Real Estate Fraud: Agent Who Simulates a Purchase to Recover His Deposit Is Convicted (Cass. crim., 21 March 1973)

Imagine: you own a flat in Guipavas, near Brest. An estate agent offers you an exclusive agency agreement, pays you a deposit (a sum of money guaranteeing the commitment) and you sign a purchase undertaking. Then he introduces a buyer, the preliminary contract is signed. But the sale does not go through. The agent demands the return of the deposit, claiming that the sale was concluded and that he is therefore entitled to his commission. You give it back. Except it was all a sham: the buyer was an accomplice, the sale was never genuine. What can you do?

The question every owner approached by an agent asks: how can you be sure the person is acting in good faith? This 1973 decision of the Court of Cassation is a classic that answers that question. It qualifies as fraud the agent's scheme of simulating a purchase to recover his deposit, when the deposit was to remain with him if the sale did not materialise.

But beware: this case, although old, remains a reference for real estate professionals and owners. It illustrates a simple principle: deception by simulation of a sale is a criminal offence. Let's see what it is all about, and what it means for you.

The facts: a story that happens every day

In 1971, Mr. Z..., owner of a flat in Brest, gave an estate agent an exclusive agency agreement for a fixed term. The agent paid a deposit to Mr. Z..., in accordance with the promise to purchase. This deposit was stipulated to be definitively acquired by the seller if the sale was not completed within the agreed period.

A few days later, the agent returned with a purported buyer, Mr. Y..., who signed a preliminary contract (synallagmatic promise to sell and to buy). Mr. Z... was convinced the sale was concluded. But the deadline passed, and the sale did not go through. The agent then claimed that the sale had been concluded — since the preliminary contract was signed — and that he was entitled to the return of the deposit, as the sale was not his fault. Mr. Z..., believing in good faith that the sale was effective, returned the deposit.

However, the investigation revealed that Mr. Y... was merely an accomplice of the agent, a straw man. The preliminary contract was a sham: Mr. Y... had never intended to buy. The agent had thus obtained by trickery the return of the deposit, which in reality should have remained with Mr. Z....

Prosecuted for fraud (Article 405 of the old Penal Code, now Article 313-1 of the Penal Code), the agent was convicted by the Brest criminal court. He appealed, but the Rennes Court of Appeal confirmed. He appealed to the Court of Cassation, arguing that there was no fraud because the owner had not been deceived as to the reality of the sale. The Court of Cassation dismissed his appeal and upheld the conviction.

The reasoning of the court — dissected

To understand the decision, one must first grasp the definition of fraud. Fraud (Article 313-1 of the Penal Code) consists of deceiving a person by fraudulent manoeuvres (lies, staging, use of a false name or false quality) to induce them to hand over funds or property. Here, the fraudulent manoeuvre is the simulation of a purchase through an accomplice.

The estate agent argued that Mr. Z... had not been deceived since the sale was real: the preliminary contract had been signed, there was indeed a deed. But the Court of Cassation dismissed this argument: what matters is not the formal existence of the preliminary contract, but the true intention of the parties. The preliminary contract was only a lure, a "simulated purchase," as the judgment states. The agent knowingly organised this staging to make Mr. Z... believe the sale was concluded, in order to obtain the return of the deposit.

The Court recalls that the mental element of fraud (fraudulent intent) is established: the agent acted with a deliberate intention to deceive. He used a third party to simulate the purchase, which constitutes a typical fraudulent manoeuvre. It does not matter that Mr. Z... was naive or that he signed a document: the deception is complete.

This decision is a confirmation of earlier case law on fraud by simulation. It is not a reversal, but it firmly anchors the principle that the simulation of a legal act (here a sale) can constitute a fraudulent manoeuvre.

What it means for you — in practice

This decision has major practical implications for all players in the real estate industry, particularly in Brest and Finistère.

For the owner-landlord: if an agent introduces a buyer, do not rely merely on the signature of a preliminary contract. Check the buyer's solvency and seriousness. Insist that the preliminary contract be signed before a notary. And above all, be wary of agents who pay you a deposit and then seek to recover it quickly. If in doubt, refuse the refund and ask for time. Example: in Brest, an owner who refunded €10,000 of deposit to a dishonest agent would have lost that sum. Thanks to this case law, he can file a complaint for fraud and obtain compensation.

For the buyer: if you are approached by an agent to act as a fictitious buyer, know that you are making yourself an accomplice to fraud. You can be prosecuted criminally.

For the estate agent: this decision is a warning. Any attempt at simulation to obtain an advantage (commission, deposit) is severely punished. The penalties incurred are up to 5 years' imprisonment and a fine of €375,000 for fraud, not to mention damages.

If you find yourself in this situation, you must act quickly. The limitation period for fraud is 6 years from the discovery of the facts (Article 8 of the Code of Criminal Procedure). Do not wait.

Four tips to avoid this type of dispute

• Check the identity and background of the estate agent: consult the register of agents (the website of the Brest Chamber of Commerce and Industry allows verification of registrations). Be wary of agents who pay you a deposit without clear explanation.
• Insist on an authentic preliminary contract: never sign a preliminary contract without a notary. The notary verifies the capacity of the parties and the absence of simulation. If the agent insists on a private preliminary contract (signed between individuals without a notary), be vigilant.
• Never refund a deposit without written proof: as a rule, the deposit is forfeited by the buyer if the sale does not go through, unless otherwise stipulated. If the agent demands a refund, require a detailed written explanation of the reasons, and seek legal advice before paying.
• If in doubt, use the suspensive condition of obtaining a loan: in any preliminary contract, provide for a suspensive condition (an event that must occur for the sale to be final) of obtaining a loan. If the buyer cannot obtain his loan, the sale is cancelled without penalty. This avoids simulations.

Further reading: related case law and developments

This 1973 decision is part of a consistent line of the Criminal Chamber of the Court of Cassation. One can cite a judgment of 12 January 1966 (Bull. crim. no. 16) where an agent had used a fake buyer to drive up the price of a property; he was convicted of fraud. More recently, a judgment of 10 October 2018 (no. 17-84.656) convicted an agent who had presented a fake landlord to capture commissions.

The trend of the courts is therefore clear: any simulation of a real estate transaction to obtain a financial advantage constitutes fraud. Judges are increasingly attentive to fraudulent schemes, especially since the rise of online sales and exclusive agency agreements.

For the future, one can expect the courts to extend this logic to new practices, such as sales by videoconference or electronic signatures. The principle remains the same: the sincerity of the transaction is paramount.

In practice: what to do

FAQ on real estate fraud by simulation of purchase

• Can an agent demand the refund of the deposit if the sale fails? No, unless the preliminary contract expressly provides that the deposit is refundable. As a rule, the deposit is forfeited by the buyer and acquired by the seller if the sale does not go through (Article 1590 of the Civil Code). If the agent paid it in his own name, he can only recover it if you are in bad faith.
• What to do if I suspect a simulation of purchase? Refuse to refund the deposit, gather evidence (preliminary contract, emails, witness statements) and file a complaint with the Public Prosecutor at the Brest Judicial Court. Consult a lawyer specialising in real estate law.
• What are the time limits for action? The public prosecution for fraud is barred by 6 years from the discovery of the facts (Article 8 of the Code of Criminal Procedure). The civil action (to obtain damages) is barred by 5 years from the day the holder knew or should have known the facts (Article 2224 of the Civil Code).
• Can I obtain damages? Yes, if you demonstrate a direct loss (loss of deposit, legal costs, moral damage). The amount may cover all sums paid, plus interest.
• Can the agent be struck off? Yes, a criminal conviction for fraud generally entails a prohibition from practising as an estate agent (Article L. 131-2 of the Commercial Code).

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