Compensation for expropriated persons

Determination of the consistency of the goods

Before determining the amount of the compensation, the consistency of the expropriated property. This means that the main compensation will take into account the material composition of the property and the rights attached to it.

All the physical elements of the property must therefore be taken into account, namely:

• The ground and basement of a plot
• The construction itself, its accessories (fence, garden, outbuildings, cellar, etc.), the quality of materials and equipment, or the state of obsolescence for built buildings.

The rights attached to the expropriated property are also included. These include leases (residential, commercial or rural) and easements (legal or conventional).

Valuation of assets

The main compensation for expropriation must correspond to the market value the expropriated property, i.e. the price at which it could have been sold on the property market under normal conditions.

To help expropriated persons appreciate this value, an online service provides access to information on sales of comparable real estate (type of property and similar area).

It is accessible from the particular space of the site impots.gouv.fr:

Taxes: access to your space Private

This service provides data on sales in the same geographical area and over a given period.

The information provided shall include:

• The location of the property (address, municipality/department, cadastral references)
• Its main characteristics (year of construction, area, type of property, number of rooms, floor, presence of an elevator, building materials, etc.)
• The date and price of sale (methods of calculating price/area and price/number of outbuildings)

These elements allow the expropriated property to be compared with similar properties and to determine a realistic estimate of its value. Only transactions that occurred during the Last 9 years may be consulted.

Assessment of expropriated buildings

In the absence of an agreement between theexpropriating and the expropriated on the value of the property, the expropriation judge sets the amount of the main allowance.

The expropriation judge then freely chooses the most appropriate assessment method for the situation. Indeed, several valuation methods can be used depending on the nature of the property and the circumstances:

• Evaluation by comparison. This is the most commonly used method. It consists in comparing the expropriated property with other properties with similar characteristics recently sold in similar geographical areas. This approach makes it possible to determine an average value representative of the local real estate market.
• Assessment by income. This method is used mainly for leased buildings. It consists in estimating the market value of the property on the basis of the income it brings in, that is to say the rents received each year. The judge then applies a capitalization coefficient to transform this annual income into a sales value.
• The valuation by the cost of reconstitution. It is reserved for specific properties, mainly classified buildings. The value is then estimated on the basis of the cost necessary to reconstruct the property identically, taking into account its condition and durability.
• Assessment of land recovery. This method applies when the value of the land is significantly higher than that of the buildings it supports. The buildings are then considered to be in need of demolition, and only the value of the bare land is retained, less the estimated cost of demolition. It is used in particular for dilapidated buildings, unsanitary buildings or buildings destined for destruction, but cannot be applied to buildings in good condition.
• Evaluation of the promoter balance sheet or the countdown. This method consists in using the final sale price of a real estate transaction (construction, rehabilitation or development) and deducting all the costs related to the transaction, including the cost of the works. It makes it possible to estimate the value of a building plot as a function of its construction potential. However, due to its uncertainty and the many assumptions to be taken into account, this method is rarely adopted.

The property must always be valued according to its actual condition and market conditions. Therefore, the estimate cannot be based on new constructions. Nor can it be based on prices displayed in agencies or on promises of sale, which are merely indications.

Valuation of goodwill

The expropriation can only concern real estate (land, buildings etc) or rights in rem in immovable property. One goodwill, which is immaterial property (such as customers or trade name), cannot therefore be expropriated directly. In practice, it is the building where the business is located that can be expropriated. The fact of being expropriated then leads to the loss of commercial activity.

In this case, the expropriator must pay a eviction pay :

• to the owner when he himself operates his business
• to the tenant holding a commercial lease, when carrying on business in the expropriated premises.

In the event of disagreement on the amount of compensation, it will be up to the expropriation judge to determine its value.

The expropriation judge freely determines the criteria necessary for the valuation of the business. Most often, he will use a comparative method which consists in evaluating expropriated trade with other similar businesses recently sold or estimated in the same sector of activity and the same geographical area. This method is based on market data and benchmarks established for each type of business (e.g. cafes, bakeries, pharmacies, hair salons, etc.).

In practice, this involves applying a valuation coefficient to one or more of the economic indicators of trade:

• the recipe daily average,
• the average annual profit calculated over the last 3 years,
• or the average annual turnover calculated over the last 3 years, all taxes included.

The coefficient used reflects the profitability of the business: the more stable, reputable and well located the business, the higher the estimated value will be.

This method thus makes it possible to set a realistic market value for the goodwill, reflecting its position on the market at the time of the expropriation.

Employment allowance

The purpose of the re-employment allowance is to enable the expropriated owner to meet the costs of using the principal allowance received.

This indemnity thus aims to cover the expenses necessary when acquiring a property similar to the one lost (searches for the property, notary fees, registration fees and, more broadly, all the expenses related to the purchase), for a price equal to the amount of the main indemnity.

For this reason, the amount is calculated as a proportion of the principal allowance. In practice, the judge fixes this allowance in a range generally between 15% and 30% of the main allowance.

There are, however, two limits to the employment allowance:

• It is not due when the property was clearly intended for sale, or put up for sale by the expropriated owner during the period of 6 months before the declaration of public utility
• Its amount must take into account any tax advantages that the expropriated person may benefit from when buying back property.

Other incidental allowances

Ancillary compensation is intended to compensate for the damage that is caused by the direct consequence of expropriation.

This may include, for example:

• Allowance related to professional activity : expropriation may undermine or disrupt a company resulting in loss of customer, dismissal or loss of net profits. In this case, the expropriator may offer compensation corresponding to the amount of the severance payments or eviction pay.
• Impairment allowance : where the expropriation concerns a part of the property, the non-expropriated part may suffer a decrease in value. This loss is compensable. This is the case, for example, if the remaining area becomes too small to build a dwelling or new constraints appear (nuisance, immediate proximity to a widened road).
• Compensation for loss of closure : if the expropriation results in the destruction of a fence, wall or partition, the cost of reconstruction may be compensated.
• Removal allowance which covers the costs of changing residence (dwelling)
• Compensation for loss of rental income : if the expropriation results in the early departure (before the end of the lease) of the tenants or renders the property unusable for rent, the owner may be compensated for the rent not collected.