Total Mayotte had breached its duty of delivery, incurring contractual liability towards the sub-purchaser and tortious liability towards the tenant.
It quashed, however, the order against Nel, under articles 1603, 1604 and 1641 of the Civil Code: “the pollution clause had not been carried into the deed of sale between Nel and Station Kaweni and the unbuildable state of the land was not a non-conformity but a hidden defect of the thing sold”. The sums of 8 570 €, 566 114.50 € and 15 960 € charged to it are quashed; remittal to the Saint-Denis court of appeal, differently composed.
What this changes for valuation
The legal basis depends on what the deed says about the soil. When the deed describes the land as remediated, through a clause and an attached report, the condition of the soil has entered the contract: polluted land does not conform to what was promised, and the buyer, or the sub-purchaser through the direct action, sues for non-delivery, with no short time limit and no need to prove a prior hidden defect. When the deed is silent, unbuildability due to pollution is a hidden defect that makes the thing unfit for its use: that is the hidden defects warranty (garantie des vices cachés), with its two-year time limit from discovery and its two options, refund of the price or price reduction. The valuer therefore reads the deed before quantifying, because the measure of the loss differs with the basis. The glossary defines the vice caché.
Under the hidden defect: the lower price and damages. The price-reduction claim measures what the buyer would have paid less had it known of the pollution: the difference between the value of clean land and that of polluted land at the date of sale, which incorporates the cost of remediation for the intended use and the residual discount an informed buyer would have required. If the seller knew of the defect, damages are added, without a ceiling, as recalled in the article on the hidden defect known to the seller. The report presents those two figures separately.
Under delivery: the cost of making good and the delay. Against the seller who promised remediated land, the loss is the cost of making it what it should have been, plus the consequences of the delay: six months of stopped works, extended project management fees, deferred rents or income for the tenant that was to trade there. The property valuer quantifies the delay in rental value and lost cash flow, and relies on a consultancy for the cost of the works. The article on polluted land burdened by easements deals with the case where the buyer’s new use is what calls for additional remediation.
The attached remediation report binds. A technical report attached to the deed, which suggests complete remediation, amounts to a promise about the condition of the soil, even alongside a waiver clause. Conversely, a clause that clearly describes a known and accepted residual risk transfers that risk to the buyer. In a pre-sale valuation, the valuer reads those documents and tells the client what they promise or exclude; in litigation, they draw the basis of their figures from them.
The sub-purchaser sues the original seller, the tenant too. The direct action allows the current owner to claim against the first seller; the tenant, a third party to the contract, sues in tort. The report separates the losses of each: loss of value and costs for the owner, loss of trade and rents for the tenant, without double counting. The article on non-compliant drainage shows a price refund for a defect of another kind.
The last operator cannot be unaware of the tanks. In a reported ruling of 29 June 2017 (Cass. 3e civ., no. 16-18.087), the Court approved a court of appeal for holding that “as the last operator of the car repair garage previously run by his father, the seller of the building could not be unaware of the defects affecting the premises”, the existence of leaking buried tanks having been revealed to the buyer only after the sale, so that he could not rely on the exclusion clause. A report quantifying the loss of value of polluted land therefore records who operated the site and what that operator necessarily knew.
What the valuer takes from it
- With no pollution clause in the deed, land made unbuildable by hydrocarbons is a hidden defect, not a non-conformity.
- Where the deed, through a clause and an attached report, presents the land as remediated, the condition of the soil is a promised characteristic: liability lies in delivery.
- The sub-purchaser has a direct contractual action against the original seller; the tenant sues in tort.
- Under the hidden defect, the loss is measured by the lower price, clean land against polluted land at the date of sale; under delivery, by the cost of making good and of the delay.
- The report reads the deed and its attachments before choosing the measure of the loss.
Further reading
The Property loss of value page describes the assignment, its timescale and its fee. The guide I paid too much, can I challenge the price? and the glossary entries vice caché, moins-value and bilan promoteur complement this article. On the same theme: Polluted land: public utility easements and decontamination cost and Hidden defect known to the seller: market value caps nothing. The decision is available on Légifrance.
What next
Land bought to build on, pollution found at the first scoop of the digger, and a loss to quantify?
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