Community Land Trust , SA of low-rent housing and public procurement: clarifications expected

17/03/2021

Reminder of the definition of the Community Land Trust :

The “Organismes de Foncier Solidaire” (hereafter “OFS[1]“) are non-profit organizations approved by the State representative in the region, which, for all or part of their activity, have the purpose of acquiring and managing land, whether built or not, with a view to building housing and collective facilities in accordance with the objectives of Article L. 301-1 of the French Construction and Housing[2] Code.

The OFS are approved by the representative of the State in the region. May be approved to carry out the activity of OFS, on a principal or accessory basis, non-profit organizations and the organizations mentioned in articles L. 411-2 and L. 481-1 of the same code.

Once the land is acquired, the OFS remains the owner and :

  • Consents to the tenant, within the framework of a long term lease called Bail Réel Solidaire – Opérateur (hereafter “BRS Opérateur”) of the real rights ;
  • The real estate operator, in its capacity as holder of rights in rem, then grants BRS – Accessors allowing the lessees access to the ownership of the dwellings, for use as a main dwelling or for mixed professional and main dwelling use, under conditions of ceiling of resources, rents and, where applicable, transfer price.

The BRS mechanism, an aid scheme for social home ownership, is relevant in particular in various large cities in France where real estate pressure is strong.

Indeed, in these agglomerations, the price of building land can be a brake on the construction and acquisition of new housing. BRS and OFS then appear as essential tools.

Consequently, the BRS mechanism is virtuous in that it allows :

  • To house households with modest incomes and to allow them to build up a real estate patrimony,
  • To strengthen the social mix in the long term,
  • Develop the housing supply and ensure the sustainability of social home ownership parks,

Maintain a social mix, particularly in the city centers, as the mechanism of accession favors the good maintenance of housing.

The public limited companies of HLM can receive the approval to be constituted as OFS

Since the ELAN law, public housing offices can be approved by the regional prefect to carry out the activities of a community land trust.

Article L.421-4, 9° of the Construction and Housing Code stipulates that the Public Housing Offices (hereafter “OPH”) may be approved by the OFS.

Under the terms of Article L. 422-2 of the French Construction and Housing Code, under the same conditions as OPHs, public housing corporations may also be approved by the regional prefect to carry out the activities of OFS.

Are the OFS constituted by the SAs of HLMs contracting authorities?

Once this legal framework was established, practice led the actors involved to question the selection of the most adequate legal vehicle so that low-rent housing corporations constitute OFS.

This reflection has led legal professionals to question the articulation between this legal framework and that relating to public procurement law.

Indeed, it appears that the legislator did not specify whether the OFS constituted by the SAs of HLM, which are contracting authorities by application of the texts, were contracting authorities or not.

Consequently, insofar as no legislative or regulatory provision has for the moment clarified the links between public procurement and OFS, the risk that the OFS constituted by public housing corporations are qualified as contracting authorities is not negligible.

Indeed :

  • The constitution of an OFS in the form of an association under the law of 1901 is not in itself such as to rule out the qualification of contracting authority in view of the existing criteria of definition;
  • The same applies to the creation of an OFS in the form of a cooperative society of collective interest (hereafter “the SCIC”). It has been specified that the characteristics of the SCICs of low-rent housing corporations must lead to their being expressly qualified as contracting authorities[3].

It therefore appears that, whatever the legal form chosen for the constitution of the OFS, there is a risk that the latter is a contracting authority subject to compliance with public procurement law. Consequently, if the contracts concluded by the OFS can also be qualified as public contracts, they will have to be concluded after a competitive tendering procedure has been organized.

It is therefore necessary to determine whether there is a risk that the BRS Operators concluded with the real estate developers can be qualified as public procurement contracts.

Are BRS Operators public works contracts?

In view of the new definition of these contracts resulting from article L. 1111-2 of the public procurement code, all contractual arrangements that are :

  • Have as their object the execution, or the design and execution of the works listed in the decree of March 22, 2019, or relate to the execution of a work meeting the requirements set by the contracting authority which has a determining influence on its nature or design;
  • Will respond to a need of the contracting authority ;
  • In return for the payment of a price or any other consideration.

Thus, the new qualification of public works contracts concerns contractual arrangements that were not covered by this qualification under the 2006 Public Procurement Code, such as sales of premises to be built, construction leases, transfers of land for premises to be built, or leases in the future state of completion. On this point, Bercy’s Legal Affairs Department also specifies the following :

“From now on, the essential criterion is that the work be carried out in accordance with the needs specified by the buyer, regardless of the means used (…) for this purpose. The work is considered to be carried out in accordance with the buyer’s needs when the buyer has taken steps to define the characteristics of the work or has exercised a decisive influence on its design. Thus, if the execution of the projected work meets specifications defined in sufficient detail by the purchaser, this assembly will be qualified as a works contract within the meaning of the public procurement code.”

In view of these elements, it is therefore highly probable that the BRS Operators that would be concluded with the real estate operators meet the criteria set by the public procurement code.

Indeed, this BRS Operator could be analyzed as a contract by which a OFS entrusts a third party with the realization of a work meeting its needs and according to its technical specifications, in return for an onerous counterpart consisting of the turnover realized by the developer during the second BRS burst.

Consequently, in the current state of the law, such arrangements incur a significant risk of requalification as public works contracts. For the time being, it is therefore advisable to be extremely vigilant and to question systematically and on a case-by-case basis the obligation that the OFS could have to organize a procedure of publicity and competition for the attribution of the BRS Operator.

In any event, and in view of what is at stake, it is certain that an intervention of the legislator is more than desirable in order to clarify the rules of the game.

Article written by Clarisse Bainvel, partner


[1] Réponse du Ministère de l’économie, des finances et de l’industrie publiée dans le JO Sénat du 14/07/2005 – page 1897

[2] Article 164 de la Loi n° 2014-366 du 24 mars 2014 pour l’accès au logement et un urbanisme rénové et articles L.329-1 et s. du Code de l’urbanisme.

[3] « I. – La politique d’aide au logement a pour objet de favoriser la satisfaction des besoins de logements, de promouvoir la décence du logement, la qualité de l’habitat, l’habitat durable et l’accessibilité aux personnes handicapées, d’améliorer l’habitat existant, de favoriser la rénovation énergétique des bâtiments et de prendre en charge une partie des dépenses de logement en tenant compte de la situation de famille et des ressources des occupants. Elle doit tendre à favoriser une offre de logements qui, par son importance, son insertion urbaine, sa diversité de statut d’occupation et de répartition spatiale, soit de nature à assurer la liberté de choix pour toute personne de son mode d’habitation.

II. – Toute personne ou famille éprouvant des difficultés particulières, en raison notamment de l’inadaptation de ses ressources ou de ses conditions d’existence, a droit à une aide de la collectivité pour accéder à un logement décent et indépendant ou s’y maintenir. »

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