Temporary occupation authorisation of public land: the precariousness of the title and its effect on the value of the asset

An investor who acquires a hotel built on a port site, a restaurant operated in a railway station, a car park built beneath a municipal square or a photovoltaic plant installed on a public facility is not buying a building: it is buying a title. The distinction seems theoretical as long as the business is running. It becomes decisive at the time of refinancing, of sale, or when the public authority announces that it will put the site out to tender again at expiry. The temporary occupation authorisation of public land (autorisation d'occupation temporaire, AOT) is governed by a written regime, that of the French General Code of Public Property (code général de la propriété des personnes publiques), which organises the precariousness of the title, caps its duration, makes its transfer conditional and determines in advance what happens to the structures at the end of the contract. This analysis sets out what this regime does not guarantee to the investor, and the points on which the value of the asset is really determined: scope of the real right, capacity to grant a mortgage, approval of a transfer, compensation in the event of early withdrawal and exposure to the public land occupation fee.

Precariousness and temporariness: two written rules, not two case-law constructions

The first analytical error is to treat precariousness as a judge-made principle that a well-drafted clause could neutralise. It is in the statute. Article L2122-1 of the General Code of Public Property (CG3P) provides that no one may, without holding a title authorising them to do so, occupy a part of the public domain of a public body. Article L2122-3 adds in a single sentence what structures everything else:

The authorisation referred to in Article L. 2122-1 is precarious and revocable.

Article L2122-2 completes the scheme: the occupation or use of the public domain may only be temporary. The wording resulting from Ordinance No. 2017-562 of 19 April 2017 added a second paragraph that directly concerns the investor. Where the title permits economic activity, its duration is set so as not to restrict or limit free competition beyond what is necessary to ensure the amortisation of the planned investments and a fair and sufficient return on the capital invested, without exceeding the limits laid down, where applicable, by statute.

This wording cuts both ways. It gives the operator an enforceable negotiating argument on duration: a title too short to amortise the planned capex is open to legal challenge as to its calibration. But it equally prevents claiming a duration exceeding what amortisation justifies. The duration of an AOT is not a variable of convenience: it is an economic quantity that the authority must justify and that the investor must document, supported by a business plan, from the application stage.

The code also provides, in the second paragraph of Article L2122-1, that a title may be granted over part of the private domain in anticipation of that property being incorporated into the public domain, the title then setting the incorporation period, which may not exceed six months, and specifying what happens to the authorisation if the incorporation has not taken place. This is a useful tool in development operations, but also a source of contractual uncertainty that must be read before signing.

A point of terminology is needed. Practice distinguishes the unilateral authorisation from the agreement for occupation of the public domain, which is negotiated and signed. The distinction has consequences in litigation, but it does not remove the foundation: the agreement concerns the public domain, and therefore an inalienable asset assigned to public use, and remains subject to Articles L2122-2 and L2122-3.

What the AOT does not guarantee: neither commercial property rights nor a right to renewal

The operator of a business on the public domain does not benefit from the protection of the commercial lease statute (statut des baux commerciaux). This position does not appear in the CG3P, and Article L145-1 of the French Commercial Code defines the scope of the statute without referring to the public domain: it is accepted by the case law and must be verified case by case, in particular where the public-domain status of the site is itself open to debate. Practical consequence: no right to renewal, no eviction indemnity under commercial law, no change of permitted use (déspécialisation), no cap on rent. The reflexes of a landlord or tenant under a commercial lease are of no use. The rules on refusal of renewal and on the eviction indemnity of which the occupant of public land is thus deprived are set out in our article on non-renewal of a commercial lease.

It would nevertheless be incorrect to conclude that no business goodwill (fonds de commerce) can exist on the public domain. Law No. 2014-626 of 18 June 2014 (Article 72) inserted into the CG3P an Article L2124-32-1 worded as follows: a business may be operated on the public domain provided that it has its own clientele. Two mechanisms accompany it. Article L2124-33 allows any person wishing to acquire a business or an agricultural undertaking to apply in advance for an AOT for the operation of that business, the authorisation taking effect from the time the competent authority receives proof that the sale of the business has been completed. Article L2124-34 deals with the death of an operator who is an individual: issue to the heirs, at their request and unless there is a contrary public-interest ground, of an authorisation identical to that granted to the former holder solely for the continued operation of the business, for three months, then the option of putting forward a successor within six months of the death, any refusal having to be reasoned. Article L2124-35 excludes this section from the natural public domain.

The scope of these provisions must be measured accurately. They recognise the existence of a transferable intangible value and facilitate its transfer. They create no right to remain on the premises or to renewal of the title. The assessment of the business's own clientele, the condition laid down by Article L2124-32-1, falls within the case law after 2014 and requires careful analysis where footfall depends mainly on the attendance of the site itself. The methods for valuing a business (fonds de commerce) and the price disputes to which they give rise are dealt with separately in our dedicated article.

As for renewal, the provisions reviewed organise no right to it. Only Article L2122-1-2, 4° governs the extension of an existing authorisation, and it does so in order to dispense with the prior selection requirement, without creating any vested right for the outgoing holder. Any financial model that includes a terminal value based on a presumed renewal therefore rests on an assumption that is not legally secured.

Prior selection since 2017: expiry becomes a new tender

Ordinance No. 2017-562 of 19 April 2017 put an end to the discretionary award, without publicity, of titles for economic occupation. Article L2122-1-1 now requires that, where the title permits economic activity, the competent authority freely organises a prior selection procedure offering every guarantee of impartiality and transparency, and including publicity measures allowing potential candidates to come forward. A lighter regime, limited to prior publicity, applies where the occupation is of short duration or where the number of available authorisations is not limited.

The exceptions are exhaustively listed. Article L2122-1-2 disapplies selection where the grant forms part of an operation that has been the subject of an equivalent procedure, where the title is conferred by a public procurement contract or forms part of a contractual arrangement already selected, where urgency so justifies, the duration of the title then not exceeding one year, and where the sole purpose of the title is to extend an existing authorisation within the limits it sets. Article L2122-1-3 allows a direct award where the procedure proves impossible or unjustified, with five illustrative cases (sole occupant by right, entity under close supervision or control, unsuccessful procedure, particular characteristics of the property, imperatives of public authority or public security), the authority being required to make public the considerations of law and fact that led it not to carry out the procedure.

For the investor, the consequence is structural. The arrival of the term does not open a bilateral negotiation but, in most cases, an open procedure in which it competes like anyone else, bearing the disadvantage of an already amortised asset that it cannot carry away. The outgoing holder has no statutory preference. Its negotiating position is at its strongest before the initial award, when it can still influence the duration having regard to Article L2122-2, and at its weakest six months before expiry.

Real right or mere occupation: the dividing line for value

Everything, as regards valuation, depends on how the title is characterised.

The State regime

Article L2122-6 provides that the holder of an AOT over the public domain of the State has, unless the title provides otherwise, a real right over the structures, buildings and fixtures of a real-estate nature that it builds for the purposes of the authorised activity, this right conferring the prerogatives and obligations of an owner for the duration of the authorisation. The title sets the duration according to the nature of the activity and of the structures, without exceeding seventy years. The wording unless the title provides otherwise is the first due diligence point: the real right is not automatic, the title may exclude it, and a silent title is not equivalent to an explicit one. Article L2122-5 excludes this regime from the natural public domain.

The last paragraph of Article L2122-6 prohibits using the AOT for the execution of works, the supply of goods, the provision of services, or the management of a public service mission, with economic consideration consisting of a price or a right of operation, on behalf of or for the needs of a contracting authority or a concession-granting authority. Where a title is necessary for the performance of a public procurement contract, it is that contract that provides for the conditions of occupation. A wrongly characterised structure exposes the transaction to a challenge directed at the contract itself, a risk that the acquirer inherits in full.

The regime for local authorities

Article L2122-20 CG3P opens to local authorities, their groupings and their public establishments two routes: the administrative long lease (bail emphytéotique administratif), under the conditions of Articles L1311-2 to L1311-4 of the General Code of Local Authorities (code général des collectivités territoriales, CGCT), or the AOT conferring real rights under Articles L1311-5 to L1311-8 CGCT.

Article L1311-5 I CGCT adds a condition absent from the State regime: the AOT conferring real rights is granted only with a view to carrying out an operation in the general interest falling within their competence. The maximum duration is the same, seventy years. Paragraph II specifies that, in ports and airports, the condition of local public interest is satisfied by activities relating to the operation of the site or likely to contribute to its animation or development, which significantly secures port and airport assets. Paragraph III restates the prohibition on using this title in place of a public procurement contract.

The administrative long lease likewise presupposes an operation in the general interest falling within the competence of the local authority, or, since Law No. 2021-1109 of 24 August 2021, the assignment to a religious association of a place of worship open to the public, and requires that the property remain outside the scope of the highway offence (contravention de voirie). In practice this reservation excludes highway sites proper. For a comparison with private-law titles, see our analysis of the long lease (bail emphytéotique) and the building lease (bail à construction) according to the nature of the asset.

Financing the asset: a restricted mortgage and automatic extinction

Article L2122-8 is the provision that every lender must read before modelling its security. The real right and the structures may be mortgaged only to secure loans taken out by the holder of the authorisation in order to finance the construction, modification or extension of the structures, buildings and fixtures of a real-estate nature located on the occupied public property. The public-land mortgage is therefore earmarked: it cannot secure a debt incurred to acquire shares, corporate financing or a refinancing unconnected with the works.

Two other rules of the same article structure the credit risk. Unsecured creditors other than those whose claim arose from the execution of those works may not take protective measures or enforcement measures against those rights and assets, which isolates the public-land asset from the general liabilities of the operator. And above all, mortgages are extinguished at the latest on expiry of the occupation titles issued pursuant to Articles L. 2122-6 and L. 2122-10, whatever the circumstances and the reason. The security dies with the title, without exception. The maturity of the debt must therefore be strictly shorter than the term of the title, with a sufficient margin to absorb an early withdrawal.

Leasing (crédit-bail) is expressly permitted: Article L2122-13 CG3P for structures built under the titles referred to in Articles L2122-6 and L2122-11, with clauses making it possible to preserve the requirements of the public service where the structures are necessary to it and, in some cases, State approval; paragraph IV of Article L1311-5 CGCT for local authorities, with the same requirement for continuity clauses.

Finally, the registered creditor has two protections deriving from Articles L2122-9 CG3P and L1311-7 CGCT. Its rights are transferred to the early eviction indemnity. And at least two months before notification of a withdrawal for breach of the clauses and conditions of the authorisation, registered creditors are informed of the intentions of the competent authority, in particular so that they may be in a position to propose the substitution of a third party for the defaulting permit holder or to substitute themselves for it. This right of substitution is the lender's genuine step-in instrument: it presupposes a proper registration, and therefore a validly created mortgage within the meaning of Article L2122-8.

Selling the asset: approval, and the lock added in 2017

Article L2122-7 CG3P, like Article L1311-6 CGCT for local authorities, makes any movement of the asset subject to approval. The real right and the structures may be transferred or assigned, in the context of inter vivos transfers or of mergers, absorptions or demergers of companies, for the remaining period of validity of the title, including in the case of enforcement of the security over those rights and assets, only to a person approved by the competent authority, with a view to a use compatible with the assignment of the occupied public domain. An intragroup restructuring by merger-absorption is therefore an event requiring approval, a point regularly overlooked in top-of-the-balance-sheet transactions.

The 2017 ordinance added a sentence that did not appear in the version prior to 21 April 2017: such transfers may not take place where compliance with the publicity and selection obligations that precede the grant of a title precludes them. A transfer cannot be used to circumvent competitive tendering. The acquirer must anticipate that a mid-term sale may be analysed as the disguised grant of a new title.

In return, Article L2122-7 offers a mechanism for securing the position upstream: the holder may ask the authority that issued the title to indicate whether, in light of the information submitted to it at that stage and subject to a later change in the circumstances of fact or law, it will grant approval to a given person. This prior position must be requested before a promise to sell is signed, and made a condition precedent. The same article finally provides that these provisions do not apply to authorisations for occupation of the public domain that were issued following a publicity and competitive tendering procedure. The transfer regime therefore differs according to the way the original title was awarded, which the data room must establish without ambiguity.

Exit: demolition as the rule, free transfer, narrow compensation

Articles L2122-9 CG3P and L1311-7 CGCT govern the end of the occupation in identical terms. At the end of the title, the structures, buildings and fixtures of a real-estate nature must be demolished either by the holder of the authorisation or at its expense, unless their retention in their existing state was expressly provided for by the title or the authority waives demolition in whole or in part. Structures whose retention has been accepted become, by operation of law and free of charge, the property of the public body, free and clear of all liens and mortgages.

Three consequences for the financial model. The terminal value of the built asset is nil. It may be negative, the demolition obligation being a liability to be provisioned over the whole period. And no security survives the transfer, which confirms the extinction rule in Article L2122-8.

Compensation is narrowly limited. It is due only in the event of withdrawal of the authorisation before the scheduled term, for a reason other than failure to comply with its clauses and conditions, and covers the direct, material and certain loss arising from the early eviction. The provisions specify that the rules for determining the indemnity may be specified in the occupation title: this is one of the few areas of negotiation that are really useful, and it must be used at the application stage, through a quantified compensation formula tied to the net book value of the structures and to the outstanding debt. These provisions concern titles conferring real rights. For an occupation agreement that confers none, the compensation regime in the event of termination on public-interest grounds depends on the clauses of the title and on administrative case law, and must be verified separately.

The public land occupation fee: a revisable cost, not a fixed charge

Article L2125-1 provides that any occupation or use of the public domain gives rise to payment of a fee, subject to exhaustively listed exceptions, the list of which was supplemented by Law No. 2020-1721 of 29 December 2020, point 5° relating to professional fishing having been in force since 1 January 2022. The same article provides that, where the occupation is authorised by a public procurement contract or where a title is necessary for its performance, the methods for determining the fee depend on the overall economics of the contract.

The basis is set by Article L2125-3: the fee takes account of the advantages of every kind procured for the holder of the authorisation. This wording justifies indexing the fee to turnover or to the performance of the business and opens the way to revisions when the activity grows. An acquirer who buys an asset on the basis of a low historical fee, without examining the revision clauses or the advantages that its own operating plan will create, is buying a margin gap that it will not keep.

Article L2125-4, in the wording resulting from Law No. 2026-403 of 26 May 2026 and in force since 28 May 2026, sets the timetable: the fee is payable in advance and annually, the beneficiary being able, by reason of the amount and the method of determining the fee, to be allowed to pay by instalments or to be required to pay either for the whole duration of the authorisation if that duration does not exceed five years, or for a five-year period otherwise. The text also provides for specific arrangements for national defence needs, for mobile service coverage in respect of the occupation agreements referred to in Articles L45-9 to L47-1 of the Postal and Electronic Communications Code, and for the development of renewable energy. A five-year payment in advance weighs heavily on working capital requirements in the first year of operation.

A last item to factor in, often forgotten: paragraph II of Article 1400 of the General Tax Code provides that, where a property is subject to an AOT conferring a real right, the property tax is assessed in the name of […] the holder of the authorisation. The real right has a price.

Due diligence checklist for an asset operated under a public-land title

• Exact characterisation of the site: public domain, private domain, natural public domain (exclusions in Articles L2122-5 and L2124-35 CG3P).
• Nature of the title: unilateral authorisation, agreement for occupation of the public domain, administrative long lease (BEA), or title conferred by a public procurement contract.
• Actual existence of the real right: check that the title contains no provision to the contrary within the meaning of Article L2122-6, and, for a local authority, the general-interest operation required by Article L1311-5 I CGCT.
• Original method of award: prior selection, exception relied on under Articles L2122-1-2 or L2122-1-3, publication of the considerations of law and fact. This point determines the transfer regime in Article L2122-7.
• Remaining term, compared with the maturity of the debt and the amortisation period of the planned capex.
• Compensation clauses in the event of early withdrawal, and their quantification.
• Fate of the structures at the end of the title: retention expressly provided for, or demolition obligation to be provisioned.
• Registered mortgages, scope of the loans secured having regard to Article L2122-8, and the lender's step-in capacity.
• Fee formula, revision clauses and payment timetable.
• Possible existence of a business (fonds de commerce) within the meaning of Article L2124-32-1 and the reality of its own clientele.

Conclusion

An asset operated under an AOT is valued as a stream of income of fixed duration and nil terminal value, never as a building. Precariousness is not a residual risk that can be covered by a clause: it is the statutory regime of the asset, written in Articles L2122-2 and L2122-3 of the CG3P, and no contractual drafting overturns it. The only three genuinely negotiable levers lie upstream of the title: its duration, calibrated on the amortisation of the investments and a fair and sufficient return on the capital invested, the explicit existence of the real right, and the compensation formula in the event of early withdrawal. These three points are discussed before the award, never after.

For an investor positioned on this type of asset, the operational recommendation comes down to two steps. Before any offer, have counsel establish the exact method by which the original title was awarded: it determines whether a later sale will require approval, and whether it may be blocked in the name of the publicity and selection obligations. And before signing any promise to sell, ask the authority for the prior position provided for in Article L2122-7 CG3P on the grant of approval to the identified acquirer, then make that response a condition precedent. Without these two checks, the price paid remunerates a liquidity that does not exist.

Frequently asked questions

Can an AOT of the public domain benefit from the commercial lease statute? No. It is accepted that the commercial lease statute does not apply to occupations of the public domain, Article L145-1 of the Commercial Code defining the scope of the statute without referring to the public domain. This position comes from case law and is not written in the CG3P, which means that the actual public-domain status of the site must be verified first. The occupant therefore has neither commercial property rights, nor a right to renewal, nor the eviction indemnity of commercial law.

Can a business be operated on the public domain? Yes, since Law No. 2014-626 of 18 June 2014. Article L2124-32-1 CG3P states that a business may be operated on the public domain provided that it has its own clientele. Article L2124-33 allows the acquirer of a business to apply in advance for an AOT, which takes effect when the authority receives proof of the sale. This mechanism does not apply to the natural public domain (Article L2124-35), and whether the business has its own clientele is a matter for the court's assessment.

What is the maximum duration of an AOT conferring real rights? Seventy years, both for the public domain of the State (Article L2122-6 CG3P) and for that of local authorities (Article L1311-5 I CGCT). This ceiling is not a duration as of right: the title sets the duration according to the nature of the activity and of the structures, and Article L2122-2 requires, for an economic activity, that it be calibrated on the amortisation of the planned investments and a fair and sufficient return on the capital invested.

Is the occupant compensated if the public body ends the title before its term? For titles conferring real rights, Articles L2122-9 CG3P and L1311-7 CGCT provide for compensation only in the event of withdrawal of the authorisation before the scheduled term, for a reason other than failure to comply with its clauses and conditions, limited to the direct, material and certain loss arising from the early eviction. The rules for determining the indemnity may be specified in the title, which makes it an essential negotiating point. For an agreement without real rights, the compensation regime depends on the clauses of the title and on administrative case law.

Can a bank take a mortgage over an asset built under an AOT? Yes, but on a restricted basis. Article L2122-8 CG3P authorises a mortgage only to secure loans taken out in order to finance the construction, modification or extension of the structures, buildings and fixtures of a real-estate nature located on the occupied property. Mortgages are extinguished at the latest on expiry of the occupation titles […], whatever the circumstances and the reason. The maturity of the financing must therefore remain strictly within the term of the title.

Does the sale of an asset operated under an AOT require the consent of the public body? In principle, yes. Articles L2122-7 CG3P and L1311-6 CGCT make the sale or transfer of the real right and the structures, including by merger, absorption, demerger or enforcement of security, subject to the approval of the competent authority. Since Ordinance No. 2017-562 of 19 April 2017, such a transfer is impossible where compliance with the publicity and selection obligations precludes it. Article L2122-7 nevertheless provides that these provisions do not apply to authorisations issued following a publicity and competitive tendering procedure.

Who pays the property tax on a building erected under an AOT? The holder of the title, where the authorisation confers a real right. Paragraph II of Article 1400 of the General Tax Code expressly places the AOT conferring a real right alongside usufruct, the long lease (bail emphytéotique) and the building lease (bail à construction), the tax being assessed in the name of the holder of the authorisation. This charge must be included in the forecast operating account, in the same way as the public land occupation fee.