In the event of cessation of business, the legal protection afforded to the principal residence of a sole trader, making it exempt from seizure, lasts as long as the rights of creditors, against whom the measure is enforceable, have not been extinguished. This was stated by the French Supreme Court in a ruling dated September 11, 2024.
The automatic exemption from seizure of a sole trader's real estate assets
The sole trader has both professional and personal assets, which are automatically protected. Real estate assets (principal or secondary residence, land, etc.) are included in personal assets without any specific procedure. You no longer need to file a declaration of unseizability with a notary.
While a sole trader's personal assets are automatically protected from business creditors, there are cases in which this rule does not apply, notably in the event of conviction for tax fraud or failure to meet tax and social security obligations.
When business assets prove insufficient to obtain the necessary credit (for example, for the purchase of expensive equipment), the sole trader may opt to waive the separation of assets. To do so, he or she must sign a waiver deed, which will only concern the creditor with whom he or she is bound by the commitment. In other words, in the event of repayment difficulties, this creditor will be able to seize the entrepreneur's personal assets.
The unseizability of the main residence is maintained after cessation of activity
In a recent case, the question of the unseizability of a sole trader' s main residence after he has ceased trading arose.
In this case, a craftsman who had ceased his professional activity in 2017 following his removal from the Trade Register (RM) was placed in receivership and liquidation in 2018. The liquidator asked the judge to order the sale by auction of the property used as the main residence belonging to the manager and his wife.
The craftsman objected to the sale on the grounds that his principal residence was exempt from seizure. On appeal, his request was rejected, as the court considered that the insolvency proceedings had been opened after he had been struck off the trade register. Accordingly, the debtor could no longer benefit from the protective provisions of the law.
Faced with this decision, the craftsman appealed to the French Supreme Court, arguing that the unseizability of the principal residence subsists as long as the rights of creditors against whom it is enforceable have not been extinguished. The Cour de cassation accepted his arguments. It overturned the appeal decision. According to the Court, the transfer of a professional activity does not put an end to the unseizability of the principal residence.
TheSeptember 11, 2024 ruling is interesting because it addresses a problem that had been somewhat neglected by doctrine and case law. Indeed, only a ruling dated November 17, 2021 had addressed the issue of the duration of a seizure-proof measure concerning an entrepreneur's immovable property.