Estate Agent Unpaid After Aborted Sale: What Does the Law Say?

You are a homeowner in Plan-de-Cuques, you have signed an exclusive search mandate with an estate agency to sell your house. The agent introduces a buyer, you sign a preliminary contract of sale, but the buyer does not obtain his loan. The sale falls through. A few weeks later, you receive an invoice from the estate agent: he demands his commission, as if the sale had taken place. Is this legal?

This question is asked by hundreds of homeowners each year in the Bouches-du-Rhône and elsewhere. The answer is no, and the Court of Cassation forcefully recalled this in a judgment of 27 November 2013 (No. 12-13.897). The case concerned a homeowner from Gemenos who, after signing a preliminary contract of sale subject to the suspensive condition of obtaining a loan, saw the transaction fail. The estate agent then tried to obtain his commission based on a clause in the mandate which provided for payment of the remuneration even in the event of the buyer's refusal.

But what did the highest court say? That this clause was void, as contrary to Article 6-1, paragraph 3, of the Hoguet Law of 2 January 1970. In clear terms, the estate agent is not entitled to any commission until the sale is actually concluded and recorded in a notarised deed. And if the suspensive condition is not fulfilled, the sale is not concluded. Full stop.

The Facts: A Story That Happens Every Day

Mr. X, owner of a villa in Gemenos, in 2008 entrusted an exclusive search mandate to an estate agency to sell his property for €350,000. The agent quickly found a buyer, Mr. Y. The two parties signed a preliminary contract of sale on 20 October 2008. This preliminary contract was concluded subject to the suspensive condition of the buyer obtaining a loan. Unfortunately, the bank refused the credit, and the sale did not materialise.

The estate agent, considering that he had accomplished his mission, claimed his commission of €21,000 (6% of the price). He relied on a clause in the mandate which stipulated that "the principal undertakes to ratify the acquisition presented by the agent at the price, charges and conditions of the mandate, on pain of having to pay, in the event of refusal, a sum equal to the amount of the agreed remuneration as if the sale had been concluded". In other words, according to the agent, even if the sale fails, the owner must pay the commission.

The owner refused to pay. The agent sued him. The Tribunal de Grande Instance of Marseille ruled in his favour at first instance, ordering the owner to pay the commission. The latter appealed. The Court of Appeal of Aix-en-Provence overturned the judgment and dismissed the agent's claim. The agent appealed to the Court of Cassation. The Court of Cassation dismissed his appeal and upheld the appeal judgment.

The Reasoning of the Court — Analysed

The Court of Cassation relied on Article 6-1, paragraph 3, of Law No. 70-9 of 2 January 1970, known as the Hoguet Law, as amended. This provision states that "no sum of money is due, for any reason whatsoever, to the estate agent before the transaction for which he has received a written mandate has been actually concluded and recorded in a single deed containing the undertaking of the parties".

How does this apply here? The sale was not "actually concluded" since the suspensive condition of obtaining a loan was not fulfilled. The preliminary contract of sale is not a definitive deed: it only binds the parties subject to the fulfilment of the condition. If the condition fails, the preliminary contract becomes void, and there is no sale. Consequently, the agent is not entitled to any remuneration.

The disputed clause provided for payment of the commission even in the event of non-completion of the sale, unless the principal was at fault. The judges considered that such a clause was contrary to the Hoguet Law because it obliged the principal to conclude the sale or pay the commission, even in the absence of fault on his part. Indeed, the buyer had not obtained his loan, which is a risk independent of the owner's will.

What the Court of Cassation makes clear: it does not matter that the principal signed a preliminary contract of sale. This preliminary contract is not the final sale. The agent cannot rely on a clause that circumvents the legal rule by acting as if the sale were concluded. This case law is consistent and confirms a consumer-protective interpretation.

In other words, the Hoguet Law is a mandatory law: it cannot be derogated from by contract. Any clause that would have the effect of making the agent paid before the effective sale is deemed unwritten. This principle has been reaffirmed several times, notably in a judgment of 19 November 1996 (No. 94-21.281).

What This Changes for You — Practically

For seller-owners: you cannot be compelled to pay the agent's commission if the sale fails, unless you are the cause of the failure (for example, if you abusively refuse to sign the notarised deed). If the buyer does not obtain his loan, you are not responsible. The agent cannot claim a penny from you.

For buyers: if you sign a preliminary contract under the suspensive condition of obtaining a loan and you are refused, you are not obliged to pay the agent's commission, even if the mandate contains a contrary clause. However, be careful: you must have taken all necessary steps to obtain the loan (submitted applications to several banks, etc.). If you did not act in good faith, you could be held liable.

For estate agents: this decision reminds you that you cannot be remunerated until the sale is definitively concluded. If you include a "lost commission" clause in your mandates, it will be void. undefined, I have come across cases where agents tried to pressure sellers by invoking this clause. The Court of Cassation is very clear: it is prohibited.

Numerical example: in Gemenos, a villa sold for €450,000 with a 5% commission (€22,500). If the sale fails due to the buyer's loan default, the owner owes nothing to the agent. He can even demand reimbursement of any advance costs (such as diagnostic costs) if the mandate so provides.

Four Tips to Avoid This Type of Dispute

• Check the commission clause in your mandate: before signing an exclusive mandate, carefully read the payment conditions. If a clause provides for payment of the commission even in the event of a failed sale, ask for its removal. If the agent refuses, change agency.
• Require a mandate compliant with the Hoguet Law: the mandate must include the express statement that "no sum of money is due to the estate agent before the effective conclusion of the sale". If this statement is absent, the mandate may be void.
• Keep all evidence of your loan applications: if you are a buyer, keep the loan refusal letters, proof of submission of files, etc. In case of a dispute, this will prove your good faith.
• In case of a dispute, do not pay under pressure: if the agent demands a commission after an aborted sale, do not give in. Reply in writing, citing the Hoguet Law and the case law. If the agent persists, consult a lawyer specialising in property law.

Further Analysis: Related Case Law and Developments

The Court of Cassation has issued several judgments in the same vein. Notably, a judgment of 19 November 1996 (No. 94-21.281) had already held that a clause imposing payment of the commission in the event of non-completion of the sale, even without fault of the principal, was contrary to Article 6-1 of the Hoguet Law. More recently, a judgment of 11 December 2019 (No. 18-23.550) confirmed that the agent cannot rely on a penalty clause to circumvent this prohibition.

The trend of the courts is therefore very protective of consumers. The judges consider that the Hoguet Law is a matter of public policy and that any clause contradicting its spirit is void. This means that estate agents must assume the risk of the sale failing, which encourages them to better verify the solvency of buyers.

For the future, the question of agents' remuneration in the event of an aborted sale remains a sensitive subject. Some reform proposals consider relaxing the rule, but to date, the case law remains firm. If you are faced with such a situation, know that the courts will rule in your favour.

Key Points to Remember

• Am I obliged to pay the commission if the sale fails due to the buyer's loan default? No, the Hoguet Law prohibits the agent from receiving remuneration before the effective conclusion of the sale. The unfulfilled suspensive condition prevents this conclusion.
• What should I do if the agent demands the commission anyway? Do not pay. Reply by registered letter, citing Article 6-1 of the Hoguet Law and the Court of Cassation judgment. If the agent sues you, you have a strong chance of winning.
• Can I be held liable if the buyer does not take steps to obtain a loan? Yes, if you are the buyer and you did not make the necessary efforts (submission of files, follow-up), you could be ordered to pay the commission. But if you acted in good faith and the loan was refused, you are protected.
• What are the time limits for legal action? The limitation period is 5 years from the date the commission is claimed. If the agent sends you an invoice, you have 5 years to contest it.

Are you in a similar situation? A 30-minute initial consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →