In September 2016, OCMW/CPAS Ghent (the City’s social centre) proceeded with the sale of 79 agricultural plots. All plots were sold through a single transaction to an investor after it emerged as the best bidder from a public procedure.
The sale was criticized by farmers from the wider region, some of whom had ongoing leases. An organic farmer from Lokeren also opposed the sale, as he felt he was deprived of the opportunity to expand his farm in the region. Because this method excludes certain categories of interested parties, the plots would have been sold for a price below their real market value. Consequently, the court was asked to pronounce the nullity of the sale-purchase agreement. The Ghent Court of Appeal now rules in favor of the farmer in question.
State aid measures
Article 107(1) TFEU defines 'State aid' as 'any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favoring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’.
Important in this context is the court's consideration that the buyer of the agricultural land enjoyed an advantage that it could not enjoy under normal market conditions, i.e. without state intervention. It is noted that a sale of immovable property is market-conform if it is conducted through a competitive, transparent, non-discriminatory and unconditional bidding procedure.
According to the court, the sale in one lot of 79 different plots, can hardly be considered a competitive, non-discriminatory procedure. Indeed, the size of the transaction is such that it has made it impossible for small players in the agricultural sector to compete effectively for the sale. This argument is reinforced by the fact that the purchase of one or more separate plots was not made possible under the procedure, and this despite the fact that several individual farmers had expressed their interest beforehand.
The arguments put forward by OCMW/CPAS Ghent to justify the sale of all the plots together are dismissed one by one. The court denounces that alternatives, such as dividing the transaction into smaller lots, were not or not sufficiently examined. It also concludes that the OCMW/CPAS Ghent seems to have acted mainly out of convenience rather than with a view to selling at market conditions. For the sake of completeness, it should be noted that taxation reports show that the plots were actually sold below the market price.
The court ultimately stated unequivocally that all the conditions for state aid were met. The aid measure follows from the grouping of 79 agricultural plots in one transaction, which ultimately resulted in the plots being sold at a lower price than the market price.
Nullity as a useful remedy
As the formalities for the granting of a state aid measure were not properly complied with, the OCMW/CPAS Ghent is held responsible. The self-employed farmer, a rather small player in the agricultural sector, had no chance to compete because of the way the sale was structured, which caused him damage. Moreover, this damage would not have occurred if the OCMW/CPAS Ghent had not made this mistake. All elements are thus combined to open the right to compensation for the farmer. The court awards compensation in kind by annulling the sale agreement of the 79 parcels of agricultural land. This way, all parties involved are put back in the situation that existed before the wrongful act of the OCMW/CPAS Ghent and the independent farmer regains the opportunity to acquire one or more parcels.
Parallels with the Dutch Didam judgment
The recent Belgian judgment is reminiscent of the Didam judgment handed down by the Dutch Supreme Court in late 2021. This judgment too stipulated - albeit with reference to the principle of equality - that public entities must offer equal opportunities to potential buyers when disposing of real estate.
In essence, this judgment states that public authorities must give sufficient publicity to their intention to sell real estate. Indeed, the aim is to inform as many interested parties as possible about the intended sale, as well as the procedure and any criteria that will be used in the context of choosing a buyer.
The practice whereby a public entity itself freely selects a buyer and then sells one-on-one to this selected buyer without too much consideration for other interested parties seems to be a thing of the past for good. It is clear from the aforementioned case-law that public entities must, to the extent reasonably acceptable, achieve equal access for all interested buyers when selling real estate. This implies, on the one hand, that the interested buyers must be able to know about the public authority's intention to proceed with the sale, which implies publicity obligations. On the other hand, unless justified, the subject of the sale may not be structured in a way that artificially limits the circle of potential buyers to e.g. only very large and wealthy property developers. Indeed, in such a case, access to competition from smaller players is made difficult or impossible.
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