The Legal Status of Leasing a Fish Pond
Fish farming is the breeding of fish. Agriculture is the exploitation of an animal or plant life cycle. Legally, fish farming is therefore agriculture, without any doubt. And in the case of exploiting agricultural property against the payment of rent, the status of farm lease applies as of right. Thus, the farm lease status, whose mandatory rules are detailed by the Rural Code, applies to the rental of ponds used for fish farming.
Context
In practice, around the ponds of Brenne in the Indre (36), discussions revolve around one-year renewable leases, agreements on sharing charges, and fifty-fifty profit sharing. Legally, the requalification of the contract as a nine-year farm lease is beyond doubt, and why not sharecropping.
All the rules of the farm lease status apply to ponds and basins exploited under a lease: a nine-year tacitly renewable duration, a right of first refusal for the tenant, a right to transfer the lease to children, rules on distribution of maintenance work, and finally the rent control.
Lease duration
The one-year lease does not exist, or is so rarely applicable in the case of a minor owner that it is anecdotal. The 3-6-9 year lease has never existed in agriculture. The multi-year exploitation or pasture agreement in Grande Brenne, which is an exception to the farm lease status, applies only to land, not ponds. The lease duration for a pond is nine years tacitly renewable as of right.
By exception, the precarious one-year renewable lease for a small plot could apply if the contract concerned a small area, less than 2.5 ha for Brenne for example.
It is even recommended for an owner to conclude a long-term lease of 18 or 25 years, to benefit from tax advantages in terms of donation or inheritance. Indeed, the three-quarters allowance on the value for calculating transfer duties on death or gift is significant.
There is a similar allowance called "Natura 2000" but its application is less secure, as it is conditional on signing an agreement with a management commitment in line with the conservation objectives of these protected areas.
Right of first refusal
In case of sale of a pond, the tenant has a right of first refusal: he has the right to buy first at the price and conditions notified to him by the notary in charge of the sale agreement. Moreover, if the tenant decides not to buy, he would still remain the tenant of the new owner. Perhaps this new landlord could terminate the lease under the restrictive conditions for notice to reclaim for personal exploitation at the time of the nine-year renewal. If an early termination were negotiated, it would give rise to compensation to the tenant for the loss of the leased surface and the income he could have derived from the leased property until the next lease renewal.
This right of first refusal ranks second after the right of first refusal of public authorities on wetlands or specific zoning[1].
Distribution of maintenance work
As in any lease, the owner must carry out major structural and major maintenance work, and the tenant the minor maintenance. The Civil Code (article 606) clearly states that maintenance of banks is the owner's responsibility. Under the farm lease status, it is not possible to derogate from this rule; the owner cannot impose additional work on his tenant. If the tenant voluntarily carried out such work, he would be entitled at the end of the lease to compensation for improvement of the leased property [2].
Rent control
The rent must be set between a minimum and a maximum fixed annually by prefectural order. For the year 2023-2024 in Indre, the annual rental value for fish farms ranges from a minimum of €82.11/ha to a maximum of €136.88/ha. This rent is indexed on the national farm lease index.
Rural lease with environmental clauses
Ponds are often located in protected areas, such as Natura 2000 zones, wetlands, coastal edges, nature reserves, regional natural parks. The lessor may request insertion in the lease of environmental clauses provided for in articles L. 411-27 and R411-9-11-1 of the Rural Code and the maritime fishing code, such as:
- 3° Harvesting methods;
- 11° Methods […] for managing water levels;
- 13° Creation, maintenance and methods of upkeep of hedges, embankments, groves, isolated trees, aligned trees, buffer strips along watercourses or forests, ponds, ditches, terraces, walls;
- 15° Conduct of crops or breeding according to the specifications of Organic Farming.
In this case, the tenant may negotiate in return a reduced rent.
Related civil and commercial activities, consequences on legal forms and taxation
The sale of fish raised in ponds by the fish farming operator is indeed an agricultural activity and falls under agricultural profits (BA). However, fish farmers may also provide pond fishing services and buy the caught fish for resale. This is then commerce and falls under industrial and commercial profits (BIC). Then, it remains to determine which activity is primary or secondary to determine the applicable tax regime.
Due to the dual agricultural and commercial activity, fish farmers often choose either:
- to create two operating entities
- or to choose a commercial company form (SARL, SAS…)
to carry out both activities together, since a commercial company can carry out a civil activity but not the reverse.
However, regardless of the choice of the operating company's legal form and tax treatment, this does not change the agricultural qualification of fish farming and the rural lease on the rental of a pond or fish farming basins.
The rural fish farming lease can therefore be made available to the company with a primarily agricultural purpose (art L. 411-37 Rural Code) whatever its legal form or concluded directly in the name of this legal entity.
Conclusion
It is impossible to derogate from the farm lease status, which is of public order. Parties may agree on something else between an owner and an operator, but in case of conflict, the Joint Rural Lease Tribunal will apply the Rural Code as of right.
Moreover, it should be noted that fish farming is at the forefront of the application of the Environmental Code and the Water Law, notably with the specific notions of IOTA and closed water.
Sources
- Article from the DEA thesis in Rural Law, Fish Farming in Brenne (University of Poitiers, 2002) written by Aurélie Brunet. She is a wealth management advisor.
La version initiale de cet article a été rédigée par Aurélie Brunet.
