VEFA Reservation Contract: Developer May Declare It Void if Planning Permission Is Challenged (Cass.)

Imagine: you own property in Saint-André-les-Vergers, near Troyes, and you have signed a reservation contract for a new house in a development of twenty-two homes. You pay a deposit, you plan ahead, you make layout plans. Then, the planning permission is challenged by a neighbour. The developer tells you the contract is void and you lose your deposit. What can you do? This is a question hundreds of buyers ask themselves every year.

The Court of Cassation decided a similar case in a judgment of 30 November 2011 (No. 10-25.451). It ruled in favour of the developer, on the ground that the reservation contract did not bind it to sell immediately, but only to offer the sale subject to final grant of planning permission. In the absence of any fault by the developer in handling the challenges against the planning permission, the voidness is legitimate.

This decision is crucial for any buyer in a VEFA (sale in the future state of completion) or reservation. It reminds us that the reservation contract is not a firm sale, but a conditional promise. Let us analyse the facts, the judges' reasoning and what this means for you in practice.

The Facts: A Story That Happens Every Day

In April 2002, SNC Sogedame (a real estate development company) applied for planning permission for a development of twenty-two houses in Aix-en-Provence. It signed several reservation contracts with buyers, each paying a deposit (often 5% of the price). The contract stated that the developer undertook, if the development went ahead, to offer the sale by preference to the reserving parties within a certain period — not to sell immediately.

Planning permission was granted, but a third party brought judicial proceedings. The planning permission was annulled. The developer then informed the reserving parties that the contracts were void and refused to return the deposits, relying on the contractual clauses that provided for such voidness in the event of annulment of the planning permission.

The reserving parties sued the developer, arguing it had acted in bad faith by not actively defending the challenged planning permission, or by failing to provide a guarantee of obtaining it. They sought return of the deposits and damages. The Tribunal de grande instance of Aix-en-Provence partly ruled in their favour, but the Court of Appeal of Aix-en-Provence, in a judgment of 22 April 2010, overturned the decision and dismissed the reserving parties' claims. They appealed to the Court of Cassation.

The Reasoning of the Court — Analysed

The Court of Cassation, in its Third Civil Chamber, dismissed the appeal. It upheld the Court of Appeal's decision based on a strict analysis of the contract terms. The legal basis here is Article 1134 of the Civil Code (old version, before the 2016 reform), which provides that agreements lawfully entered into take the place of law for those who have made them. In other words, the contract is the law of the parties.

The judges noted that the reservation contract did not provide for a firm sale upon signature, but a promise of sale subject to the suspensive condition of final grant of planning permission. The developer undertook to offer the sale by preference to the reserving parties if the development materialised. However, since the planning permission was annulled, the condition was not fulfilled. The contract expressly provided for its voidness in that situation.

The reserving parties argued bad faith on the part of the developer, claiming it had neglected to defend the challenged planning permission or had not sufficiently secured the arrangement. The Court responded that bad faith was not established: the developer committed no fault in handling the challenges (no negligence was alleged or proven). Therefore, it was entitled to rely on the voidness. This decision is in line with consistent case law (Civ. 3e, 30 Sept. 2009, No. 08-17.255) which protects developers when the contract is clear and the planning permission is annulled without any fault on their part.

The Court thus reaffirmed that freedom of contract prevails, and the reserving party bears the risk of the planning permission not being obtained, unless it proves a fault by the developer. This is not a reversal, but a confirmation: the reservation contract is not a firm sale.

What This Means for You — In Practice

If you are a buyer of a property under VEFA or reservation, this decision directly concerns you. Here is what you need to remember:

• For the buyer: You cannot demand the sale if the planning permission is annulled, unless the developer has undertaken to do so by a firm clause. Your deposit may be lost if the contract provides for voidness in case of annulment of the planning permission. Example: in Romilly-sur-Seine, a buyer reserved a house for €250,000 with a deposit of €12,500. The planning permission was annulled, and he lost everything because the contract so provided.
• For the developer: You are protected if you have drafted the contract properly. You can rely on voidness without fear of an action for bad faith, provided you have not committed any fault (for example, not neglecting to defend the planning permission in court).
• For the co-owner: In a VEFA co-ownership, the same principle applies: if the planning permission is challenged and annulled, the reservations fall through. Check whether the developer has included a substitution or guarantee clause.

If you are in this situation, you should: 1) check the exact terms of your contract (is it a firm sale or a conditional promise?), 2) examine whether the developer committed a fault (delay in applying for planning permission, failure to defend before the administrative court), 3) consult a lawyer to assess your chances of claiming damages if there is a fault.

Four Tips to Avoid This Type of Dispute

• Read the voidness clauses of the reservation contract carefully. Before signing, check whether the contract provides that the sale is conditional on final grant of planning permission. If so, you know that the risk of annulment of the planning permission lies with you.
• Negotiate a guarantee for the return of the deposit. Ask for a clause providing for full return of the deposit in case of annulment of the planning permission, even without fault of the developer. Some developers accept this, especially in a favourable market.
• Monitor the progress of the planning permission. Inquire with the town hall about the status of any challenges. If a challenge is filed, ask the developer what steps are being taken to defend it. Keep written records.
• Engage a specialist lawyer before signing. Having a professional review the contract can save you years of litigation. In Saint-André-les-Vergers, a buyer was able to negotiate a substitution clause that allowed him to recover his deposit.

Further Reading: Related Case Law and Developments

This decision is part of a line of judgments that uphold the binding force of reservation contracts. One can cite a Court of Cassation judgment of 30 September 2009 (No. 08-17.255) which already held that voidness of the reservation contract is automatic in case of annulment of the planning permission, unless the developer is at fault. More recently, the Court clarified in a judgment of 12 July 2018 (No. 17-21.677) that the developer must prove it has used all means to obtain the final planning permission. The trend is therefore protective of developers, but judges do not hesitate to sanction proven negligence. For the future, with the increase in challenges to planning permissions (particularly on environmental grounds), buyers must be especially vigilant. Some contracts now include substitution clauses (another plot, another development) to avoid voidness. This is an avenue worth exploring.

Key Takeaways

FAQ:

• Can I demand the sale if the planning permission is annulled? No, unless the contract provides for a firm sale not conditional on planning permission. Generally, the developer can rely on voidness.
• What can I do to recover my deposit? Check whether the developer committed a fault (failure to defend the planning permission, delay). If so, you can sue for contractual liability (Article 1231-1 of the Civil Code). Otherwise, the deposit is lost if the contract so provides.
• What remedies do I have against the developer? You can plead bad faith if you prove the developer deliberately allowed the planning permission to be annulled (e.g., by not filing a defence). In that case, claim damages for the loss suffered (loss of chance, expenses incurred).
• Can the developer modify the contract after signature? No, a reservation contract cannot be unilaterally modified. Any modification must be accepted by both parties.
• What is the time limit to take action? You have 5 years from the voidness to sue the developer (standard limitation period). But act quickly to avoid losing evidence.

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