Fraud on Real Estate Commission: When the Buyer Withdraws to Bypass the Agent (Cass. civ., 8 April 2010)

Imagine the scene: you own a flat in Montreuil, and you sign a preliminary contract of sale with a buyer, through a real estate agency. The deal seems done, you are already preparing your move. But suddenly, the buyer withdraws, invoking his right of withdrawal (10-day cooling-off period after signing the preliminary contract). You are disappointed, but you put the property back on the market. A few days later, the same buyer comes back… but this time, he offers to buy the property not as freehold, but as usufruct only, with his children as bare owners. And above all, he deals directly with the notary, without going through the estate agent. The agent cries fraud, but is he right? The answer from the Court of Cassation is clear: yes, and this manoeuvre is outright fraud to evade the commission.

This decision of 8 April 2010 (No. 09-14.597) is essential for all players in the property market: seller-owners, buyers, and of course estate agents. It reminds us that the right of withdrawal is not a free pass to circumvent contractual obligations through artificial legal arrangements. But what exactly does this change? How do you distinguish a legitimate withdrawal from fraud? And above all, how do you protect yourself? Let's dive into the facts.

The Facts: A Story That Happens Every Day

Mr and Mrs X, owners of a house in Boulogne-Billancourt, entrust the sale of their property to Pozzo Immobilier agency. A preliminary contract of sale is signed on 26 August 2005 with Mrs Y., for a price of €195,000. Mrs Y. pays the deposit and everything seems in order. But a few days later, she withdraws, using the legal 10-day period (Article L. 271-1 of the Construction and Housing Code). The owners put the property back on the market.

However, shortly afterwards, the sellers' notary, who also held a selling mandate, drafts a second preliminary contract… with the same Mrs Y. But this time, the deed is concluded with an “indivision Y.”: Mrs Y. buys the property as usufruct only, while her children acquire the bare ownership (the right to dispose of the property, without enjoying it). The price remains the same, and above all, the Pozzo Immobilier agency is completely excluded from the transaction. The estate agent, who had nonetheless found the initial buyer, finds himself deprived of his commission (about 5% of the price, i.e. €9,750). He sues Mrs Y. and the sellers for payment of his commission, alleging fraud.

At first instance and on appeal, the judges dismiss the agent. They consider that the withdrawal was lawful and that the second preliminary contract was a new contract, distinct from the first. Since the agent was not mandated for the second sale, he cannot claim any commission. But the agent appeals to the Court of Cassation. Will the Court of Cassation protect the right of withdrawal or penalise fraud?

The Reasoning of the Court — Explained

The Court of Cassation quashes the appeal judgment. It considers that the estate agent's submissions were “operative” (i.e. admissible and capable of influencing the outcome of the dispute): the fact that the buyer withdrew from the first preliminary contract and then signed a second preliminary contract by changing the ownership structure (freehold → usufruct/bare ownership) constitutes fraud intended to defeat the agent's right to commission. In short, the withdrawal was not a normal exercise of the right of withdrawal, but a manoeuvre to evade the commission.

Legal basis: Article 1382 of the Civil Code (old, now Article 1240 since the 2016 reform) provides that “any act of man, which causes damage to another, obliges the person by whose fault it occurred to repair it.” Here, the fault lies in the simulation of a withdrawal followed by a legal arrangement (usufruct/bare ownership) to circumvent the initial undertaking. The Court recalls that contractual freedom does not permit defrauding the rights of a third party (the estate agent).

What few people know is that the Court of Cassation does not merely note the withdrawal; it examines the intention of the parties. If the real reason for the withdrawal is to avoid paying the commission, then there is fraud. In other words, the right of withdrawal is not a “joker” to cancel everything without consequence. The trial judges must investigate whether the withdrawal is fraudulent. In this case, the second sale took place very quickly, with the same parties, the same price, and only the split of ownership changed. That is enough to characterise fraud.

However, note: this decision does not challenge the right of withdrawal itself. If a buyer legitimately withdraws (for example, because he does not obtain his loan) and another buyer comes forward, the agent cannot claim a commission. But if the same buyer returns through an arrangement, it is fraudulent.

What This Changes for You — Concretely

For estate agents: this decision gives you a powerful legal weapon. If you suspect fraud (withdrawal followed by a direct sale or through a notary, change of legal structure, etc.), you can sue the buyer and/or the seller for payment of your commission, on the basis of tortious liability (Article 1240 of the Civil Code). Do not hesitate to keep all evidence: initial preliminary contract, email exchanges, witness statements. However, note: the burden of proving fraud lies with you. You must demonstrate that the withdrawal was motivated solely by the aim of evading the commission.

For sellers: if you are an owner in Montreuil or Boulogne-Billancourt, and you are selling through an agency, know that you owe loyalty to the agent. If you accept a fraudulent withdrawal by the buyer and then sell directly or through another intermediary to the same buyer, you could be jointly ordered with the buyer to pay the commission. For example, for a property of €250,000 with a 5% commission (€12,500), you risk having to pay that sum in addition to the sale price. It is better to require the buyer to provide a real reason for withdrawal (loan refusal, hidden defect, etc.).

For buyers: do not play with fire. If you withdraw and then repurchase the property in a different form (usufruct, SCI, etc.), know that the courts can reclassify your behaviour as fraud. You could have to pay the agent's commission, and even damages. In practice, if you change your mind about the legal structure, do so before signing the first preliminary contract, or negotiate directly with the agent for a reduced commission, rather than trying to bypass him.

Four Tips to Avoid This Type of Dispute

• For agents: have an exclusive selling mandate signed with a penalty clause (fixed fine) in case of a direct sale by the owner to a buyer you have introduced, during the mandate and even after its expiry (non-circumvention clause). This clause must be limited in time (e.g. 6 months after the mandate) and provide for a reasonable amount.
• For sellers: if a buyer withdraws, ask him in writing for the reason for his withdrawal. Keep this document. If the same buyer returns through another channel, inform your estate agent. This will avoid you being sued for complicity in fraud.
• For buyers: if you wish to acquire in split ownership (usufruct/bare ownership), state this from the outset in the offer to purchase or the preliminary contract. Do not sign a first preliminary contract as freehold if you know you want a split. Transparency is your best asset.
• For everyone: when in doubt, consult a lawyer specialised in property law before signing a preliminary contract or withdrawing. A 30-minute consultation can save you years of litigation.

Further Reading: Related Case Law and Developments

The decision of 8 April 2010 is part of a consistent line of case law that penalises fraud against estate agents' commission rights. For example, in a judgment of 17 March 2010 (No. 08-21.086), the Court of Cassation held that the fact that a seller revoked his mandate after finding a buyer, then sold directly to that buyer, constitutes fault engaging his liability. Similarly, a judgment of 9 February 2011 (No. 10-10.039) condemned a buyer who had simulated a loan refusal to withdraw, then repurchased the property through an SCI.

The trend of the courts is therefore clear: they scrutinise legal arrangements that have no other purpose than to evade the commission. The trial judges are invited to investigate the true intention of the parties. Since 2010, several Court of Appeal decisions have followed this path, condemning buyers who changed the ownership structure (freehold to usufruct, acquisition by an SCI, etc.) after a withdrawal. However, note: if the withdrawal is legitimate (loan refusal, hidden defect, etc.), no fraud is found. The criterion is fraudulent intent.

For the future, we can expect the courts to become increasingly vigilant, especially in a context of rising property prices where commissions are high. Estate agents have an interest in properly documenting their files and not hesitating to take legal action.

Summary and Next Steps

FAQ:

• Can I withdraw from a preliminary contract without reason? Yes, during the legal 10-day period (Article L. 271-1 CCH), without having to justify. But be careful: if you then repurchase the property in a different form, you risk being sued for fraud.
• What should I do if the estate agent accuses me of fraud? Consult a lawyer. Gather evidence of your good faith (legitimate reason for withdrawal, no link to the second purchase). Do not underestimate the threat: the agent can claim his commission (about 5% of the price) and damages.
• What are the time limits for action? The action in tort (Article 1240 of the Civil Code) is time-barred after 5 years from the discovery of the damage (for example, the day the agent learns of the fraudulent sale).
• Can I buy in usufruct without going through the agent? Yes, but if you have already signed a preliminary contract as freehold through him, and you withdraw to do so, it is risky. Instead, negotiate a modification of the preliminary contract or a reduction of the commission.
• Is the seller also liable? Yes, if he participated in the fraud (by accepting the withdrawal and then reselling directly to the same buyer). He can be jointly ordered to pay the commission.

Checklist:

1. If you are an agent: as soon as you have a buyer, have an offer to purchase or preliminary contract signed. In case of a suspicious withdrawal, note the date, the reason, and monitor publications (direct sale).
2. If you are a seller: require a written reason for withdrawal. If the buyer returns, inform your agent.
3. If you are a buyer: be transparent about your intentions from the start. If you want a split ownership, mention it in the offer.

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