Demolition Guarantee Clause: Validated by the French Supreme Court, Implications for Purchasers

Imagine: you have just bought a house in Les Mureaux, in the Yvelines. Everything seems perfect, until the day you receive a letter from the mayor ordering you to demolish an extension built without planning permission by the previous owner. The bill? €50,000, not including the daily penalty that accumulates each day. You turn to your seller, but he opposes a clause signed in the deed of sale: you guaranteed the execution of the works. Is this legal? The French Supreme Court has just ruled: yes, such a clause is valid, even for the penalty. Explanations.

I see this issue regularly in my practice. Owners in Versailles, purchasers in Houilles, all wonder how to protect themselves against hidden planning defects. The judgment of 17 September 2020 (No. 17-14.407) provides a clear answer: the contractual guarantee can cover demolition and the penalty, without being a criminal sanction. But beware, this does not mean you are defenceless.

This article analyses the decision for you, owners, tenants or real estate professionals. You will find practical tips to avoid pitfalls. Ready? Let's go.

The facts: a story like many that happen every day

Mr X, owner in Les Mureaux, sells his house to Mr Y. The deed of sale contains a clause by which the purchaser undertakes to "guarantee the seller the execution of a demolition and compliance measure" ordered by the criminal court under Article L. 480-5 of the French Planning Code (which allows the judge to order the restoration of the premises in case of infringement). In addition, the purchaser waives any recourse against the seller if he considers he has suffered loss.

Problem: after the sale, the local authority carries out the demolition. The purchaser pays for the works, but disputes having also to pay the penalty (daily fine for non-compliance) of €100 per day, i.e. €36,500 over one year. He sues the seller for payment of this penalty, arguing that the clause does not cover a penalty, which is a personal and criminal measure.

The court rules in favour of the purchaser, but the Versailles Court of Appeal reverses: the clause is valid and includes the penalty. Appeal to the Court of Cassation. The French Supreme Court, in its judgment of 17 September 2020, dismisses the appeal and confirms the validity of the clause. According to it, the contractual guarantee can extend to the payment of the penalty, because it is not a criminal sanction but a measure ancillary to the restoration.

The reasoning of the court — dissected

The French Supreme Court relies on Article L. 480-5 of the French Planning Code (which allows the judge to order demolition or compliance) and Article L. 480-7 of the same code (which provides for the penalty). It recalls that the penalty aims to compel the owner to carry out the works, not to punish him. Consequently, it is not a "criminal sanction" in the strict sense. The clause can therefore validly cover it.

What few people know: the distinction between criminal sanction and civil measure is crucial. In law, a clause that would transfer a criminal fine (for example, a ticket) would be void as contrary to public policy. But here, the penalty is considered a civil coercive measure, even if pronounced by a criminal judge. However, beware: the Court specifies that the clause must not be abusive. In this case, it was clear and accepted by the purchaser.

In short, the decision confirms a jurisprudential trend favourable to contractual freedom in real estate sales. Judges consider that parties can freely allocate the risks related to planning infringements, provided the clause is explicit. In other words, if you buy a property with a demolition guarantee clause, you will be liable to pay for the works and the penalty, unless you can prove a defect in consent (fraud, mistake).

What this changes for you — concretely

If you are a seller-owner: you can include such a clause to protect yourself. But be careful to draft it properly: it must expressly mention the penalty. Example: "The purchaser guarantees the seller the execution of any demolition, compliance or penalty measure ordered under Articles L. 480-5 and L. 480-7 of the French Planning Code." Without this, the risk of challenge exists.

If you are a purchaser: read the deed of sale carefully. A vague clause can cost you dearly. If you buy a house in Houilles with a non-compliant extension, check whether the seller has obtained a regularisation permit. Otherwise, require an eviction warranty or a price reduction. undefined, I have seen cases where purchasers had to pay €80,000 for works plus €20,000 in penalties. A real money pit.

If you are a tenant: you are not directly affected, but if your landlord sells, you could be affected by the works. Check your lease: no rent can be claimed from you for compliance works that are not your fault.

If you are a real estate professional (agent, notary): this decision secures standard clauses. But remind your clients that the purchaser can still sue for hidden defects if the seller concealed the infringement. Example: a seller who knew the extension was illegal and did not disclose it can be sued for fraud, even with a guarantee clause.

Four tips to avoid this type of dispute

• Carry out a planning diagnostic before the sale: ask the seller for a planning certificate or a certificate of non-contestation of works. In Les Mureaux, the town hall can issue a document listing known infringements. Cost: around €150 to €300, but it avoids surprises.
• Negotiate the guarantee clause: if you are a purchaser, propose to cap your commitment (for example, 10% of the sale price) or exclude the penalty. The seller may agree if the property is hard to sell.
• Consult a solicitor before signing: a review of the deed by a lawyer (like me) costs between €200 and €500, but can save you thousands of euros in works. In Houilles, a client saved €30,000 by having an ambiguous clause amended.
• Check insurance policies: some structural defects insurance or legal protection policies cover compliance costs. Ask your insurer if you are covered.

Further reading: related case law and developments

This decision is part of a line favourable to contractual freedom. Already in 2015, the French Supreme Court validated a clause transferring to the tenant the obligation to demolish an unlawful construction (Civ. 3e, 10 June 2015, No. 14-14.676). On the other hand, a clause that would transfer a criminal fine (for example, a 5th class ticket) would be void for public policy reasons. The line is therefore fine.

Since 2020, the trend has been confirmed: judges favour the execution of restoration works, even if they fall on the purchaser, considered to have accepted the risk. This means that, for the future, notaries will generalise these clauses. But beware: if the infringement predates the sale and the seller concealed it, the purchaser can still invoke fraud (Article 1137 of the French Civil Code: fraud is a manoeuvre to obtain consent). In that case, the guarantee clause could be set aside.

In practice: what to do

• Before buying: require from the seller a declaration on honour of the conformity of constructions. Check the land registry and planning permissions at the town hall. If doubt persists, include a suspensive condition in the preliminary contract: "The sale is conditional on obtaining a certificate of non-contestation of works."
• If you have already signed and you receive a notice to comply: do not pay without checking the clause. Contact a solicitor to analyse whether the clause is abusive or the seller committed fraud. Time limit: you have 5 years to take legal action (standard limitation period).
• If you are a seller and wish to protect yourself: have a clear clause drafted by your notary, mentioning the penalty and the waiver of recourse. Example: "The purchaser undertakes to execute any demolition, compliance or penalty measure ordered by a final court decision, and waives any recourse against the seller in this respect."

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