Suspensive Condition of a Mortgage Loan: What to Do If Nothing Is Written?

Imagine: you sign a building contract for your future home in Boulogne-Billancourt. You pay a deposit of €15,000. But nothing is written about financing. You thought you would obtain a mortgage, but the bank refuses. The builder says: 'No clause, no refund.' What to do? I have seen this question dozens of times in my practice in Paris. The Law of 13 July 1979, known as the Scrivener Law, nevertheless protects borrowers. But what about when the contract does not mention any loan?

The Court of Cassation ruled as early as 1987: even without a written clause, as soon as the subscriber has actually applied for a loan, the suspensive condition (a future and uncertain event on which the contract depends) is deemed to be included. The builder must refund all sums paid if the loan is not obtained, without deduction or compensation. Better still: if he refuses, he may be criminally liable.

In other words, an omission in the contract does not deprive you of legal protection. But beware: you must still prove that you did apply for a loan. And that is where the difficulty lies. In this article, I dissect the ruling of 10 June 1987, its practical consequences, and give you tips to avoid pitfalls.

The Facts: A Story That Happens Every Day

Mr X, a Parisian homeowner, signs in 1982 a building contract for an individual house in Boulogne-Billancourt with company Y. The contract provides for a price of 200,000 francs (approximately €30,500). Mr X pays a 10% deposit on signing. No clause mentions a loan. Yet Mr X did submit a loan application to his bank, which refused it due to insufficient guarantees.

Mr X then requests a full refund of his deposit from the builder, who refuses. The builder argues that the contract contains no suspensive condition of a loan, so the deposit is acquired. Mr X sues the builder before the Tribunal de Grande Instance of Paris, which rules in his favour. The builder appeals. The Paris Court of Appeal upholds the judgment in 1985. The builder appeals to the Court of Cassation.

The case comes before the Court of Cassation, Criminal Division (because the refusal to refund may constitute a criminal offence). The builder argues that since the suspensive condition was not written, it cannot be enforced, and in any event, the condition was fulfilled because Mr X had not provided the necessary supporting documents to the bank. The Court dismisses the appeal: the suspensive condition is automatic as soon as a loan has actually been applied for, and the refusal to refund falls within the scope of Article 33 of the Law of 13 July 1979 (criminal penalties).

The Court's Reasoning — Analysed

The Court of Cassation relies on two key provisions of the Scrivener Law of 13 July 1979 on information and protection of borrowers in real estate matters. First, Article 18, paragraph 2, which provides that 'as soon as a loan is actually applied for, the building contract is deemed to be concluded subject to the suspensive condition of obtaining that loan, even if the deed contains no indication of recourse to such financing of the price'. Second, Article 17, paragraph 2, which provides that 'if this condition is not fulfilled, any sum paid in advance by the subscriber to the builder must be immediately refunded without deduction or compensation of any kind'.

The builder tried to circumvent the law by arguing that the absence of a written clause made the condition unenforceable. But the Court is clear: the law supplements the silence of the contract. In other words, even if you sign a building contract without mentioning a loan, if you have actually sought financing, the suspensive condition is automatically included. The Court also clarifies that the condition is not deemed fulfilled merely because the subscriber did not respond to a request for supporting documents: it is for the builder to prove that the loan could have been obtained.

In short, the Court of Cassation here confirms a consumer-protective precedent, already established in the 1980s. This is neither a reversal nor an evolution, but a strict application of the law. The originality lies in the fact that the Criminal Division intervenes: the refusal to refund can be criminally sanctioned (fine, even imprisonment). What few people know is that the Scrivener Law is still in force today, incorporated into the Consumer Code (Articles L. 312-1 et seq.).

What This Means for You — Practically

For buyers (homeowners or future homeowners): if you sign a building contract and you apply for a loan, you are protected even if the contract does not mention it. In case of loan refusal, you are entitled to a full refund of all sums paid (deposit, administration fees, etc.). The builder cannot deduct anything. If you are in Paris or Boulogne-Billancourt, do not hesitate to demand a refund by registered letter with acknowledgement of receipt. In practice, I have seen cases where the builder withheld 10% of the price, i.e., €30,000 on a house worth €300,000. The law prohibits any deduction.

For builders: beware! Failure to refund exposes you to criminal prosecution. Article 33 of the 1979 Law provided for a fine of €4,500 (at the time) and up to 6 months' imprisonment. Today, penalties are heavier (fine up to €300,000 for a legal entity). If you are a builder in Boulogne-Billancourt, ensure your contracts mention the suspensive condition, even if the law implies it.

For tenants or co-owners: this decision mainly concerns building contracts, so primarily buyers. But the principle of borrower protection is general: any real estate sale contract should include a suspensive condition for obtaining a loan. If it does not, you can invoke the Scrivener Law (now the Consumer Code).

However, be careful: the protection only applies if you actually applied for a loan. If you did nothing, the contract remains valid and you must pay. Another point: the suspensive condition is not retroactive. If work has already started, the refund may be partial.

Four Tips to Avoid This Type of Dispute

• Insist on a written clause. Even if the law protects you, it is better for the contract to clearly mention the suspensive condition for obtaining a loan. This avoids disputes. Specify the amount, the validity period of the offer, and the supporting documents to be provided.
• Keep all evidence of your loan application. Letters, emails, acknowledgements of receipt, bank statements. If the builder disputes, you must prove that you did seek financing. Without proof, the suspensive condition is not automatic.
• Send a registered letter to the builder in case of loan refusal. Put them on notice to refund the sums within 8 days. Mention Articles L. 312-1 et seq. of the Consumer Code (formerly the Scrivener Law). Keep a copy.
• Consult a lawyer at the first sign of trouble. A quick consultation (€45 with Maître Zakine) can save you months of proceedings. If the builder refuses, you can apply to the judicial court in summary proceedings (urgent) to obtain the refund under penalty.

Further Reading: Related Case Law and Developments

The decision of 10 June 1987 is part of a protective line. As early as 1983, the Court of Cassation had ruled (Civ. 3e, 4 May 1983, No. 82-10.123) that the suspensive condition of a loan was implicit in any building contract. The 1987 ruling confirms and extends this solution to criminal penalties. More recently, the Court of Cassation clarified (Civ. 3e, 12 September 2019, No. 18-18.325) that simply applying for a loan from a single institution is sufficient, even if the offer does not conform to the contract. The trend is therefore very favourable to borrowers.

However, since the ALUR Law of 2014, the building contract must explicitly mention the suspensive condition of a loan (Article L. 231-2 of the Construction and Housing Code). The absence of a clause is now a risky practice for builders, as it may lead to the nullity of the contract. In the future, judges are likely to continue protecting consumers, especially in cases of professional failure to inform.

What You Absolutely Must Remember

• FAQ 1: What if my contract does not mention a loan but I applied for financing? You are protected. Send a registered letter to the builder requesting a refund of the sums paid, citing the Scrivener Law.
• FAQ 2: Can I recover administration fees? Yes, the law requires a refund of all sums paid, without deduction. This includes the deposit, administration fees, guarantee fees, etc.
• FAQ 3: What are the time limits to act? The builder must refund immediately. If he refuses, you have up to 5 years (standard limitation period) to take legal action. But in practice, act quickly to avoid recovery difficulties.
• FAQ 4: What if I have already started paying monthly instalments to the builder? The refund concerns sums paid before the condition was fulfilled. If work has started, you can request termination of the contract and partial refund.
• FAQ 5: Can the builder sue me for non-payment of the balance? No, if the suspensive condition is not fulfilled, the contract is void. You are not obliged to pay. However, if you had obtained a loan and you refuse to sign the deed of sale, you could be at fault.

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