A manufacturer runs its plant on a former polluted foundry site, which the prefect (préfet) burdens with public utility easements (servitudes d’utilité publique): housing banned, operating constraints. It seeks compensation for the loss of value of its land. In a reported decision of 14 December 2022, the Cour de cassation (the French supreme court for civil matters) answers in two stages: the loss is measured on the possible use of the property at a reference date (date de référence), which here rules out a loss linked to housing that was then impossible; but the loss caused by the operating constraints cannot be dismissed on the ground that the owner had not proved it intended to sell or let.
The facts
By order of 22 September 2015, the prefect instituted public utility easements on a former foundry site, because of pollution by hydrocarbons, metals and chlorinated solvents found in the soil. Since 1997 the plots have belonged to a company that runs a plastics processing activity there, subject to the rules on regulated industrial facilities (installations classées).
Article 2 of the order prohibits, in particular, “residential” or similar uses and developments (translated from the French, as are all quotations below). Article 3 institutes easements concerning the use of the groundwater, drinking water supply pipes, the control of excavation and digging works and the integrity of surface coverings.
Its claim for compensation having been refused, the owner applied to the expropriation judge (juge de l’expropriation), under article L. 515-11 of the Environmental Code, against the last operator of the foundry. It claimed its loss of market value and the cost of a rent-free period (franchise locative). The decision does not state the amounts claimed.
On 6 July 2021 the Lyon Court of Appeal dismissed the claim. It took 14 January 2014, one year before the consultation of the owners, as the reference date, and rejected the loss linked to article 3 because the owner did not prove that it intended to sell or let its land.
The decision
The Cour de cassation quashed the decision in part (Cass. 3e civ., 14 December 2022, appeal no. 21-23.129, reported).
It restates the rule drawn from articles L. 515-11 and L. 515-12 of the Environmental Code, for the easements provided for in article L. 515-8: “Where the institution of the easements provided for causes a direct, material and certain loss, it gives rise to compensation for the owners, the holders of real rights or their successors in title.” Then the measure: “For the assessment of the loss, only the possible use of the real property and real 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.”
On the ban on housing, the appeal fails. The complaint about relying on the property’s situation in 2018 is inadmissible, that is, dismissed without examination: the owner itself had relied before the trial judges (juges du fond, who assess the facts) on a 2018 expert report describing the site, stating that nothing had changed since 1997. They had found that part of the land lay in an unbuildable natural zone and that, for the rest, located in a residential zone, any conversion to housing required the demolition of the installations and the decontamination of the site. Since “the industrial activity could be continued on the site and its conversion to housing use was not possible at the reference date”, the Court of Appeal was entitled to hold that no compensation was due “for loss of market value of the property owing to the land use restrictions” set by article 2.
On the operating constraints, the decision is quashed. On the basis of article L. 515-11, paragraph 1, the Court notes that the claim linked to the operating constraints of article 3 was rejected for want of proof of a plan to sell or let, and holds that this reason, irrelevant to whether a loss exists, cannot justify the rejection: “In so ruling, on a ground that is ineffective to exclude any loss of the owner on that account, the Court of Appeal failed to give a legal basis to its decision.” The decision is quashed and the case remitted, on that point only, to the Lyon Court of Appeal differently composed.
The Court does not say that these constraints necessarily cause a loss: its existence, direct, material and certain, and its amount remain to be established before the remittal court.
What this changes for valuation
The possible use at the reference date sets the basis. The loss is assessed on the uses the property could actually receive at the reference date, not on a hypothetical use. The valuer establishes at that date the zoning, the condition of the buildings, the known pollution and the conditions for a change of use, and justifies reliance on any later document. In this case, conversion to housing required prior demolition and decontamination and the industrial activity could continue: the Court of Appeal was entitled to infer that the ban on residential use gave rise to no compensation. The decision fixes when the use is assessed, without ruling on when the value itself is estimated. In compulsory purchase, only permanent restrictions existing at the reference date count for building land: see Expropriated building land: only permanent restrictions count.
Operating constraints are also examined for the owner who stays. Groundwater off limits, pipes to be isolated, controlled excavations, surface coverings to be maintained: these burdens may weigh on the operator in place, whether or not it sells; the decision only forbids dismissing the loss on that ground. The report quantifies each one (future earthworks, access to be provided, water to be found elsewhere), then the discount a buyer or tenant would apply, by comparison with business properties without easements. It avoids counting the same burden twice, as a rent-free period and as a discount; the decision does not rule on how these two heads relate. On proving a nuisance and a discount, see Claiming loss of enjoyment and devaluation of a French home.
Two heads, two methods. The report separates the use restrictions, measured on the uses possible at the reference date, from the operating constraints, measured on the continuing use, itself possible at the reference date. Decontamination costs when a buyer changes a site’s use fall under another 2022 decision, discussed in Decontamination for a new use: the extra cost falls on the buyer.
What the valuer takes from it
- The loss caused by public utility easements on polluted land is assessed on the possible use of the property one year before the public inquiry or the consultation of the owners.
- Where the banned use was impossible at the reference date, given the property’s condition at that date, and the activity in place can continue, the judges may refuse compensation for loss of market value.
- The loss caused by operating constraints cannot be dismissed for want of a plan to sell or let; it remains to be proved and quantified.
- The report describes the site at the reference date and separates use restrictions from operating constraints, without double counting.
Further reading
The Property loss of value page describes the assignment, its timescale and its fee. The guide Compulsory purchase of my business premises: what compensation? and the glossary entries date de référence, moins-value and perte de jouissance complement this article. The decision of 29 June 2022 is discussed in Decontamination for a new use: the extra cost falls on the buyer. On the same theme: Claiming loss of enjoyment and devaluation of a French home and Landlocked land in France: one right-of-way indemnity per user. The decision is available on Légifrance.
What next
Business land burdened by pollution easements, and compensation to quantify?
I establish the possible use of the land at the reference date, then quantify the loss of value caused by the use restrictions and the cost of the operating constraints, item by item, for the compensation claim before the expropriation judge.
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).
