A comparative analysis of municipal pre-emption rights across Europe
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Abstract
The Netherlands faces significant spatial challenges, prompting the Dutch government to consider broadening municipal pre-emption rights that provide the municipality with a right of first refusal. This article contains a comparative analysis of pre-emption rights in the Netherlands, Germany, Scotland, Flanders, and France, focusing on key principles such as material conditions, legal effect and procedure. The findings show that the Dutch system is efficient with strong safeguards for both beneficiaries and property owners. Insights from Scottish law suggest potential benefits for registering pre-emption rights on land with a continuing agricultural function. This article concludes with some general principles of European pre-emption rights, emphasizing their role in facilitating specific spatial developments rather than preserving status quo.
1. Introduction
191The Netherlands faces major spatial challenges in the coming years. Resolving the housing shortage, preserving the quality of nature, transitioning the agricultural sector and sustaining the energy supply, all ask for space. At the same time, space in the Netherlands is scarce. A ground surface of roughly 4.2 million hectares is home to over 18 million inhabitants and 2.3 million companies, both still growing.[1]192The combination of urgent spatial tasks in the areas of living, climate, agriculture and energy with a lack of space is a reason for the Dutch government to try to regain control of the living environment. To this end, two Ministries presented a number of plans.[2] Based on these plans, it is clear that the Ministries foresee a role for the so-called ‘pre-emption right’. A pre-emption right restricts the transferability of land in the sense that the landowner who wants to sell his or her land must first offer it to the preferred public authority. In the Netherlands, oftentimes the municipality registers the pre-emption right.[3] The Ministries believe that by broadening the conditions under which they can be registered, pre-emption rights can positively impact land reform. In particular, the envisioned possibility to register a pre-emption right on land with a continuing agricultural function is expected to positively influence land development and, if necessary, land acquisition.[4] Under current Dutch law, a pre-emption right cannot be registered on land with a continuing agricultural function (see § 3.2).
In face of the recent attention on (broadening) pre-emption rights in the Netherlands, this article has three objectives. First, it provides a comparative legal analysis of pre-emption rights – or equivalents thereof – in different European jurisdictions (Chapters 3 through 7). The comparison takes place on the core principles of the Dutch pre-emption right being, material conditions, competent authority, legal effect and procedure after the right is registered. As far as we can tell, such an analysis does not yet exist. By extension, we aim to provide a comprehensive overview of the basic rules for registering and exercising a pre-emption right in each jurisdiction.
Second and subsequently, this article calibrates the Dutch pre-emption right in light of the other jurisdictions (Chapter 8). Thereby providing some insights for the Dutch government as to the strengths and weaknesses of the Dutch pre-emption right.
Third, this article derives some general principles of the ‘European pre-emption right’ (Chapter 9). We end this article with some concluding remarks (Chapter 10).193
2. Defining three concepts
This article focuses on statutory municipal (or local authority) pre-emption rights. A definition of three concepts is required: ‘pre-emption’, ‘municipal’ and ‘statutory’.
First, for the purposes of this article a ‘pre-emption right’ entails a right of first refusal for the beneficiary. A pre-emption right does therefore not result in a forced transfer of immovable property from landowner to beneficiary. It rather limits the transferability of property, to the extent that the landowner must first offer his property (often land) to the beneficiary.[5] The beneficiary can only purchase the property if the landowner decides to sell. Consequently, land policy instruments that go beyond this right of first refusal and (directly or indirectly) render compulsory transfers of property, such as expropriation, compulsory purchase agreements and (some forms of) purchase options fall outside the scope of this article. A pre-emption right provides a land policy instrument by which the public authority can control land prices and prevent speculation in the early stages of spatial developments.[6]
Second, by ‘beneficiary’ is meant a municipality or, if a certain jurisdiction has a different form of local government, the local authority. The reason for this is that in the Netherlands, pre-emption rights are registered, mostly by municipalities.[7] Pre-emption rights can in fact also be registered by ‘higher’ forms of government, such as by provinces or by the Minister, but these ‘higher’ pre-emption rights are in practice rare, or – in the case of the Minister – non-existent.[8] This has to do with the fact that a pre-emption right by the province or the Minister is limited to cases in 194which provincial or national interests are at stake, whereas the development of the physical environment is primarily a task for the municipality.[9]
Lastly, this article concerns pre-emption rights provided by specific statutory provisions in national legislation. It is imaginable that municipalities conclude pre-emption agreements via ordinary national contract law, but these pre-emption agreements fall outside the scope of this article. The reason for this is that any legal entity can be the beneficiary of such a pre-emption right agreement and that national contract law is not created for the purposes of land policy or land reform.
3. Pre-emption rights in the Netherlands
3.1 Background of the applicable law
On January 1st 2024, the long-awaited Dutch Environmental Act (hereafter: ‘Omgevingswet’) entered into force.[10] Consequently, pre-emption rights are now included in the Omgevingswet (Chapters 9; 15.4; 16.3.6; 16.8 and 16.11). Before January 1st 2024, a separate act existed for pre-emption rights – the so-called ‘Municipal pre-emption right Act’ (Wet voorkeursrecht gemeenten).[11]
3.2 Material conditions for registering pre-emption rights
To understand the situations in which a pre-emption right can be registered, first a short explanation on the difference between an environmental vision and an environmental plan within the context of Dutch land policy law is needed. In the environmental vision, the municipality explains how it intends to develop and protect the physical living environment for the coming years (art. 3.2 Omgevingswet). These choices are then laid down in an environmental plan. The main difference between the former and the latter is that the environmental plan contains the actual binding rules for the physical living environment, whereas the environmental vision is a non-binding strategic vision. The key feature of an environmental plan is its allocation of functions to locations (art. 4.2 Omgevingswet). This feature enables municipalities to determine for each location of its territory what activities will or will not 195be allowed, for instance, residential living, and/or recreational, business or agricultural activities and adds rules to these activities.
Subsequently, a pre-emption right can be registered in any of three situations. First, it can be registered on land that has been given a non-agricultural function in an environmental plan and whose current use deviates from that function (art. 9.1 (1) (a) Omgevingswet). Second, a pre-emption right can be registered on land that is included in an environmental vision and that vision gives directions for the designated function. That function must in any case be non-agricultural and the current use must deviate from the designated function (art. 9.1 (1) (b) Omgevingswet). Third, a pre-emption right can be registered on land that is not yet included in an environmental plan nor environmental vision, but a so-called ‘pre-emption-right-decree’ designates a non-agricultural function to the land and the current use deviates from that function (art. 9.1 (1) (c) Omgevingswet).
These different situations enable municipalities to register the pre-emption right in different stages of the spatial planning process. Generally, municipalities want to register the pre-emption right as early as possible, which is by ‘pre-emption-right-decree’, because every later stage could lead to price increases due to expected lucrative spatial developments. In this regard, also the so-called ‘preliminary designation’, codified in art. 9.1 (2) Omgevingswet, should be mentioned. The ‘preliminary designation’ renders the possibility to register a pre-emption right on quicker and less extensive terms (§ 3.3). This ‘preliminary designation’ expires after three months or at the time one of three pre-emption rights provided in art. 9.1 (1) takes effect, whichever is earlier (art. 9.4 (3) Omgevingswet).
3.3 Competent authority
On the level of the municipality, the competent authority to register a pre-emption right in compliance with art. 9.1 (1) Omgevingswet is the (city) council.[12] In the Netherlands, this is the democratically legitimized and, therefore, ‘highest’ administrative body on the level of the municipality. The reason that the competence to register the right is assigned to the council, and for instance not the municipal executive, is that it is also the council that is competent regarding the allocation of a function to a location.[13] The municipal executive, being the college of mayor and aldermen, is however the competent authority when it comes to the ‘preliminary designation’ as 196referred to in art. 9.1 (3) Omgevingswet. The ‘preliminary designation’ is a way to register a pre-emption right in the earliest stages of the spatial planning process, before third parties have a chance to anticipate the decision-making in the environmental vision and/or plan. In this respect, it makes sense that the municipal executive is the competent authority to issue the ‘preliminary designation’ because its decision-making processes usually go faster and are subject to fewer regulations.
3.4 Effect
Art. 9.7 Omgevingswet stipulates the principal effect that pre-emption rights have on immovable property. The owner of that immovable property – often, land – is obliged to first offer his property to the municipality, before he may transfer his land to a third party or establish any sort of property related right with the intention of impairing the purpose of the pre-emption right. A transfer in violation of the pre-emption right constitutes no legal effect.[14] The articles 9.8, 9.9 and 9.10 Omgevingswet contain exemptions on the principal rule provided in art. 9.7. Art. 9.8 comprises a list of transactions that cannot be subject to a pre-emption right. It involves for example (a) transactions between certain family members, (b) the partition of matrimonial estates or (c) transactions pursuant to a will. Art. 9.9 provides an exemption for transactions subject to a prior agreement between landowner and third party. This prior agreement must be made before the registering of the pre-emption right and meet the conditions set forth in art. 9.9. The last exemption is stipulated in art. 9.10. This article states that due to compelling reasons on the landowners’ side, the preferred public authority can make an individual exception. As far as we can tell, the exception provided in art. 9.10 is virtually non-existent.
Besides the fact that a transfer in violation of the pre-emption right does not constitute a legal transfer, art. 9.22 Omgevingswet contains an extra safeguard for the beneficiary. If for instance a landowner, in spite of a pre-emption right and without applicability of any of the exemptions, transfers his property to a third party without offering it first to the preferred public authority, this preferred public authority can then invoke the nullity of that transaction before the local court.[15] The civil-law notary functions as a ‘gatekeeper’ in the sense that the notary must issue, for every transaction of immovable property, an affidavit that indicates that in fact 197no pre-emption right was registered in the transaction (art. 9.21 Omgevingswet). Research indicates that between 2000 and 2014 there are sixty to ninety court rulings on nullity, with a success rate of roughly 85 %.[16]
3.5 Procedure after the right is registered
When the right is registered, the landowner who wants to transfer his land must first offer it to the preferred municipality. The articles 9.12, 9.13 and 9.14 Omgevingswet describe the procedure to do so. First, the landowner must invite the competent authority of the beneficiary – in the case of the municipality, this is the municipal executive[17] – to enter into negotiations (art. 9.12). A landowner does so via a letter.[18] Next, within six weeks of receiving the letter the competent authority must indicate whether it is willing to buy the land on conditions to be agreed upon (art. 9.13). If the competent authority decides to not enter into negotiations or fails to react within six weeks, the landowner is free to transfer his land to a third party for duration of three years (art. 9.14).[19] If the competent authority is however willing to buy the land, negotiations commence. There are no specific rules or regulations on these negotiations. Regular Dutch contract law and general principles of good governance apply. Of course, the beneficiary holds a strong position in the negotiations.
If it appears impossible to reach an agreement, the landowner can request the competent authority to initiate a so-called ‘price determination procedure’ at the local court. The competent authority must initiate this procedure within four weeks after the request (art. 9.16 (1)).[20] During the price determination procedure, the competent authority announces the price it is willing to pay. The landowner does the same for the desired price. In addition, the court appoints one or more – in practice, 198mostly three – independent experts who shall, as soon as possible, present the court with an expert-valuation on the price (art. 16.122 Idem.). To this end, the experts usually visit the land, conduct a hearing and present both parties first with a preliminary opinion.[21] When determining the price, the rules of expropriation law apply (art. 16.122 (2)). The court should decide on the price within six months after the request (art. 16.123 (1)).[22] The decision of the court may only be appealed directly at the Supreme Court (art. 16.123 (3)).
4. Pre-emption rights in Germany
4.1 Background of the applicable law
In contrast to the Netherlands – where pre-emption rights have only recently been at the political forefront – in Germany they have long been a subject of debate as a means to achieve spatial (development) goals.[23] In the current era of housing shortages, attention to pre-emption rights is even increasing.[24] This attention, however, has not yet led to much practical significance. The literature shows that pre-emption rights in Germany are relatively spars.[25] The rationale of the German pre-emption right is similar to that of the Dutch, namely prevent speculation in early stages of spatial developments and render direct impact on spatial development.[26]
German law knows several different sorts of pre-emption rights. For the purposes of this article, only the municipal pre-emption right provided in §§ 24–28 Bau199gesetzbuch (‘Building Code’, hereafter: ‘BauGB’) is relevant.[27] Like in the Netherlands, the registering of a pre-emption right does not lead to a forced transfer of property, but rather to a right of first refusal for the beneficiary.
4.2 Material conditions for registering pre-emption rights
§§ 24 and 25 BauGB list the cases in which a pre-emption right may exist or may be registered. § 24 BauGB contains the ‘general’ pre-emption right. Key feature of this ‘general’ pre-emption right is that it exists by force of law – that is, automatically – when one of eight sections of § 24 BauGB is met. The most prevalent section is § 24 (1) (1).[28] According to this section, a pre-emption right exists 1) on land zoned for public purposes in a zoning plan or 2) on land zoned for compensation measures for interventions in nature and landscape. Considered may be lands intended for traffic or public green spaces. The pre-emption right exists from the moment the zoning plan takes effect.[29] The other seven categories, in which a pre-emption right exists by force of law, are for instance land included in a re-allocation resolution (from the moment the resolution takes effect) (§ 24 (1) (2) BauGB), land included in a zoning plan, insofar as it involves non-built land in the rural area for which the zoning plan specifies a use as residential land or area (§ 24 (1) (5) BauGB) and land situated in areas that must remain unbuilt for preventive flood protection (§ 24 (1) (7) BauGB. The common denominator of these ‘general’ pre-emption rights is that they originate from a specific planning measure, exhaustively listed in § 24 (1) BauGB.[30]
§ 25 BauGB contains the ‘special’ pre-emption right. Key difference with the ‘general’ pre-emption right of § 24 BauGB is that the ‘special’ pre-emption right is registered through active registration. The ‘special’ pre-emption right from § 25 BauGB can be registered in any of three situations. We describe two of these situations.[31] First, a special pre-emption right can be registered through registration on 200non-built land included in a zoning plan (§ 25 (1) (1) BauGB). The zoning plan must be in effect at the moment the resolution holding the registration is issued. Rationale of this first category is that it is of general interest that uncultivated land is available for spatial development.[32] Second, a special pre-emption right can be registered on land that is not (yet) included in a zoning plan, but the municipality envisions an urban spatial development (§ 25 (1) (2) BauGB). For registering it is sufficient that the municipality ‘envisions’ a certain urban development. The reason for this broad phrasing is that municipalities must be able to purchase land at the earliest possible stage of the urban planning process.[33] This last situation looks somewhat like the Dutch ‘pre-emption-right-decree’ included in art. 9.1 (1) (c) Omgevingswet (see § 3.2).
4.3 Competent authority
As described in Chapter 1, in the Netherlands state law – the Omgevingswet – prescribes the competent authority. This is different in Germany. The BauGB – i.e. the state law – does not contain provisions regarding the competent authority. The BauGB speaks consistently of ‘the municipality’ as a whole. This is a result of the fact that the municipality as a legal entity holds the pre-emption right rather than one of the organs of this entity.[34] German municipalities can determine themselves, through their statutes and ordinances, which body is competent regarding registration and practicing the pre-emption right. In most municipalities, the (city) counsel is appointed as the competent authority for both registering (in case of the ‘special’ (§ 25 BauGB) pre-emption right) and exercising (in case of both the ‘general’ (§ 24 BauGB) and ‘special’ (§ 25 BauGB) pre-emption right). This is different if the municipality appoints – via their statutes or ordinances – another municipal body as the competent authority, or if the council has delegated its authority to another body, such as the mayor.[35] General conclusions cannot be drawn. There are subtle differences between large and small municipalities as well as with regard to the sums of money up until which each authority is appointed as competent.201
4.4 Effect
In Germany, the existence of a pre-emption right does not impose an obligation ex ante for the landowner to first offer his immovable property to the preferred municipality. In this, it differs from the Netherlands (see § 3.4). Rather, the owner is free to enter into a purchase agreement with a third party. From the moment the owner concludes this purchase agreement, the pre-emption right renders its principal effect. According to § 28 (1) BauGB the landowner must notify the municipality immediately about (the contents of) the purchase agreement that is agreed upon with the third party.[36] The municipality may then decide whether it wants to exercise the pre-emption right during the period set forth in § 28 (2) BauGB (see § 4.5). During this period and until the municipality has made its decision, the transaction with the third party is put on hold. In principle, the municipality can choose between “replacing” the third party in the purchase agreement and refusing/waiving the pre-emption right (for a nuance, see § 4.5).[37]
In the Netherlands, there are two safeguards to secure the pre-emption right. First, the civil-law notary functions as a ‘gatekeeper’, second – if a transaction were to take place that impedes the pre-emption right – the preferred municipality may invoke the nullity of that transaction before the court (see § 3.4). German law also provides two safeguards, but they differ slightly from Dutch law. First, § 28 (1) BauGB contains a ‘land register blockage’. A third party can only be registered in the land register if this register has received a statement proving that in fact no pre-emption right exists or is exercised. This statement is issued by the municipality and is called a Negativzeugnis/Negativtest (refusal certificate). Thus, not the civil-law notary, but the land register office functions as the formal ‘gatekeeper’.[38] Second – and this is a more substantial difference – German law does not provide a possibility to annul a transaction that is executed in spite of the pre-emption right. This means that if somehow a third party is registered as the new landowner in breach of § 28 (1) BauGB, the transaction is legally valid. To ensure that a third party is not indeed registered in the land register, § 28 (2) BauGB provides the possibility for the municipality to preregister its pre-emption right in the land register (Vormerkung). Preregistration is possible as soon as the municipality receives notification that a 202purchase agreement is concluded with a third party. Preregistration yields a property law effect and therefore ‘tackles’ the impossibility to annul.[39]
German law contains a number of transactions that cannot be subject to a pre-emption right. These exemptions are listed in § 26 BauGB. Some of these exemptions are comparable to the Dutch exemptions, such as transactions between certain family members (§ 26 (1) BauGB).
4.5 Procedure after the right is registered
If a pre-emption right exists in accordance with § 24 or § 25 BauGB, both the owner of the property and the third-party with whom a purchase agreement is concluded, can notify the preferred municipality (§ 28 (1) BauGB). In practice, it will however often be the civil-law notary – that passes the purchase agreement – that issues the notification.[40] The notification may be issued to the municipality as a legal entity.
The municipality may exercise its pre-emption right within three months after the notification (§ 28 (2) BauGB).[41] The municipality exercises its right through an administrative decision that is reported to the landowner and the third party. The decision is subject to administrative legal protection.[42] If the municipality chooses to exercise its pre-emption right, the purchase agreement is established in accordance with the terms that were negotiated between landowner and third party (§ 28 (3) BauGB jo. § 464 BGB). The municipality is not only obligated to pay the purchase price, but also to fulfil all of the third parties contractual obligations.[43] In other words, the municipality ‘replaces’ the third party in the purchase agreement.[44]
A consequence of this ‘replacement’ is that the municipality has no influence on the purchase price and conditions. The municipality must accept the purchase price, 203even if this price is excessive. To remedy this potential problem, German law contains two price-limiting mechanisms (§ 28 (3) and (4) BauGB). First, the municipality may fix the price on the market value whenever the purchase price exceeds this market value (§ 28 (3) BauGB). The municipality is not obliged to use the price-limiting function provided in § 28 (3) BauGB. A reason for refraining from this function is that the owner may invoke his right of rescission and the municipality is left empty handed.[45] In contrast to the price-limiting mechanism of § 28 (3) BauGB, the price-limiting mechanism of § 28 (4) BauGB, is not a choice, but an obligation if two conditions are met. First, the pre-emption right exists pursuant to § 24 (1) (1) BauGB – that means on land included in a zoning plan and zoned for public purposes – and second the land in question could be subject to an expropriation procedure. If these conditions are met, the municipality must fix the price on the expropriation value that would have been determined if the land was expropriated. The municipality may request the assistance of experts in determining the expropriation value, but this is not compulsory.
5. Pre-emption rights in the United Kingdom (Scotland)
5.1 Background of the applicable law
In England and Wales, no statutory pre-emption rights for municipalities exist. Municipalities generally rely on different mechanisms for land reform and land acquisition. Municipalities can register a pre-emption right, but do so via a ‘pre-emption right agreement’ with the landowner (Land Registration Act 2002, s. 115). If such an agreement is concluded, it renders a similar effect as most of the ‘statutory municipal pre-emption rights’ that we describe in this article. In other words, the grantor of the right undertakes that he or she will not sell the property without first offering it to the beneficiary. The beneficiary can purchase the property only if the grantor decides that he or she wants to sell.[46] The main difference with the pre-emption rights which we describe, is that any legal entity can be the beneficiary with regard to the English pre-emption right. Therefore, and in light of Chapter 2, the English and Welsh pre-emption rights fall outside the scope of this article.
204This is different in Scotland; Scottish law contains a ‘classic’ pre-emption right. As part of a whole raft of land reform measures, Part 2 of the Land Reform (Scotland) Act 2003 (hereafter: ‘the Act’) introduced the so-called ‘community right to buy’.[47] This community right to buy is a ‘classic’ pre-emption right in the sense that the beneficiary is entitled to a right of first refusal. The Act also contains land policy instruments that go beyond a right of first refusal. These instruments fall outside the scope of this article. It concerns the ‘crofting community right to buy’ (Part 3 of the Act), the ‘Community Right to Buy Abandoned, Neglected, or Detrimental Land’ (Part 3A of the Act) and The Right to Buy Land to Further Sustainable Development (Part 5 of the Land Reform (Scotland) Act 2016). Common feature of these land policy instruments is that they can be exercised at any time. This distinguishes them from the community right to buy, because land can be acquired without the consent of the owner. The instruments of Part 3, Part 3A and Part 5 liken more to a compulsory purchase or expropriation.[48]
5.2 Material conditions for registering pre-emption rights
Unlike the Netherlands and Germany, Scottish local government does not comprise municipalities, but rather 32 council areas. These council areas are responsible for spatial development and land policy, but are not eligible to register a pre-emption right. Instead, Part 2 of the Land Reform (Scotland) Act 2003 introduced the opportunity for ‘community bodies’ representing local communities across Scotland to register a community right to buy on ‘any land other than excluded land’ (s. 33). Initially, the right applied to rural areas only, but since the enactment of the Community Empowerment (Scotland) Act 2015, it applies to the whole of Scotland.[49] ‘Excluded land’ in terms of the Act are certain rights owned separately from the land, such as rights to gather mussels and oysters.[50]
Only a community body (hereafter: ‘CB’) is eligible to register a pre-emption right pursuant to Part 2 of the Act. Once a CB is successfully established (on CB’s, see 205§ 5.3), this CB registers a pre-emption right via an application to Scottish Ministers.[51] The application must meet four material conditions. These are listed in s. 38 of the Act. In the first place, the application must demonstrate a certain level of community support – for example via a petition – from the CB.[52] Second, the application must show proposals for the land and sustainable development benefits for the land. This means that the community right to buy does not intend to preserve status quo. Third, the application must describe the connection the CB has with the land. Part 2 does not define which connection a CB is expected to have with the land. It is up to the CB to demonstrate the relationship (for instance via their statutes).[53] Fourth, the Scottish Ministers need to be satisfied that the application is in the public interest. If these material conditions – alongside the other conditions mentioned on the application form – are met, the application can be submitted to Scottish Ministers.
5.3 Competent authority
In Scotland, only a CB can register a pre-emption right. The council areas are not eligible to do so. If a council area wants to register a pre-emption right it must do so with the interference of a CB. Forming an eligible CB is therefore a prerequisite for submitting the application set out in § 5.2. According to s. 34 of the Act a CB can be a number of legal entities, such as a company limited by guarantee (CLBG), a Scottish charitable incorporated organisation (SCIO), or a community benefit society (BenCom). The legal entity must always be covered by a governing document.[54] S. 34 (1) of the Act specifies extensively the matters that must be provided for in a CB’s governing document. These matters may differ slightly depending on the chosen legal 206entity. However, two key requirements that any governing document must address are 1) expressing that the main purpose of the CB is consistent with furthering the achievement of sustainable development,[55] and 2) defining the community it represents. Pursuant to s. 34 (5) of the Act ‘defining the community’ can be done in a number of ways, such as via postcode unit(s) or via community council area(s).[56] The goal is that Scottish Ministers are able to verify that the CB represents a defined group and territory.
Upon completion – and if desired after a pre-assessment by the Community Land Team – the governing document of the CB must be submitted to Scottish Ministers. When Ministers are satisfied that the CB’s governing document contains provisions which satisfy the criteria provided in s. 34 of the Act, they will issue a letter that states their acceptance. From that moment on, the CB can register an interest in land via the application form set out in § 5.2.
5.4 Effect
Once Scottish Ministers have approved the registration of the community right to buy, submitted via the application form, s. 40 (1) of the Act contains the principal effect of the community right to buy.[57] The owner of the immovable property is obliged to first offer his property to the CB, before he may transfer his property to a third party or may take any action with a view to a transfer. Put differently, the CB holds a right of first refusal. Similar to Dutch law, s. 40 (4) of the Act immediately lists some exemptions as to transactions that cannot be subject to the community right to buy. It includes for example (c) transactions between spouses or (e) a transfer between companies in the same group. Prior agreements – i.e. purchase agreements between landowner and a third party made before the community right to buy is registered – are also exempt, but only if the prior agreement is successfully concluded (s. 39 (1) of the Act). If the prior agreement is however not yet concluded – i.e. the land has been put up for sale or other actions with a view to a transfer have been taken, but missives have not been concluded – the community right to buy can 207still be registered. This is done via a ‘late application’ and for such an application, stricter rules apply (s. 39 of the Act).
An approved community right to buy is registered in the Register of Community Interests in Land (RCIL) (s. 37 (20) of the Act). A CB’s interest is valid for a period of five years from the date Ministers approved the application (s. 44 (1) and (4) of the Act). If a landowner, in spite of the community right to buy (and without applicability of any of the exemptions), transfers his property to a third party without offering it first to the CB, this transfer has no legal effect and does not constitute a transfer (s. 40 (2) of the Act). In such a case, the CB is entitled, in terms of s. 50 of the Act, to apply to the Lands Tribunal for Scotland to buy the land as if the landowner had informed Ministers according to s. 48 (1) of the Act (see § 5.5).
5.5 Procedure after the right is registered
When a landowner decides to transfer the registered property, he or she must notify the preferred CB as well as Scottish Ministers (s. 48 (1) of the Act). An owner does so via a standardized form.[58] Within seven days of the receipt of that form, Ministers will (in accordance with s. 49 (2) of the Act), write to the CB seeking written confirmation that the CB in fact wishes to exercise the right to buy the land. If the CB does not wish to exercise the right or fails to react within 30 days after the written notice from Ministers, the registered interest is removed and the prohibition on the landowner is lifted, leaving him free to sell the land to a third party. If the CB however wishes to exercise the right to buy the land, it confirms this decision to Ministers. From that moment, two tracks start running simultaneously.
First – like in the Netherlands – the landowner and the CB may enter into free negotiations to conclude the price. There are no specific rules or regulations on these negotiations. Regular Scottish contract law and general principles of good governance apply. Second – and unlike in the Netherlands – Ministers immediately appoint an independent expert to determine market value of the land (s. 59 of the Act).[59] Given s. 59 (7), this market value approaches the expropriation value, because the fact that a community right to buy is registered should be eliminated in the valuation. This all means that landowner nor CB needs to request an independent valuation. If the CB or the landowner is not satisfied with the independent valuation, appeals may be made to the Lands Tribunal for Scotland (s. 62 of the Act) who 208then determines the price. So, the price to be paid by the CB is any of three: 1) the amount agreed between parties, 2) if no agreement is reached, the market value as assessed by the valuer or 3) if the valuation is appealed, an amount to be determined by the Lands Tribunal for Scotland.
Following the valuation, Scottish Ministers will appoint an independent ballotter to conduct a ballot of all eligible voters within the CB’s defined community (s. 51A-52 of the Act). The aim of the ballot is to seek the approval of the community for the purchase price. Only after a successful ballot, Scottish Ministers can approve the community right to buy.
6. Pre-emption rights in Belgium (Flanders)
6.1 Background of the applicable law
In Flanders, public authorities also – just as in The Netherlands – may feel the need to have a pre-emption right in case of a possible sale of immovable property that in the future may be used for new developments. If the public authority manages to buy these properties, it will – in the future – be able to refrain from the use of expropriation.
In Flanders this right differs from The Netherlands in the sense that it entails a ‘German style’ right of first refusal (called “voorkooprecht” or “droit de préemption”). This means that the owner is obliged, whenever he enters into a purchase agreement with a third party, to give the beneficiary the opportunity to purchase the property on a priority basis at the price and terms agreed in the sale agreement with the third party (or such other price as would be provided for in the terms of the right of first refusal).[60]
There is a great variety of laws in which rights of first refusal are introduced to the benefit of (mainly) public authorities,[61] but for the scope of this article the most relevant is the Vlaamse Codex Ruimtelijke Ordening (the Flemish Law on Spatial Planning or ‘VCRO’). This law contains the right of first refusal that we will analyze in more detail.209
6.2 Material conditions
A pre-emption right based on the VCRO can only be registered on real estate. Which means on immovable property. The pre-emption right is established by including the affected property in a designated zone incorporated in the spatial development plan.[62]
This means that in a spatial development plan zones may be indicated where a pre-emption right will be in effect. Technically, the VCRO does not prohibit the registration of a pre-emption right on land with a continuing agricultural function. In this, it likens to Scotland. The VCRO does however stipulate that the pre-emption right is registered to achieve spatial development goals. Put differently, the Flemish pre-emption right is not intended to preserve status quo. Therefore, any continued agricultural function should clearly differ from the current use.
The spatial development plan can also stipulate for which period of time the pre-emption right will be valid and/or if there is any sort of hierarchy of beneficiaries of the right (for instance higher forms of government). The period during which the pre-emption right applies, starts at the moment the final spatial development plan is enacted and ends by law after fifteen years.[63]
6.3 Competent authority
Article 2.4.1 VCRO attributes the right to register a pre-emption right to a raft of public authorities, such as the Flemish Community (‘Vlaams Gewest’), the provinces, the municipalities and the cooperation of public authorities (‘intercommunales’), but also to institutions that resort under such public authorities and even private entities that are acknowledged by those public authorities or institutions. The reason for establishing a preference right has to be the realization of a spatial development plan (‘ruimtelijk uitvoeringsplan’). Similar to the Netherlands the (city) council is the competent authority to register the pre-emption right.[64]210
6.4 Effect
The right of first refusal creates an opportunity for the beneficiary to insert himself as buyer in an (almost) concluded sale. In this, the Flemish pre-emption right is similar to the German one (§ 4.4).
The owner and the third party conclude the purchase agreement on the condition that the beneficiary of the pre-emption right will not use that right. It is the civil-law notary who – before actually transferring the property to the prospective buyer – will contact the so-called ‘e-right of first refusal booth’ (‘e-voorkooploket’).[65] This is a unique electronic information booth regarding all existing and future Flemish rights of first refusal.[66] The ‘e-voorkooploket’ acknowledges receipt of the offer and relays it to potential beneficiaries. A beneficiary then has a period of 60 days to decide whether he will exercise his pre-emption. If he does so, this will result in a sale between the property owner and the beneficiary under the exact same conditions as the envisaged sale between the property owner and the third party. Unlike Dutch, German and Scottish law, the Flemish VCRO does not contain a price limiting mechanism. The beneficiary can only insert himself as buyer.[67] To avoid excesses, owner and third party can only conclude the purchase agreement on the original terms. These are the terms that led the beneficiary to refrain from exercising the pre-emption right. For any change in the original terms, the beneficiary must be given a new opportunity to exercise the right.[68]
In case the beneficiary refrains from using his pre-emption right the sale between the property owner and the third party may be concluded, and the property may be transferred.
6.5 Procedure after the right is registered
In case a transaction between landowner and third party takes place in spite of the pre-emption right, the beneficiary of the right may choose whether he wants 211to be substituted for the buyer nevertheless or to receive a compensation for damages.[69]
These sanctions do not come into effect automatically: the beneficiary has to claim his rights in court. This procedure must be started within six months after a public sale or in case of a private sale, after a notice of sale by the aforementioned ‘e-right of first refusal booth’. In case the sale was not noticed the term expires after one year after the deed was inscribed in the register of the mortgage office.
A legal action aimed at substitution will have to be directed against both the owner and the third party. The action is only admissible after the action has been inscribed on the litigious sale deed. The substitution implies that the beneficiary refunds the purchase price to the buyer and the seller refunds the buyer all the costs incurred by the buyer. The beneficiary takes the place of the buyer vis-a-vis the seller and assumes all the rights and duties of the buyer as far as they were described before the action for substitution.
7. Pre-emption rights in France
7.1 Background of the applicable law
Just as in Flanders and in Germany, France has a system of rights of first refusal in the sense that the beneficiary may replace the third party in a concluded purchase agreement (“voorkooprecht/droit de préemption”).
Different from Flanders however – and in fact from all aforementioned legal systems – French law also provides the possibility to exercise a pre-emption right on moveable property (‘droit de préemption commercial).[70] For the purposes of this article, we will only focus on the pre-emption right on immoveable property (‘droit de préemption immobilier’).
There are four categories of this type of pre-emption right: a pre-emption right on a departmental level (‘la zone d’aménagement différé’), a pre-emption right on a municipal level (‘le doit de préemption urbain’), a pre-emption right to protect valuable natural areas (‘le droit de préemption dans les espaces naturels sensibles’) and 212a pre-emption right to protect agricultural areas (‘le droit de préemption pour la protection et mise en valeur des espaces agricoles et naturels periurbains’).[71] Again, for the purpose of this article, the second is the most important and we will therefore focus on the municipal pre-emption right.
The pre-emption right on the municipal level (‘le doit de préemption urbain’, or abbreviated as DPU) has a twofold aim. On the one hand the right of first refusal is deemed to prevent – or at least discourage – speculation on the property market. On the other hand the right of first refusal is expected to be an instrument that would facilitate public authorities to purchase property that is needed for future (urban) development.
7.2 Material conditions
Article L. 211–2 of the Code de l’urbanisme stipulates that a municipal pre-emption right (DPU) may be created by the municipal council.[72] Article L. 300–1 of the Code de l’urbanisme lists the reasons for which a ZAD may be created: local housing projects, an urban housing project, the creation of expansion of economic activities, the development of tourism or recreation, the development of certain communal facilities, the protection and/or upgrading of French cultural heritage.
The DPU may only be registered where a municipality has already enacted a planning regulation/zoning plan (a plan d’occupation des sols – POS or a plan local d’urbanisme – PLU). It is noteworthy that the DPU is not limited in time. The DPU may be retracted by the municipal council or the perimeter may be changed.
7.3 Competent authority
The DPU is – as mentioned before – created by the municipal council.[73]
Affected parties – such as property owners – can object to the decision to create a DPU before the Council of State. The Council of State reviews the aforementioned decision by not only assessing whether the DPU is based on one of the reasons mentioned above, but also whether the perimeter is not apparently unreasonable or 213there are other reasons to assume that the project for which the right of first refusal is created is unlikely to ever be carried out. The latter could be the case when the project is deemed useless or it is apparent that the municipality does not have sufficient funds to carry out the project.[74]
7.4 Effect
The effect of the French pre-emption right is such that the owner of the affected property has – usually through a notary – to inform the beneficiary (via the municipality, the ‘mairie’) of his intention to sell his property and the sale price (‘la déclaration d’intention d’aliéner’ or DIA). The DIA must indicate the assets concerned, the price (or the assessment of the payment in kind), the terms and conditions of the proposed disposal and the information required under Article L.514–20 of the French Environmental Code.[75] There is no legal obligation to mention the name of the purchaser. The sale agreement between owner and purchase will be under the condition that the DPU is not used.
Any breach of the DPU entails the nullity and unenforceability of any deeds of transfer enacted. Judicial proceedings shall be instigated before the Court of first instance (Tribunal de grande instance) of the place where the asset is situated. This action is subject to a five-year limitation period as from the publication date of the deed whereby ownership is transferred. The pre-emption right holder may also instigate proceedings against the seller and, if applicable, the seller’s agent (drafter of the instrument), on the grounds of fault-based liability.
7.5 Procedure after the right is registered
Once the beneficiary of the DPU has received a DIA, he has two months to make up his mind.[76] He may pose additional questions to the property owner regarding the property. This suspends the period of two months.[77] In case the beneficiary does not want to use his right, or does not respond with the aforementioned period of time, the property may be sold and transferred to a third party. However, if the price or 214the terms and conditions of the sale change, the owner will be required to file a new DIA.
In case the beneficiary wants to use his right and finds the conditions of the sale (including the price) acceptable he will be able to take the position of the original buyer in the sale and transfer documents.
In case the beneficiary is interested to buy the property, but believes that the price is too high he may suggest a different – lower – price. If the property owner does not agree with this price he may either refrain from a sale or he can approach the court to determine the price.[78] The procedure before the expropriation court is the same as a valuation procedure in a regular expropriation case. There will for example be an appointment of an expert and there will be a visit to inspect the property. Of course, the difference with an expropriation procedure is that in this case only the value of the property has to be determined. The property owner is not entitled to any additional compensation of damages.
Once the court has determined a price both the beneficiary and the property owner may still refrain from buying or selling the property. In case the beneficiary refrains, the property owner may sell the property to a third party for the (at least) the price determined by the court. In case he asks a different – lower – price he still has to offer the property first to the beneficiary.
If the municipal council decides to use the acquired property for a reason other than that mentioned in the DPU decision, it must offer the former owner the possibility to buy it back. This is called the right of retrocession. The municipality has to make the former owner an offer of sale indicating a sale price. This offer must be made by registered letter with notice of receipt. The former owner has two months to either agree to repurchase the property at the price proposed by the municipality, or to renounce the repurchase of the property, or to request the repurchase of the property at a different price. The absence of a (timely) reaction is considered to be a renunciation of the right to repurchase the property.
In the absence of an agreement, the former property owner and/or the municipality can approach the court to determine the sale price of the property. In case the former owner does not agree to a sale for the court-determined price, the municipality has to offer the property at this price to the person who intended to buy the property at the moment of the DIA. Only if this person also declines to buy the property is the municipality free to either keep it, or sell it to a third party of its choice.215
8. Synergy and calibration
As described in the Introduction, two Dutch ministries believe that by broadening the conditions under which pre-emption rights can be registered, they can have a positive impact on land reform. First, the ministry of Agriculture, Nature and Food Quality (LNV) envisions the possibility to register a pre-emption right on land with a continuing agricultural function.[79] This is expected to increase influence on the specific use of that agricultural land.[80] Second, the ministry of the Interior and Kingdom Relations (BZK)[81] encourages municipalities to register pre-emption rights “more and earlier”.[82] This is expected to increase control of the living environment and decrease land speculation.
Regardless of whether the envisioned extensions of the Dutch pre-emption right are internally feasible,[83] the comparative analysis in this article shows that the Dutch pre-emption right can – internationally – already be regarded as a ‘fast and efficient’ procedure. Of course, Dutch law requires an active act of registration, but this holds true for all the included jurisdictions. The only exception is the German ‘general’ pre-emption right which exists by force of law (§ 4.2). This ‘general’ pre-emption right does however call for an enacted zoning plan, which – by the time of the enactment – will potentially have already increased speculation. Moreover, Dutch law allows the possibility to register a pre-emption right at the earliest stage of the spatial planning process. This is done by the municipal executive via a so-called ‘preliminary designation’ (§ 3.2) and without the precondition of an enacted zoning plan or other development plan.[84] Only German law – as far as it concerns the ‘special’ pre-emption right (§ 4.2) – provides that same possibility, albeit only with regard to urbandevelopments. One could argue that also Scotland should be mentioned at this point, because the community right to buy does not require an enacted zoning plan. In Scotland, however, more extensive conditions apply before 216the pre-emption right can be registered at all, such as the formation of an eligible CB (§ 5.3).
As far as it concerns a fast and efficient procedure, two other elements should be mentioned. First, Dutch law allows the beneficiary to negotiate the terms of the purchase for itself. In all other countries – except for Scotland – the beneficiary can only ‘replace’ the third party in a(n) (almost) concluded purchase agreement. The latter has a number of negative consequences such as little to no influence on the terms of the purchase agreement and a less timely involvement. Second, the Netherlands and Scotland are the only countries that deem transfers in spite of a pre-emption right legally invalid (see § 3.4 and § 5.4) – i.e. to generate no legal effect. This ‘property law effect’ is the strongest safeguard possible. In Germany, for instance, transactions that impede the pre-emption right are legally valid (unless the municipality used the Vormerkung, see § 4.4).
When it comes to the intention of the Dutch ministry of LNV to broaden the pre-emption right in such a way that it can be registered on land with a continuing agricultural function, lessons can be learned from Scottish law. Scotland is the only included country that does not (eventually) require a zoning plan containing (urban) spatial developments at the basis of the pre-emption right.[85] Scottish law requires that the CB shows sustainable development benefits for the land (§ 5.2). The rationale behind the intention of LNV is to encourage other more extensive forms of farming, such as nature-inclusive farming.[86] Under Scottish law, this would qualify as a sustainable development benefit as improving the environmental quality of the land is specifically mentioned as a sustainable development benefit.[87] Scottish law can also serve as an example on another element. Unlike any other jurisdiction Scottish law provides the immediate appointment of an independent expert to determine market value of the land as soon as the beneficiary expresses its wants to exercise the pre-emption right (§ 5.5). This means that landowner nor beneficiary need to request an independent valuation or price determination procedure via the court.217
9. Common features of the pre-emption right
Because of the fact that ‘only’ five legal regimes are included in this comparative study, common features of the ‘European pre-emption right’ should be interpreted with restraint. Still, it is noteworthy to show three transnational principles.[88]
The first common feature that the included jurisdictions share is that pre-emption rights do not intend to preserve status quo. They are always linked to a particular spatial development that meets a public interest. In most countries, this development is operationalized – at some point – via a zoning plan or other (urban) development plan. The only exception is Scottish law, which does not require a zoning plan at the basis of the pre-emption right (§ 5.5 and § 8). The fact that pre-emption rights always anticipate a particular spatial development implies that they cannot be registered without ex ante decision-making on the specific purpose and public interest of the pre-emption right. In addition, in all countries pre-emption rights are only valid during a set time period. These safeguards protect owners of immovable property against unjustified and everlasting decreases in value and disguised forms of expropriation. By extension, we argue – and feel supported by the lack of ECtHR case law – that the pre-emption right in the jurisdictions satisfies s. 1 Protocol to the ECHR.
Second, there are two ‘flavors’ when it comes to exercising the right of first refusal. The Netherlands and Scotland have a system in which the landowner is obliged to first offer the land to the beneficiary after which free negotiations between landowner and beneficiary commence. Only after withdrawal from the beneficiary, the property may be offered to third parties. Flanders, France and Germany have a system in which the beneficiary is notified as soon as a purchase agreement is almost concluded between landowner and third party. The beneficiary may then replace the third party said purchase agreement. Both systems render a right of first refusal, but do so in another way.
Third, all the included legal regimes – except for Flanders – provide ‘price limiting mechanisms’. These mechanisms ensure that the purchase price can be fixed at a certain value in the case landowner and beneficiary do not reach an agreement. In all countries, this value relates to either the expropriation value, or the market value of the property. France and the Netherlands allow for a price determination procedure at the local court. The local court appoints independent experts that determine the expropriation value of the property. In Germany the expropriation va218lue is also determined by independent experts, but without court-interference. Under specific circumstances (see § 4.5), in Germany the price can also be fixed on the market value of the property. Also Scottish law taps into the market value, but this market value is closely related to the expropriation value. Upon confirmation from the CB that it wishes to exercise its community right to buy, Scottish Ministers immediately appoint an independent expert to determine the market value of the land (§ 5.5).
10. Concluding remarks
In face of the recent attention on (broadening) the scope of pre-emption rights in the Netherlands, this article had three objectives. The first objective was to provide a comparative legal analysis on pre-emption rights – or equivalents thereof – in five different European jurisdictions (Chapters 3 to 7). The second objective was to calibrate/evaluate the Dutch pre-emption right in light of the other jurisdictions (Chapter 8). The last objective was to derive some general principles/common features of the ‘European pre-emption right’ (Chapter 9).
Based on the comparison, we observe that the Dutch pre-emption right renders a relatively fast and efficient procedure with sufficient safeguards that protect the pre-emption right and that result in a fair price. When it comes to broadening the applicability of the pre-emption right in the sense that they can be registered on property with a continuing agricultural function, we argue that Scottish law can serve as an example. As a general principle of the ‘European pre-emption right’, we however note that pre-emption rights are nowhere intended to preserve status quo. The envisioned agricultural use of the land should therefore differ from the already existing use.
© 2024 the author(s), published by Walter de Gruyter GmbH, Berlin/Boston
This work is licensed under the Creative Commons Attribution 4.0 International License.
