The fourth paragraph of Article 1115 of the French Tax Code shortens the period of the commitment to resell from 5 to 2 years where the transaction constitutes a sale by lots triggering the pre-emption right of the occupants: Article 10 of Law no. 75-1351 of 31 December 1975 (protection of occupants of residential premises) or Article 15 of Law no. 89-462 of 6 July 1989 (landlord-tenant relations). This regime is emblematic of the so-called « vente à la découpe » (break-up sale), and its scope was clarified by a ruling of the French Cour de cassation of 9 October 2024, which provides an important clarification as to when the occupancy condition of the lots is assessed.
The fourth paragraph of Article 1115 of the French Tax Code derogates from the ordinary 5-year period by imposing a shorter period of 2 years where the resale consists of « sales by lots triggering the pre-emption right » provided for by two distinct sets of rules: Article 10 of Law no. 75-1351 of 31 December 1975 (protection of occupants in the event of a sale by lots to a non-occupying purchaser) and Article 15 of Law no. 89-462 of 6 July 1989 (landlord-tenant relations, notice to quit for sale).
The legislature sought to accelerate the turnover of so-called break-up sale transactions (division of buildings into lots, unit-by-unit resale to purchasers who are often the occupants) in order to preserve the balance between the property dealer's tax interest and the protection of tenants. The counterpart is a tight deadline that requires close control of the timetable from the moment of acquisition.
The ruling of the French Cour de cassation of 9 October 2024 settled a long-debated timing issue: the occupancy condition of the lots concerned is assessed at the expiry of the 2-year period (and not at the date of acquisition). The practical consequence is that all lots not resold after 2 years which are then capable of being pre-empted by their occupants fall within the short period, without any need to demonstrate their initial occupancy at the time of purchase.
Beyond the principle, the 2-year period raises practical difficulties: characterisation of the transaction, starting point, interaction with the ordinary 5-year period, and consequences in the event of a partial resale.
The transaction must constitute a sale by lots within the meaning of the two laws referred to. In concrete terms: division into co-ownership lots, unit-by-unit resale, and triggering of the pre-emption right of the sitting tenants, either because the property is sold to a non-occupant (Law 75-1351, art. 10) or because a notice to quit for sale is served (Law 89-462, art. 15).
The 2-year period runs from the date of acquisition of the building by the property dealer, not from the notification of the notice to quit or of the pre-emption offer to the tenants. The timetable for organising the notifications is therefore essential: it must fit within an operational window that leaves enough time for the actual resale before the deadline.
The ruling of the French Cour de cassation of 9 October 2024 holds that the occupancy condition of the lots is assessed at the expiry of the 2-year period, not at acquisition. The short 2-year period applies to all lots not resold after 2 years which are then capable of pre-emption by their occupants. This framework benefits operators by clarifying the scope of the period.
Where some lots are resold quickly to occupants (pre-emption or direct sale) while others remain in stock, applying the 2-year period to the lots concerned and the 5-year period to the other lots can raise difficulties. A lot-by-lot mapping from the moment of acquisition is essential to manage the tax risk.
Failure to comply with the 2-year period entails forfeiture and the recovery of the duties not collected, payable within one month of the expiry of the commitment, increased by late-payment interest under Article 1727 of the French Tax Code (0.20% per month, i.e. 2.40% per year), in accordance with paragraph I of Article 1840 G ter of the French Tax Code. The penalty is identical to that of the ordinary regime.
On break-up sale transactions, the firm acts upstream (analysis of the characterisation of the transaction, choice of the acquisition vehicle, drafting of the clauses in the preliminary agreement and the deed of acquisition to specify the commitment and the applicable period, timetable for the division and the marketing) and downstream (securing the timetable of notices to quit for sale or pre-emption notifications, monitoring compliance with the period, litigation in the event of a challenge).
The ruling of 9 October 2024 opens up room for optimisation for operators: it is now possible to reason with greater certainty about the scope of the short period, taking into account actual occupancy at the end of the 2-year window.
Article 1115, paragraph 4 of the French Tax Code imposes a short period of 2 years (instead of 5 years) for sales by lots triggering the pre-emption right of the occupants, either under Article 10 of Law no. 75-1351 of 31 December 1975 (protection of occupants of residential premises) or under Article 15 of Law no. 89-462 of 6 July 1989 (landlord-tenant relations, notice to quit for sale). The legislature thereby specifically targets break-up sale transactions in order to preserve the balance between the property dealer's tax advantage and the protection of tenants.
The period runs from the date of acquisition of the building, not from the notification of the sale to the tenants or of the pre-emption offer. This point has been consistently reiterated by case law and by the BOFiP doctrine. The practical consequence is that a timetable for the division and the notifications must be organised from closing so that the actual resale takes place before the period expires.
Before that ruling, the question was debated. By a decision of 9 October 2024, the French Cour de cassation held that the occupancy condition is assessed at the expiry of the 2-year period, meaning that the short 2-year period applies to lots which, at the end of that window, are occupied by a tenant or an occupant entitled to pre-emption. This reading facilitates the operational management of break-up transactions by removing the need to demonstrate initial occupancy at the time of acquisition.
In practice, the analysis is carried out lot by lot. The 2-year period concerns the lots which, at its expiry, are capable of pre-emption by their occupants. The other lots (vacant, or with occupants who do not hold the pre-emption right) remain subject to the ordinary 5-year period. A precise mapping of the lots from the moment of acquisition is therefore essential.
Forfeiture is incurred. The duties not collected must be paid within one month of the expiry of the commitment, increased by late-payment interest under Article 1727 of the French Tax Code (0.20% per month, i.e. 2.40% per year), on the basis of paragraph I of Article 1840 G ter of the French Tax Code. As with the 5-year period, only duly established force majeure (external, unforeseeable and irresistible) can defeat the forfeiture.
No. The 2-year period is strictly reserved for sales by lots triggering the pre-emption right. A transaction that does not trigger that right (for example: a sale of the building as a whole, or a sale to a professional non-occupying purchaser where no pre-emption applies) remains subject to the ordinary 5-year period. The characterisation of the transaction must be analysed on a case-by-case basis from the moment of acquisition.
Topics frequently linked with the reduced 2-year period.
Overview: reselling, building, extensions, takeover of commitments.
Voir la page Commitment to resellWhen can the tax authorities challenge the commitment on the basis of L.64 / L.64 A LPF?
Voir la page Commitment to resellProcedure, admissible grounds, administrative doctrine, and the specific case of ZACs.
Voir la page Real-estate practiceGeneral framework of transfer duties on sales for consideration and exemptions.
Voir la pageAn initial confidential discussion to analyse the scope of the applicable period, secure the timetable of notifications and resales, or defend your interests against a challenge.
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