In a long-awaited decision of 2 December 2022, the Council of State clarified that leases relating to property belonging to the private domain of public persons could be concluded without prior advertising and competitive bidding. This decision removes the hesitation on this subject and goes in the direction of an even greater freedom of management of the private domain of public persons.
It is true that the management of private property gives public bodies valuable tools to enhance their assets and implement their land use policy and should therefore not be neglected. This management must be carried out in compliance with the applicable principles of public law, including the prohibition of liberalization by public entities.
belonging exclusively to a public person
and which are either assigned to the direct use of the public; or assigned to a public service provided that in this case they are the subject of a development essential to the execution of the missions of this public service.
Some property is also part of the public domain by law: maritime public domain (Articles L2111-4 to L2111-6 of the CG3P), fluvial (Articles L2111-7 to L2111-13 of the CG3P), aeronautical (Article L2111-16 of the CG3P), road (Article L2111-14 of the CG3P) and rail (Article L2111-15 of the CG3P).
- What property belongs to the public domain and what property belongs to the private domain of public persons?
Public domain property is property that meets the following two cumulative conditions (Article L. 2111-1 of the CG3P):
On the other hand, property not belonging to the public domain comes under the private domain (Article L. 2211-1 of the CG3P). In addition, the legislator has defined four categories of property belonging to the private domain: on the one hand, land reserves, real estate for office use that does not form an indivisible property with those belonging to the public domain (Article L. 2211-1 of the CG3P) and on the other hand, rural roads, and woods and forests subject to the forestry regime (Article L. 2212-1 of the CG3P).
2. Is there an obligation to advertise and put out to tender before the transfer or lease of a property in the private domain of a public person?
No. Public persons freely manage their private domain according to the rules applicable to them (article L. 2222-1 of the CG3P).
It is not necessary to initiate a prior competition for the sale of a private property, which does not prevent public persons from organising one if they so wish (CE, 27 March 2017, Sociétés Procedim et Sinfimmon, n°390347). By exception, buildings belonging to the private domain of the State are subject to prior publicity and competitive bidding (Article R. 129 et seq. of the Code du domaine de l’Etat).
In its decision of 2 December 2022, the Conseil d’Etat specified that leases concluded on the private domain of public persons did not have to be preceded by advertising and competitive bidding measures (CE, 2 December 2022, Ns°455033 and 460100). In this case, it was an emphyteutic lease, but the solution applies to all private leases, as specified by Ms Cécile RAQUIN, public rapporteur, in her conclusions on this decision.
3. Under what conditions can property belonging to the private domain of public persons be transferred or leased?
Public bodies are subject to the principle of prohibition on granting gifts.
Thus, if they can sell private property for less than its market value, it is only under the terms of case law that the following two conditions must be met: a reason of general interest and sufficient compensation (CE, 3 November 1997, Commune de Fougerolles, n°169473).
For the first condition, the following constitute reasons of general interest.
- The installation of young households on the territory of the commune, in order to revitalise it by increasing and rejuvenating the sedentary population (TA de Nantes, 28 Apr. 1998, n°974256);
- The promotion, by the purchasing association, of the integration of inhabitants of foreign origin within the municipality through the creation of collective activities (CE, 25 Nov. 2009, Commune de Mer, n°310208);
- The reinforcement of public safety, particularly for traffic in the town centre (CE, 25 Nov. 2009, Commune de Mer, n°310208);
- The desire to allow travellers to be housed decently (CE, 14 Oct. 2015, n°375577).
With regard to the second condition, the mere existence of compensation is not sufficient. A quid pro quo is defined as ‘the advantages that, in view of all the public interests for which the transferring authority is responsible, it is likely to procure for it, and to ensure, taking into account the nature of the quid pro quos and, where applicable, the obligations placed on the transferees, that they are effective’. It is necessary that these considerations be sufficient to justify the difference between the sale price and the value of the property transferred (CE, 14 Oct. 2015, n°375577).
By way of example, the commitment by the company to create five jobs within a period of three years and, in the event of non-performance, the obligation to reimburse the price of the land transferred as evaluated by the land registry service, constitutes sufficient consideration to justify the transfer of a plot of land for a symbolic euro (CE, 3 Nov. 1997, Commune de Fougerolles, n°169473). On the other hand, this is not the case of the purchaser’s commitment to create, within two years, two jobs of an indeterminate nature in the establishment to be built on this land (CAA of Bordeaux, 8 Nov. 2005, n°02BX00744).
Still by application of the principle of prohibition of gifts, a public person “cannot legally rent a property to a person pursuing private interest purposes for a rent lower than the rental value of this property, except if this rental is justified by reasons of general interest and includes sufficient counterparts” (CE, 28 Sept. 2021, CCAS de Pauillac, n°431625). The desire to “encourage the installation of a masseur-physiotherapist in the commune of Pauillac, even though the latter is not part of the areas, determined by the director general of the regional health agency, that are characterised by an insufficient supply of care for this profession” does not constitute a reason of general interest (CE, 28 Sept. 2021, CCAS de Pauillac, n°431625).
4. What rules apply to leases concluded on private property?
In most cases, leases entered into by public bodies on private property constitute private rights, subject to the rules of private law. These rules are different from those applicable to administrative contracts and may sometimes not be sufficiently taken into account by public persons when managing their private property. For example, the possibilities for changing rents in the case of commercial leases are restricted and subject to very specific rules. If these rules are not respected within the required timeframe, it is not possible to modify amounts, sometimes for quite long periods.
In conclusion, even if a public entity remains free to manage its private domain as it wishes and does not have to carry out publicity and competitive bidding measures prior to the sale or lease of its private domain assets, it must remain careful not to underestimate the market value of its assets. The creation of jobs or the revitalisation of a district may not be sufficient to justify advantageous prices granted to entrepreneurs if they are not accompanied by sufficient compensation. In any case, the public entity must ensure that the rules of private law are respected.
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