Joint and Several Guarantee for Works: When the Professional Project Owner Must Prove His Status

Imagine: you own a flat in Bagnols-sur-Cèze, you rent it out, and you decide to carry out renovation works. You sign a contract with a contractor, but things go wrong. The contractor demands a joint and several guarantee (a guarantee given by a bank) to protect you in the event of his default. You refuse, believing these works are for your personal use. Who must prove what? The Court of Cassation ruled in 2003: it is for the project owner who claims not to be required to provide this guarantee to prove that the contract does not fall within his professional activity. A decision that changes everything for landlords and SCIs.

This question, you may be asking yourself as you read these lines: am I required to demand a guarantee from my contractor? And if I do not, what are the risks? The answer depends on your status. The law (Article 1799-1 of the Civil Code) requires the professional project owner to provide a joint and several guarantee to the contractor, unless the contract is for personal needs. But it is necessary to know who is considered a professional. The ruling of 24 April 2003 of the Court of Cassation (n° 01-13.439) provides decisive clarification, particularly for civil real estate companies (SCI).

In this article, we will dissect this decision, its concrete implications for you, owner, landlord or real estate professional, and give you practical advice to avoid disputes. Whether you are in Nîmes, Le Vigan or elsewhere, this case law can make the difference between a smooth project and a legal conflict.

The facts: a story that happens every day

The case begins in 1996, in Versailles. An SCI, the company ETPM, owner of a building, entrusts renovation works to a company, Spie Batignolles Bâtiment. The contract is signed on 12 February 1996. But very quickly, the project falters: defects (poor workmanship) appear, and the contractor demands payment of the balance of the contract. The SCI ETPM, for its part, turns against the contractor, claiming damages for the defects and rental loss (the rents it did not receive due to the delay).

Before the Versailles Court of Appeal, a crucial point is raised: did the SCI ETPM have the obligation to provide the contractor with a joint and several guarantee? Article 1799-1 of the Civil Code requires the professional project owner to provide this guarantee, unless the contract is for his personal needs. The SCI argued that the works were for its own account and did not fall within its professional activity. But the contractor retorted that the SCI was registered in the trade register, with a capital of 2,000,000 francs (approximately €300,000), and that the operation had a speculative character (it rented out the premises).

The Court of Appeal rules in favour of the contractor: it considers that the SCI does not prove that the works were for personal needs. The SCI appeals to the Court of Cassation. But the Court of Cassation, in its ruling of 24 April 2003, dismisses the appeal. It confirms that it is for the project owner who claims not to be bound by the obligation to provide a guarantee to prove that the contract is for non-professional needs. And it validates the reasoning of the Court of Appeal: the SCI, with its significant capital and the rental nature of the operation, does not demonstrate that the works fall outside its professional activity.

The reasoning of the court — dissected

The decision is based on a rule that is simple in appearance, but with heavy consequences: Article 1799-1 of the Civil Code provides that the professional project owner must provide the contractor with a joint and several guarantee (bank guarantee) to guarantee payment of the works. But an exception exists: if the contract is concluded for needs not falling within the professional activity of the project owner. It is this exception that the SCI ETPM invoked.

The Court of Cassation recalls that the burden of proof (who must prove) lies with the one who relies on the exception. In other words, it is for the project owner who claims to be a mere individual for these works to demonstrate that the works are personal. And to assess whether the operation is professional or not, the judges look at objective indicators: the legal form (SCI, company), registration in the trade register, the amount of capital, the destination of the premises (rental, resale), the speculative character of the operation.

In this case, the SCI ETPM was registered in the trade register, had a capital of 2,000,000 francs, and the building was intended for rental (it moreover claimed a rental loss, which proves that rental was its activity). The judges deduced that the operation had a speculative character, therefore professional. The Court of Cassation validates this reasoning. It does not create a new rule, but it confirms a trend: the courts are demanding towards project owners who hide behind a company to escape their obligations.

What does this mean for you? If you are an SCI or a professional landlord, you will be presumed to be acting within the scope of your activity. It is up to you to prove otherwise if you want to avoid providing a guarantee.

What this changes for you — concretely

This decision has immediate implications for several categories of actors. If you are a landlord owner, especially if you rent through an SCI, be careful: as soon as you carry out works on a rented property (or intended for rental), you will be considered a professional. For example, in Le Vigan, an owner who renovates a flat to rent it out will have to provide a guarantee to the contractor, unless he proves that the property is for his personal use. Concretely, if you do not do so, the contractor may demand immediate payment of his works without waiting for the end of the project, or even suspend the works.

For purchasers of real estate: if you buy to resell (property dealer), you are clearly professional. But if you buy your main residence and carry out works before moving in, you are probably an individual. The line can be blurry: an individual who buys a property to renovate and rent it out a few years later could be reclassified as professional if there is a profit motive.

In practice, here is what you should remember: if you are a company (SCI, SARL, etc.), you are presumed professional. If you are an individual, you are presumed non-professional. But be careful, this presumption can be reversed. For example, an individual who builds a house to resell within a year could be reclassified as professional.

If you are in this situation, before signing a works contract, you must ask yourself: am I a professional project owner? If yes, include the guarantee in your budget (generally 1 to 3% of the amount of the works). If not, keep all evidence that the works are for your personal use: affidavit, proof of residence, absence of rental, etc.

Four tips to avoid this type of dispute

• 1. Determine your status before signing. Before any works contract, ask yourself: are you a real estate professional? If you are an SCI, a property dealer, or a serial landlord, you will likely be considered professional. In case of doubt, consult a lawyer.
• 2. Demand a guarantee if you are professional. If you are a professional project owner, require in the contract that the contractor provide you with a joint and several guarantee (completion guarantee). This protects you in case of contractor default.
• 3. Keep written records. If you consider yourself an individual for this project (e.g., works on your main residence), keep evidence: water and electricity bills in your name, tax returns, etc. In case of dispute, you can prove that the property is not intended for professional activity.
• 4. Have the contract drafted by a professional. A well-drafted works contract can clarify the status of the project owner and the guarantee obligations. A lawyer specialised in real estate law can help you avoid ambiguities.

Further analysis: related case law and developments

The Court of Cassation has maintained this position in subsequent rulings. For example, in a ruling of 8 April 2009 (n° 08-10.905), it held that an SCI that leases a building is presumed to be acting within its professional activity, even if the lease is concluded with a related company. This case law confirms the strictness of the judges towards corporate structures.

On the other hand, for individuals, the Court of Cassation has been more flexible. In a ruling of 27 January 2010 (n° 08-70.183), it held that an individual who builds his own house is not a professional, even if he has built before, unless the operation has a speculative character (quick resale).

The trend is therefore clear: the more you have a professional structure (SCI, company) and the more the operation has a profit motive (rental, resale), the more you will be considered professional. Conversely, an individual renovating his main home is protected. This distinction is fundamental to know whether you must provide a guarantee or not.

For the future, one can expect the courts to continue scrutinising the economic reality of the operation. If you are a small owner who rents out a single property, you might still be considered an individual, but the line is thin. Better safe than sorry.

In practice: what to do

1. Check your status. If you are a company, you are professional. If you are an individual, ask yourself whether the works are for your personal use (main residence) or for rental or speculative use.
2. Draft the contract accordingly. If you are professional, include a clause requiring a guarantee from the contractor. If you are an individual, expressly state that the works are for your personal dwelling.
3. Keep evidence. In case of dispute, you will have to prove your status. Keep all relevant documents.
4. In case of doubt, consult a lawyer. A simple consultation can save you a costly lawsuit.

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