The long lease is provided for in article L. 451-1 of the French Rural Code, which states that "The long lease of immovable property confers on the lessee a real right that may be mortgaged; this right may be assigned and seized in the manner prescribed for the seizure of immovable property. This lease must be granted for more than eighteen years and may not exceed ninety-nine years; it may not be tacitly renewed".
The purpose of a long lease is often to increase the value of a property as a result of improvements that the lessee is required to make. If the contract includes such an improvement clause, the fee payable will generally be small.
The emphyteutic lease can be an alternative to the status of tenant farming, and offers a number of advantages. The farmer will be able to operate on the leased land for a long period, with the option of transferring his rights at any time. As for the owner, he will not have to pay any contributions or charges relating to the property covered by the lease.
An emphyteutic lease can also enable a public entity to develop its private assets without disposing of them permanently.
This type of lease always requires the involvement of a notary, as it must be published at the local mortgage office.
The study of the long lease will follow the following outline:
Duration of the long lease
Obligations of the lessee
Transfer of a real right
End of the long lease
Taxation of the long lease
Duration of the long lease
Along lease is a lease concluded for a long period: at least 18 years, but not more than 99 years. This type of contract cannot be tacitly renewed.
Lessee's obligations
Unlike a construction lease, the lessee (or emphyteutic lessee) is often required to improve the property but not to build (construction is possible but need not be compulsory, in which case the lease could be requalified as a construction lease).
The lessee is responsible for all charges and contributions relating to the leased property. The lessee must also pay for major and minor repairs, but may not make any alterations that would reduce the value of the property.
The lessee has a right of ownership over the improvements, constructions and plantations that he or she carries out.
Improvements or constructions that increase the value of the property may not be destroyed at the end of the lease by the lessee, nor may they give rise to compensation in his favour.
However, thelessee is under no obligation to rebuild the buildings if he can prove that they have been destroyed by an act of God or force majeure, or that they have perished as a result of a defect in the construction prior to the lease.
Transfer of a real right
An emphyteutic lease, which may cover any tangible property(land, house, flat, etc.), entails the transfer of a real right to the lessee.
For example, a tenant who takes out a long lease on a building in Aix les Bains can mortgage the property, sell it or have it repossessed.
It should be noted that the mortgage, sale or seizure only concern a temporary real right and are only valid for the duration of the long lease.
In addition, the emphyteutic lessee may create any kind of easement over the property covered by the lease. Here again, these deeds will be concluded for a period not exceeding the term of the lease, and the owner must be notified.
End of the long lease
The long lease terminates at the end of its term or prematurely by the lessor, in the event that he is authorised to have the long lease terminated by the courts. This option is available if the lessor fails to pay for two consecutive years, after a summons to pay has remained without effect.
The same applies in the event of non-performance of the terms of the long lease or if the lessee has caused serious damage to the property. However, the courts have the option of granting an extension depending on the circumstances.
Of course, the lease can always be terminated by mutual agreement.
Taxation of long leases
The conclusion of an emphyteutic lease is subject to land registration tax at a rate of 0.60%, calculated on the expressed price plus the charges imposed on the lessee, or on the actual rental value of the leased property if that value is higher than the price plus the charges. It is payable on the cumulative amount of all the years to run.
If there is a right to take back buildings at the end of an emphyteutic lease of more than 20 years, they will not be included in the tax base.
Any transfer of the lessor's or lessee's rights will be taxed at the same rates as an ordinary sale.
The parties must draw up an estimate of the market value of the property, which will be used to calculate the tax due.
The amicable termination of an emphyteutic lease is simply subject to the rules governing the termination of ordinary leases.
On the other hand, if an indemnity is provided for in the same case, it will be taxed at the rate of 0.60%.
