The passing of an immovable into public hands is not always dependent on a court decision. If the administration and the owner are able to reach agreement on the price and the conditions of transfer, the immovable changes hands without any recourse whatever to lengthy and costly litigation. Known in practice as settlement or the purchase procedure, this mechanism removes expropriation from the realm of unilateral administrative imposition and converts it into a transfer founded on mutual consent.
The legislature has not left this route to the choice of the parties. In the expropriation of immovables recorded in the land registry, the first step to be taken by the administration must, under Article 8 of the Expropriation Act No. 2942, be an attempt to reach agreement with the owner. It is not possible to move to the judicial route before that preliminary stage has been completed.
Below we examine systematically the circumstances in which the purchase procedure comes into play, the stages of the process running from valuation to the record of settlement, the time limits to be applied and the legal position which arises according to whether or not agreement is reached.
The Concept of Settlement in Expropriation
Settlement is among the most decisive stages of expropriation; it establishes a point of balance between the public interest and the right of property. Thanks to this institution, the change of ownership becomes the product not of administrative compulsion but of the will of the parties.
Definition of Settlement
In its technical sense, settlement is the transfer to the administration, with the owner’s consent and on condition that the consideration is paid in advance, of an immovable in respect of which a public interest decision has been taken. Here the expropriation is brought to a conclusion not by a judicial decision but by operating the purchase procedure. In this relationship the administration stands as purchaser and the owner as seller; the rules determining the conditions of transfer, however, derive not from the general law of obligations but from the special legislation on expropriation.
Purpose of Settlement
The rationale for this procedure may be gathered under three heads:
- Accelerating public investment: Enabling projects such as roads, dams and schools to be realised without awaiting the outcome of litigation spread over years.
- Limiting the owner’s detriment: Minimising the disquiet arising from the restriction of the right of property by affording the person deprived of the immovable the opportunity to collect the consideration without delay.
- Easing the burden on the courts: Forestalling the accumulation of files seeking the determination of price and registration which weighs on the judicial system.
Legal Basis: Article 8 of Act No. 2942
The basis of the purchase procedure is Article 8 of the Expropriation Act No. 2942.
Expropriation Act No. 2942, Art. 8
“Administrations shall be obliged to apply the purchase procedure as a matter of priority in the expropriations they are to carry out under this Act.”
The wording of the provision leaves the administration no margin of appreciation. Settlement is not an option to which the public legal entity may resort if it so wishes, but a procedural obligation which it must fulfil. Unless this route has been attempted and exhausted in the proper form, it is not possible for the administration to apply directly to the civil court of first instance seeking the determination of price and registration.
How the Purchase Procedure Operates
In the case of immovables recorded in the land registry, the statute prescribes a preliminary phase which must be completed before the litigation stage is reached. Subject to formal requirements, this phase is also the measure of whether the expropriation has been conducted lawfully.
In an action for the determination of price and registration brought while that stage is omitted, the court will dismiss the case on procedural grounds for want of a procedural requirement, without entering into the merits of the dispute at all. The attempt at settlement is therefore not a formal detail of the process but a precondition for the opening of the judicial route.
The Mandatory Character of the Procedure
The statute does not permit the administration to turn directly to the courts in the expropriation of an immovable recorded in the land registry. The understanding that interference with the right of property should arise only as a last resort has led the legislature to ensure that the parties first effect the transfer by agreement.
For that reason the administration must approach the owner of the immovable to be expropriated and make an offer to purchase by negotiation. In an action brought without such an offer, the court will dismiss the case on procedural grounds without proceeding to an examination of the merits. As will be seen, the purchase procedure is not a facility afforded to the administration but a statutory obligation which must be fulfilled.
The position is partly different as regards urgent expropriation. Under that procedure the expropriation formalities are not abolished altogether; the immovable is merely allowed to be taken into possession swiftly, and the steps relating to the determination of price and the registration of ownership are completed at a subsequent stage. In urgent expropriation, by contrast, operating the purchase procedure in the classical sense before an action is brought has not been made mandatory.
A comparable position is seen in disputes concerning zoning restrictions, in other words legal interference. In such actions the owner of the immovable is obliged to apply to the administration concerned before going to court. Although that application is not a settlement meeting in the classical sense, it is a mandatory preliminary stage so as to avoid encroachment on administrative jurisdiction, given that the dispute is to be resolved before the administrative courts.
Both institutions are reflections in our legal system of the principle that interference with property must be a last resort.
Taking the Expropriation Decision and Entering an Annotation on the Title Deed
Before settlement negotiations can be embarked upon, an expropriation decision must first exist. The process begins with the administration deciding, in line with the public interest and the requirements of the service, to expropriate a particular immovable.
Following the decision, the land registry directorate holding the record of the immovable is informed of the position and an expropriation annotation is entered on the record. That annotation, which shows that the immovable has entered the expropriation process, is an important legal step.
The annotation entered on the register may affect the legal consequences of dealings carried out in respect of the immovable; it likewise affords legal certainty to interested parties as regards transactions such as transfer or the creation of rights in rem.
Determination of the Price: The Valuation Commission
Immediately after the decision has been taken, the administration constitutes a valuation commission in order to establish the value of the immovable to be expropriated.
In carrying out its assessment, the commission has regard to the following elements:
- The location in which the immovable is situated
- The area it covers, that is to say its surface area
- Its type and the characteristics it bears
- Its position in relation to the zoning plan
- The purpose for which it is actually used
- The sale prices of similar immovables in the vicinity
- The income which the immovable yields
Where it needs to do so, the commission may request information from the relevant public bodies and may equally establish value by obtaining reports from expert persons or institutions.
The figure thus arrived at forms the starting point of the settlement negotiations; the bargaining between the parties is conducted on the basis of that value.
Invitation to Settlement
Once the value has been established, the administration sends the owner or owners a letter inviting them to a meeting. In practice this step is termed an “invitation to settlement”.
The letter of invitation must be delivered by official service. In matters of service the provisions of the Expropriation Act apply in the first place; where that statute contains no regulation, the Notification Act No. 7201 comes into play.
The matters to be notified to the owner in the letter are the following:
- The procedure by which the owner may take part in the negotiation process
- The date on which the meeting is to be held
- The administration’s intention to acquire the immovable by negotiation
The point to be underlined here is that it is not mandatory for the price of the immovable to be shown in the letter of invitation. Upon the letter reaching the owner, the owner is formally apprised of the expropriation; and the time limit for bringing an action before the administrative courts against the expropriation likewise begins to run from that date.
Conduct of the Negotiations
An owner, or an authorised representative, who applies to the administration within fifteen days of the day on which the letter is served has the opportunity to take part in the negotiations. The bargaining process begins upon that application. At this stage the parties may address the following matters:
- The expropriation price to be agreed upon
- The method by which the price is to be paid
- The time at which payment is to be made
- Other conditions relating to the transfer of the immovable
- Where thought appropriate, the exchange of the immovable
If agreement is reached, a record of settlement setting out the terms of the accord arrived at is prepared and signed by the parties.
If no accord can be reached, the administration proceeds, on the basis of Article 10 of the Expropriation Act No. 2942, to bring an action seeking the determination of the price by the court and the registration of the immovable in its own name.
Legal Consequences of Reaching an Agreement
If accord is reached on a figure within the limits determined by the valuation commission, the expropriation is completed by the purchase procedure without any recourse whatever to the courts. Ownership of the immovable passes to the administration on the basis of the agreement between the parties and the matter is concluded within a short time.
Signature of the Record and Its Binding Force
The matters on which the owner and the settlement commission have agreed acquire formal status through a record of settlement signed by both parties. Although that document, which sets out together the expropriation price, the conditions of transfer and the owner’s consent, does not have the character of a court judgment, it is definitive and binding as between the parties.
From the moment the record is signed, the owner’s opportunity to bring an action also comes to an end; neither an action for annulment against the expropriation nor an action objecting to the price may be brought.
Registration of the Title Deed in the Name of the Administration
Where agreement has been reached, the record of settlement constitutes the legal basis of the registration; no separate act of conveyance of the kind required in ordinary sales is necessary.
- Document underlying registration: The signed record showing that the parties have reached accord on the transfer constitutes the foundation of the transaction to be carried out at the land registry directorate.
- Operation: On the basis of that document the administration requests the relevant land registry directorate to register the immovable in its own name; the directorate effects the registration in accordance with the record, without awaiting any further declaration by the owner.
- Position of encumbrances: Ownership passes to the administration upon registration. If there are annotations, mortgages or attachments over the immovable, these are deleted from the title deed record, to be met out of the expropriation price in accordance with the relevant legislation.
Payment of the Price to the Owner
Under this procedure payment and the change of ownership are closely bound to one another; the process is concluded within a short time.
- Running of the time limit: Once the record has been signed and the registration formalities completed, the administration is obliged to pay the agreed sum to the owner within 45 days.
- Form of payment: As a rule the price is paid in advance and in cash; in practice it is commonly remitted to the bank account notified by the owner.
- Consequences of delay: A failure by the administration to make payment within that period does not mean that the owner has withdrawn from the agreement. The owner may have recourse to legal remedies to collect the debt and may claim statutory interest for the period of delay.
Legal Consequences of Failing to Reach an Agreement
A failure to obtain a result from the negotiations conducted within the framework of Article 8 of the Expropriation Act No. 2942, or a failure by the owner to attend the negotiations at all, does not bring the expropriation process to an end. In such a case the administration has no option, if it is to complete the act, but to have recourse to the courts.
At this point the process moves to the stage of determination of the price by the court and registration of the immovable in the name of the administration.
Bringing the Action for Determination of Price and Registration
Where no settlement is achieved, the administration applies to the Civil Court of First Instance for the place in which the immovable is situated and brings the action seeking determination of the price and registration. The action has two essential functions: the establishment by the courts of the real value of the immovable, and the registration of ownership in the name of the administration against that established price. That action constitutes the mandatory judicial phase of expropriation.
Expert Examination and Determination of the Price
After taking the statements of the parties, the court orders an examination by court-appointed experts in order to establish the value of the immovable; in most files an on-site examination is also carried out.
- Valuation criteria: The calculation is made on the basis of objective criteria such as the type and location of the immovable, comparable sale prices and income potential.
- Commencement of interest: If the proceedings cannot be concluded within 4 months of the date of the action, statutory interest runs on the price determined from the day the fourth month expires until the date of the decision.
Blocking of the Price in a Bank Account
Once the court has determined the price, it allows the administration time to deposit that sum in a bank in the name of the owner.
- Obligation to deposit: The administration is obliged to deposit the sum established by the court into the owner’s account in cash and in advance; in practice this step is referred to as “blocking the price in a bank”.
- Timing: The step is carried out at the stage immediately preceding the delivery of the decision, within the 15-day period allowed by the court or within any additional period granted.
- Nature of the blocking: The money deposited waits at the bank at this stage; the owner cannot withdraw that sum until registration is ordered.
- Accrual of return: The sum held is invested so as to earn a return, in the manner of a term deposit, for the period until the court’s decision.
Payment and the Registration Decision
When the receipt showing that the administration has deposited the price is submitted to the court, the file reaches the decision stage. At this stage the court orders the registration of the immovable in the name of the administration and the payment to the owner of the sum deposited at the bank. The owner makes an application on the basis of the payment letter sent by the court to the bank and collects the expropriation price.
No requirement of finality: It is not required by law that the decision pass through appeal or appeal on points of law and become final before the price may be paid. While collecting the money, the owner may also exercise the right to apply to the higher court if the price is considered too low.
Passing of Ownership to the Administration
Ownership of the immovable passes to the administration upon the delivery of the registration decision. The land registry directorate registers the immovable in the name of the administration on the basis of the court’s decision, and the expropriation is thereby complete in law.
Independent Legal Assessment
The purchase procedure is a stage which is in practice often treated as a formality but which, in terms of its consequences, determines the whole of the process. For the owner it is the point at which the choice is made between collecting the price without delay and litigation spread over years. For the administration, operating the procedure incompletely or incorrectly gives rise to the risk that the action brought will be dismissed without the merits being reached.
Given that the opportunity to object closes entirely upon the signature of the record of settlement, the signature stage should not be reached before the price offered has been compared with the real value of the immovable. In establishing a roadmap in a concrete file, the following heads should be addressed as a priority:
- Reviewing whether the letter of invitation was served in the proper form, and the fifteen-day period for application
- Independently testing the comparables and the valuation method used in the valuation commission’s report
- Assessing, before the record is signed, that the right of action will come to an end and that the price will become binding
- Clarifying in advance the manner in which mortgages, attachments and annotations over the immovable are to be met out of the price
- Where agreement has been reached, monitoring the 45-day payment period and advancing a claim for interest in good time in the event of delay
- Devising from the outset, against the possibility that settlement is not achieved, a strategy for the defence in the action for determination of price and for objecting to the expert report
Independent Legal provides advisory and litigation services throughout the whole of the process in expropriation disputes, from the conduct of settlement negotiations to the pursuit of actions for the determination of price and for registration.