Unseizability of the principal residence: the burden of proof rests with the entrepreneur

In a recent case, the French Supreme Court (Cour de cassation) reiterated that, in order to assert the unseizability of a residence, the sole proprietor must prove that it constitutes his principal residence. The burden of proof lies with the entrepreneur.

Principle of unseizability of principal residence

In this case, a sole trader selling costume jewelry was the subject of receivership proceedings followed by compulsory liquidation. At the liquidator's request, the official receiver ordered the sale by auction of a property she owned. However, she objected to the sale, arguing that it was her principal residence.

Article L 526-1 of the French Commercial Code makes the entrepreneur's principal residence unseizable by professional creditors whose claims arose after the entry into force of the law of August 6, 2015, also known as the "Macron Law". The automatic separation of the professional and personal assets of sole proprietors was reinforced by the law of February 14, 2011. This law enables anyone operating under this status to have two distinct assets: a business asset made up of items linked to their activity, and a personal asset comprising assets excluded from the business activity. To oppose a compulsory or protective execution measure concerning the exclusion of one or more assets from the scope of the creditor's general right of lien, the entrepreneur must nevertheless provide proof of the allocation of these assets to his personal assets.

Demonstrate that the property is your principal residence

To prove that the property was her principal residence, the entrepreneur had provided a work certificate attesting to a job held for a certain period in a commune close to the one in which it was located. She had also kept letters from the local health insurance fund.

The Cour de cassation ruled that these elements were not sufficient to prove that the property was her principal residence. The documents provided by the tax authorities showed that she had never paid any council tax on the property, as it had been issued in the name of a tenant. It therefore rejected the appeal lodged by the entrepreneur and ordered her to pay the costs.

In this ruling handed down on June 14, 2023, the Commercial Chamber reiterates that proof of the principal residence status of a property whose unseizability is challenged by the debtor against a creditor pursuing its sale may be provided by any means, excluding any hierarchy of evidence.

Thus, the burden of proof lies with the sole proprietor when it comes to demonstrating that the property put up for sale in the course of insolvency proceedings corresponds to his principal residence.