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St Barth, French West Indies Law Firm

07/03/2007

Pre-emption Right (click on the photo for download)

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"Article LO 6214-7. - The territorial authority may subordinate the declaration of inter vivos transfers of landed property located in its territory or related social rights, with the exception of donations to a direct or collateral descendant up to the fourth degree of relationship.

With the aim of preserving social cohesion in Saint Barth, guaranteeing the efficient exercise of its inhabitants' right to housing and preserving or developing natural spaces, the territorial authority may exercise its pre-emption right over landed property or related social rights specified on the declaration within a time limit of two months as from receipt of the transfer declaration, provided that it pays the amount of the value of said landed property or social rights to the beneficiaries. In the absence of an agreement, this value will be determined using the same method for expropriation.

The above paragraph does not apply to transfers carried out to persons:

1. who can provide proof of residency in Saint Barth for a sufficient period of time;

2. or who can provide proof of marriage, cohabitation or a civil union pact for a sufficient period of time with a person who can provide proof of residency in Saint Barth for a sufficient period of time.

It also does not apply to legal entities whose registered office is located in Saint Barth and controlled, directly or indirectly, by the persons mentioned in points 1 and 2."

Comments

The legal regime resulting from this article of the institutional act is open to significant criticism.

It introduces a rule that nationality is conferred by descent into French law for the exercise of attributes of the right to property and creates inequality between citizens of the same country.

While the introduction of a pre-emption right is not open to criticism in itself, the right must however be identical for everyone since its objective is to serve the general interest and not an individual interest.

Pre-emption is either in the general interest or not, irrespective of the capacity of the seller or the purchaser.

The period of residency in Saint Barth enabling the exercise of this pre-emption right to be avoided is not specified but it seems to be obvious that this is intentional with a view to instituting a period of residency higher than the period for tax matters, i.e., almost six years (five years and the year of the move).

The second issue of concern relating to a pre-emption right specific to Saint Barth involves ascertaining whether it will be an exception to the regime laid down by Articles 213-1 et seq. of the Town Planning Code, which provides for protection measures for the seller, who may notably abandon the sale if the price fixed by the judge responsible for fixing the compensation payable upon expropriation seems to be undervalued in the seller's opinion (Article L.213-7). The seller is also guaranteed that he will receive the price accepted within a time limit of six months (Article L.213-14).

If these provisions did not apply to Saint Barth given the full devolution of powers for town planning matters pursuant to the institutional act and the specific characteristics introduced by this act, whose purpose is voluntarily distinguished from the objectives of the pre-emption right established by the Town Planning Code (Article L.300-1) at national level, the pre-emption right introduced by the institutional act would actually constitute a real right to expropriate, which could be exercised upon any alienation of real estate or social rights conferring rights over real estate.

We consequently have strong reservations regarding the constitutionality of this article of the institutional act.

Indeed, the expropriation procedure to which the present pre-emption right is equated, since it seriously infringes the right to property which is guaranteed by the Constitution (Declaration of Human Rights of 1789, Article 17: "no person may be deprived of his property unless required by public necessity and in accordance with the law and the general principles of international law") and the European Convention for the Protection of Human Rights and Fundamental Freedoms (Additional Protocol 1, Article 1, paragraph 2, which prohibits any expropriation based on an arbitrary, selective and unforeseeable pre-emption measure). Expropriation may only be carried out in accordance with the provisions of the Expropriation Code due to public necessity. Any expropriation carried out in breach of these rules would in theory be qualified as a patently illegal action by an administrative authority affecting the fundamental freedoms or property of an individual.

Moreover, we are very doubtful regarding the appropriateness of this provision in view of the objective sought since the territorial authority of Saint Barth will have powers relating to town planning and housing policy, regardless of this pre-emption right.

It is consequently by means of a voluntary town planning and housing policy (for example, by introducing a quota for seasonal rental property, introducing green zones, etc.) and not by despoiling the right to property, that the territorial authority can work towards the stated objectives, in particular, involving offering reasonably priced housing to young persons in Saint Barth.

The pre-emption of beautiful villas is not related to the social aspect of the objective sought.

The continuation of this pre-emption regime will have a very negative impact on Saint Barth's image, whose inhabitants and visitors all come from respectful countries with a certain degree of legality.

Furthermore, the Constitutional Council has placed strict restrictions on the continuation of this provision under the following conditions:

"Nevertheless, the Territorial Council will be responsible for deciding a period, which must not exceed the time strictly required to satisfy the objectives sought in the public interest. Moreover, it must comply with France's EU obligations and international undertakings."

In fact, in its decision of 15 February 2007, the Constitutional Council de facto condemned the application of this provision, using a very particular style, on the basis that it would lead to an infringement of the right to property and discrimination between French citizens, on the one hand, and French and European citizens, on the other hand.

An extraordinary risk of endless legal disputes will hang over the citizens of Saint Barth if this provision of the institutional act is not immediately abolished by a decision taken by the territorial authority!

Copyright: Emmanuel Jacques

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