Completion Guarantee for Roads and Networks: When the Bank Bond Ends with the Completion Declaration

Imagine: you have just purchased a flat in a new development in L'Isle-sur-la-Sorgue. The works are finished, the bank has released the completion guarantee. But the roads and networks are not in accordance with the contract: the paths are too narrow, the electrical connections are defective. Who pays to put them right? The bank? The developer? This is exactly the question the French Supreme Court decided in this ruling of 12 January 2000.

You may be asking this question if you have signed a contract for sale in the future state of completion: you buy off-plan, and the developer undertakes to deliver a compliant building. But when does the bank guarantee end? Until the certificate of conformity? Or before? The answer is not obvious, and many owners are taken by surprise.

In this judgment, the French Supreme Court quashes a decision of the Court of Appeal which had ordered the bank to pay for the roads and networks after completion of the works. It reminds that the bank bond ends at the declaration of completion, not at the certificate of conformity. A crucial point that changes the situation for buyers.

The facts: a story that happens every day

The company Soricag, a developer, had taken out a completion guarantee for the roads and networks with a bank, in the form of a suretyship (personal undertaking by the bank to pay if the developer does not). Buyers of premises bought off-plan in a development in L'Isle-sur-la-Sorgue. The roads and networks works were carried out, but the buyers considered that they were not in accordance with the contract (for example, roads that were too narrow or poorly made connections).

The commune issued a certificate of conformity, certifying that the buildings complied with planning regulations. But the buyers sued the bank for payment to finish the roads and networks. The Court of Appeal ruled in favour of the buyers, holding that the bank had undertaken to pay and that the certificate of conformity did not relieve the developer of its obligation to deliver a compliant building.

The bank appealed to the French Supreme Court. It argued that its guarantee had ended with the declaration of completion of the works, made in accordance with Article R. 460-1 of the French Town Planning Code (a declaration certifying that the works are finished, signed by a qualified professional). The French Supreme Court agreed with it: the Court of Appeal had violated Article R. 261-24 of the French Construction and Housing Code. In short, the completion guarantee ends at the declaration of completion, not at the certificate of conformity.

The reasoning of the court - analysed

To understand, we must distinguish between two documents: the declaration of completion (Article R. 460-1 of the Town Planning Code) and the certificate of conformity (issued by the commune after verification). The declaration of completion is a simple declaration by the developer, often certified by an architect or a control office. It certifies that the works are physically finished. The certificate of conformity, on the other hand, is an administrative act that checks compliance with planning regulations.

Article R. 261-24 of the French Construction and Housing Code provides that the completion guarantee ends at the declaration of completion of the works. However, note that this declaration must be made in accordance with Article R. 460-1, i.e. certified by a qualified professional. In other words, as soon as the developer declares that the works are finished, and this declaration is certified, the bank is no longer liable.

In this case, the Court of Appeal had considered that the bank's guarantee ran until the certificate of conformity. But the French Supreme Court quashed the decision: the bank had undertaken to guarantee completion, not conformity. As soon as the roads and networks were completed (even if they were not in accordance with the contract), the bond ended. What few people know is that the notion of completion here is material, not contractual. The bank guarantees that the works are done, not that they are done properly.

The judges therefore applied a strict interpretation of the suretyship contract. This confirms previous case law: the completion guarantee is limited in time and scope.

What this means for you - practically

For a buyer in a sale in the future state of completion, this decision means that you should not rely on the bank to finance remedial works after completion. If the roads and networks are poorly done, it is up to the developer to rectify them, and if the developer is in default, you will have to take action against him on the basis of contractual liability (Article 1231-1 of the French Civil Code: non-performance of the contract).

Let's take an example: you buy a unit in a development in Apt. The developer declares completion of the roads and networks on 1 March. The bank releases the bond. In June, you notice that the water pipes are badly fitted and leaking. The bank will tell you that its guarantee has ended. You will then have to sue the developer, but if he is insolvent, you may get nothing.

For a developer, this is good news: the bond ends at the declaration of completion. But be careful: this does not relieve the developer of the obligation to deliver a compliant building. The developer remains contractually bound.

For a landlord owner, if you rent out a new property, make sure the roads and networks are compliant before the declaration of completion. Once the bond is released, you have no recourse against the bank.

In practice, if you are in this situation, you must check the date of the declaration of completion. If it has already occurred, your action against the bank is doomed to fail. You must turn against the developer, and possibly against his insurer.

Four tips to avoid this type of dispute

• Insist on a one-year perfect completion guarantee: when signing the sale in the future state of completion contract, negotiate a one-year perfect completion guarantee (Article 1792-6 of the French Civil Code) which covers defects after delivery.
• Appoint an expert before the declaration of completion: commission a control office to check the roads and networks before the developer declares completion. This way, you can request rectifications before the end of the bank guarantee.
• Record reservations in writing: if you notice non-conformities, notify them to the developer by registered letter with acknowledgement of receipt before the declaration of completion. Keep evidence (photos, emails).
• Check the suretyship clause: in your contract, carefully read the completion guarantee clause. Some banks extend their guarantee beyond the declaration of completion, but this is not the rule. If not, negotiate an extension.

Further reading: related case law and developments

This decision is part of a consistent line of case law from the French Supreme Court. For example, in a judgment of 24 January 1996 (No. 93-20.123), the Court had already held that the completion guarantee ended at the declaration of completion. More recently, in a judgment of 13 September 2017 (No. 16-19.845), it reminded that the bank bond is not required to guarantee compliance of the works with the contract, but only their material completion.

The trend is therefore clear: the courts protect banks by limiting their commitment. This means that buyers must be vigilant. However, if the developer has made a fraudulent declaration of completion (for example, by declaring works that are not finished), the bank could be liable for complicity, but that is another story.

For the future, there is no indication of a reversal. On the contrary, case law confirms the strict reading of Article R. 261-24. Buyers must therefore anticipate.

Key points to remember

FAQ:

• When does the bank completion guarantee end? As soon as the declaration of completion of the works, certified by a qualified professional, is made, and not at the certificate of conformity.
• What to do if the roads and networks are non-compliant after completion? Take action against the developer on the basis of contractual liability (Article 1231-1 of the French Civil Code).
• Can I negotiate an extension of the bank guarantee? Yes, but it is rare. It is better to provide for a perfect completion guarantee.
• What are the time limits for taking action? The action against the developer is time-barred after 5 years from delivery (Article 1792-4-3 of the French Civil Code).

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Checklist:

1. Before the declaration of completion: have the roads and networks inspected.
2. In case of defect: notify reservations to the developer.
3. After the declaration of completion: check if the bank guarantee is still in force (rare).
4. If the developer does not repair: consult a lawyer to bring a liability action.

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 →