What are the most important areas of public law for an investor to consider when purchasing real estate?
Private ownership of real estate is subject to land use rules and other limitations, such as the protection of archaeological sites, or mandatory expropriation for reasons of public interest (expropriation pour cause d’utilité publique). Ownership rights can also be restricted by easements for public use (servitude d’utilité publique), which are incorporated into planning documents such as the local land use plan.
Public authorities also have pre-emption rights, allowing municipalities to purchase property to facilitate projects that are in the public interest (for example, the creation of communal facilities) (droit de préemption urbain).
A buyer should also verify that the property is not part of the public domain (domaine public). Public authorities hold both public domain (including property and fixtures that are either identified as belonging to the public domain or used for the performance of a public service) and private domain assets. Authorizations to occupy a public domain property normally take the form of a temporary occupancy agreement between the public authority and a private contractor. These authorizations are subject to the French General Code of Public Property (Code général de la propriété des personnes publiques).
An authorization for temporary occupation of the public domain usually grants the private developer some of the privileges typically associated with legal ownership, such as the right to dispose of (subject to prior approval by the public authority), or create a security interest over, a building or structure on the public domain, even though the legal ownership of the land remains with the public authority.
The public body granting a temporary occupancy authorization is not obliged to renew it upon expiry. If an authorization is not renewed, the French General Code of Public Property does not provide for any right to compensation.
More generally, an investor should also have a clear understanding of the commercial lease regime as set out in the French Commercial Code which has been deeply modified following the law n°2014-626 (Pinel law) dated 18 June 2014.
These past years American and English compliance rules are increasingly being incorporated into French real estate acquisition practice. The latter integrates more and more in the performance of the obligations of the parties some of the provisions of the United States Foreign Corrupt Practices Act 1977 and the UK Bribery Act of 2010 concerning anti-corruption, sanctions and anti-money laundering compliance – which French equivalent legal provisions would be the law “Loi no 2016-1691 du 9 décembre 2016 relative à la transparence, à la lutte contre la corruption et à la modernisation de la vie économique” (often referred to as loi Sapin II).