Error as to substance: when a cancelled planning permission vitiates the sale

Imagine: you buy a building plot in Hayange, with a brand new planning permission in your pocket. You sign the deed, you plan your family home. And then, two months later, the council cancels the permission. Your dream collapses. What can you do? This question is asked by hundreds of people each year in the Metz area. The Court of Cassation answered it in a judgment of 23 May 2007: error as to substance (the defect concerning an essential quality of the property) is assessed on the day of the sale, and the retroactivity of the cancellation of the permission does not change that. Explanations.

The facts: a story that happens every day

In 1998, a real estate company (SCI) sold a building plot to individuals, the Z couple, in Montigny-lès-Metz. The sale was concluded subject to the condition precedent of obtaining planning permission. On 16 December 1998, the permission was granted by the town hall. The Z couple therefore completed the sale by notarial deed. But alas: on 4 February 1999, the town hall revoked (cancelled) this permission. The Z couple found themselves with a non-buildable plot. They sued the seller for annulment of the sale for error as to substance. The Metz Court of Appeal dismissed their claim, considering that the municipal order revoking the permission was not final at the time they brought their claim. Wrong move: the Court of Cassation quashed the judgment. It recalled that the error is assessed at the time of conclusion of the contract, and that the retroactivity of the cancellation of the permission is irrelevant. In other words, it does not matter that the cancellation occurred after the sale: if the buyer was unaware of the defect (here, the risk of cancellation), he can seek annulment of the sale.

The reasoning of the court — dissected

The trial judges (the Court of Appeal) had considered that since the municipal order revoking the permission was not final (it could be challenged before the administrative court), the error was not established. The Court of Cassation disagreed. Its reasoning is summed up in one sentence: "Retroactivity has no bearing on the error, which is assessed at the time of conclusion of the contract." Basis: Article 1110 of the Civil Code (in its version then in force, now taken up in Articles 1132 et seq.), which provides that error is a ground for nullity of the agreement when it concerns the very substance of the thing. The substance, here, is the buildability of the plot. Now, on the day of the sale, the permission was valid. But the error is not the cancellation itself: it is the fact that the buyer was unaware that the permission was fragile, liable to be withdrawn. For the judges, what matters is the substantial quality of the property at the time of the undertaking. If that quality subsequently disappears due to an external event (here, the cancellation of the permission), and the buyer had no knowledge of it, the error may be invoked. The Court of Cassation is not creating a reversal: it confirms settled case law (Civ. 3e, 13 March 1973, Bull. III, No. 192). But it clarifies that the retroactivity of the cancellation should not mislead: it is not because the annulled act is deemed never to have existed that the error must be assessed at that fictitious date.

What this means for you — practically

For buyers: if you buy a plot with planning permission that is later cancelled, you can seek annulment of the sale for error as to substance, provided you prove that you were unaware of the risk of cancellation. But beware, the time limit is short: the action for nullity is barred after five years from the discovery of the error (Article 1304 of the Civil Code, now 1144). Concrete example: a plot at €80,000 in Montigny-lès-Metz, with permission, which becomes non-buildable. You lose the value of the land and the notary fees (about €8,000). Annulment would refund you the price and the fees. For sellers: you must inform the buyer of any pending appeal or litigation regarding the permission. If you conceal a defect, you incur contractual liability. For notaries: systematically check for any challenges to the permission before the sale. If you are in this situation, you must act quickly: consult a lawyer specialised in property law to assess your chances and bring an action for nullity.

Four tips to avoid this type of dispute

• Check for any challenges to the permission: Before signing, ask the seller or notary for a certificate from the town hall confirming that no challenge is pending. Check the planning permission register.
• Include a warranty clause: In the sale deed, provide a clause by which the seller guarantees the buildability of the plot and undertakes to reimburse you if the permission is cancelled within two years.
• Consult a lawyer before signing: A legal review of the preliminary sale agreement can save you from nasty surprises. Cost: €200 to €500, much less than a trial.
• Keep all documents: Keep the permission, correspondence from the town hall, the sale deed. In case of a dispute, you will need to prove the date of grant and cancellation.

Further reading: related case law and developments

The same year, the Court of Cassation issued a similar judgment (Civ. 3e, 30 May 2007, No. 06-15.142) concerning a planning permission cancelled after the sale. It held that the buyer could rely on error as to substance, even if the cancellation was not yet final at the time of the claim. The trend is thus clear: judges protect the good faith buyer. Conversely, if the buyer was aware of the challenge or the risk, the error is inexcusable and nullity is refused (Civ. 3e, 8 July 2015, No. 14-18.654). For the future, the 2016 reform of contract law (Ordinance No. 2016-131) incorporated error into Articles 1132 to 1136 of the Civil Code, without changing the substance. The case law therefore remains current.

Checklist before taking action

• Have I discovered the cancellation of the permission? -> Yes, date: _____
• Did I sign the sale after obtaining the permission? -> Yes
• Was I aware of any challenge before signing? -> No
• Have I acted within five years of the discovery? -> Yes / No (if no, urgent)
• Have I consulted a lawyer? -> Yes / No

FAQ:
Can I cancel the sale if the permission is cancelled after signing? Yes, if you were unaware of the risk of cancellation. You must bring an action for nullity for error as to substance.
What is the time limit to act? Five years from the discovery of the error (Article 1144 of the Civil Code).
Can the seller be ordered to pay damages? Yes, if he concealed the risk (fraud) or acted in bad faith.
What if the permission is cancelled but I can obtain a new one? The error may be ruled out if the plot remains buildable. Consult a lawyer.
Do I have to pay the notary fees if the sale is cancelled? In principle, the seller must refund the price and the fees (Article 1352-4 of the Civil Code).

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 →