Is it possible to lease-sell agricultural land? This is a question that comes up very often and requires a good understanding of the status of farming. We will shed some light on this issue.
The hire-purchase contract is a contract whereby the tenant pays a rent, a fraction of which (the acquisitive part) is used to pay the purchase price of the property. After a certain number of years, the tenant can become the owner of the property by exercising the purchase option and paying the owner the balance of the purchase price.
If the tenant does not purchase the property, the owner must pay the tenant the purchase price.
In the agricultural sector, it is common for a lessor and a farmer to wish to set up this type of contract, but it is difficult to achieve.
The rural lease is a contract that allows the parties few freedoms. Indeed, many clauses in the Rural Code are said to be of public order, which means that it is not possible to derogate from them even with the agreement of the farmer and the lessor. Any clause that runs counter to this principle is therefore null and void.
This applies to the initial duration of the rural lease, which is at least 9 years. The farmer and his landlord are therefore not entitled to conclude a lease for a shorter period.
The farmer's right to renew the lease is also a public policy provision. At the end of the initial lease, the farmer has a right to renewal for a period of 9 years.
He may, 18 months before the end of the lease, inform the lessor of his wish not to continue the lease.
The lessor may oppose the renewal of the lease by a bailiff's deed 18 months before the end of the term, or oppose the renewal of the lease in order to farm the land himself. The lessor's wish to sell his farmland is not a reason to oppose the renewal of the lease to the benefit of the farmer.
The amount of the rent is itself governed by minimum and maximum amounts and a partial reimbursement of property taxes by the farmer. It is forbidden to provide for the payment of an additional sum.
In view of the 3 points above, it is therefore impossible to insert a hire-purchase clause in a rural lease contract as this clause would be against the law.
It is also forbidden to sign a contract separate from the lease contract and which would include these illegal clauses.
The farmer has rights at the time of signing the rural lease which he cannot waive. But he can do so later.
This is what he does, for example, when he informs his landlord of his wish not to renew the lease at the latest 18 months before the end of the lease.
It is therefore quite possible after the signing of the initial lease to conclude an agreement providing for a purchase by the farmer before the end of the lease.
On the other hand, it is not certain that a clause in a contract providing for the non-renewal of the lease if the farmer does not purchase the land during the initial period of the lease is legal.
Caution should therefore be exercised when drafting this type of clause or contract and a notary, lawyer or lawyer specialising in rural law should be consulted.
Public order clauses are mainly concluded to protect the farmer. If it is not possible to include a promise to buy, there is no reason why a promise to sell should not be signed.
First of all, a quick definition of the different contracts of sale.
The promise to buy: the buyer promises to buy the property at a given price and from a given date. It is therefore the seller who decides whether or not to "exercise" this option.
The promise to sell: the seller promises to sell the property at a given price and from a given date. It is therefore the buyer who decides whether or not to exercise this option.
Compromise of sale: the seller and the buyer mutually commit to the purchase.
It is therefore quite possible to provide for a promise of sale in parallel with the signing of a rural lease contract. In fact, it is the farmer who will decide whether or not to purchase. In the absence of a purchase, the lease will continue with the classic clauses.
If the farmer cannot commit to buying the agricultural land he is going to lease, another person can.
It is therefore possible to sign a rural lease in favour of a natural person and at the same time sign a provisional sale agreement in favour of a legal person (i.e. a company) for example. Or to sign a rural lease for the benefit of a company and the sale for the benefit of an individual.
However, these contracts must respect the rights of the farmer, in particular his right of pre-emption. And they will not benefit from the exemption from the SAFER's right of pre-emption after 3 years of tenancy.
The motivation of the lessor and the farmer to set up a hire purchase is sometimes to circumvent the SAFER's right of pre-emption.
The SAFER has a right of pre-emption on all sales of agricultural property. However, there is an exception for the benefit of the farmer. If the farmer has been on the agricultural land for at least 3 years, the purchase of this property by the farmer is not subject to the SAFER's right of first refusal.
However, the notary must inform the SAFER of the transaction, indicating that it is not subject to the right of pre-emption. And SAFER is entitled to challenge the transaction if it considers that the lease was fictitious and was concluded with the sole aim of circumventing its right of pre-emption.
In order to be valid, the lease requires, in particular, that the farmer has obtained an authorisation to farm and that the rent has been paid. SAFER may ask to verify these elements and decide to take legal action.
The statute of tenancy was put in place after the Second World War to allow agriculture to develop and to balance the existing power relationship between farmer and lessor. This very protective contract for farmers is also a legal framework that is sometimes too rigid. It prevents the implementation of certain operations despite the agreement between the parties.
There are possibilities for setting up a sale in parallel with a rural lease, but they are complex and require support from specialists in rural law.
