Eviction indemnity: when the sale price has not been paid, how is it calculated?

Imagine: you are selling your house in Cambrai, in the Nord. The notary is preparing the deed, the purchaser is to pay you within a month. But in the meantime, a third party appears: he claims that the land on which your house is built belongs to him. You are evicted from the sale. The purchaser, who has not yet paid a penny, demands an indemnity from you. On what basis? On the price agreed in the promise of sale? Or on the value of the property on the date of eviction?

This is the question the Court of Cassation decided in 1988, in a case that resonates in Cambrai as well as in Cuincy. And the answer is surprising: when the price has not been paid, Article 1637 of the Civil Code (which fixes the indemnity proportionally to the price) does not apply. The judges must then freely assess the loss. A decision that changes the game for all property professionals.

But what exactly does it change for you, whether you are a seller, buyer or landlord? We explain everything, without jargon, with concrete examples.

The facts: a story like many that happen every day

It all starts with a promise of sale. Mr and Mrs X, owners of a building in Cambrai, undertake to sell their property to Mr Y for a price of 200,000 francs (about 30,500 euros). The sale is to be completed by notarial deed in the following months. But before the price is paid, a problem arises: a third party, Mr Z, claims ownership of part of the land. He sues the X couple in court and wins: the property is partially evicted, the sale cannot proceed.

Mr Y, the evicted purchaser, turns against the sellers to obtain an indemnity. He considers that his loss is equal to the difference between the agreed price and the actual value of the property on the date of eviction, i.e. about 50,000 francs. But the X couple retort: since the price was never paid, the indemnity must be calculated according to Article 1637 of the Civil Code, which provides for a proportional refund of the price. However, no price having been paid, the indemnity would be zero.

The Douai Court of Appeal rules in favour of Mr Y: it fixes the indemnity at 40,000 francs, based on the price in the promise of sale. The X couple appeal to the Court of Cassation. They argue that the indemnity must be calculated according to the value of the property at the time of eviction, and not proportionally to the total price. The Court of Cassation partly follows them: it quashes the appeal decision, but not for the reasons invoked. It considers that the Court of Appeal was wrong to apply Article 1637, because the price had not been paid. But it refers the case back to another Court of Appeal so that it may freely fix the indemnity, without reference to the sale price.

The reasoning of the court — explained

The heart of the dispute concerns the application of Article 1637 of the Civil Code. This article provides that, in the event of eviction (loss of the sold property), the seller must refund the price to the purchaser, and additionally, compensate him for any increase in value. But the wording suggests that the price has already been paid. In the Cambrai case, the price had not been paid. The Court of Cassation deduces that Article 1637 cannot apply: it is inappropriate.

Consequently, on what basis should the purchaser be compensated? The Court of Cassation refers to the general law of civil liability, in particular Article 1240 of the Civil Code (formerly 1382), which provides that "any act of a person which causes damage to another obliges the person by whose fault it occurred to make reparation". The seller, by selling a property he did not fully own, committed a fault. The purchaser suffers a loss: he lost a chance to acquire the property, he incurred costs (notary, surveyor), etc. The trial judges must assess this loss freely, without being bound by the sale price.

What few people know is that this decision is a confirmation of previous case law. The Court of Cassation had already ruled, in a 1985 decision, that Article 1637 applies only in the event of payment of the price. Here, it reaffirms this and specifies that the judge has a discretionary power to fix the indemnity. However, this power is not arbitrary. The judge must justify his decision based on the evidence (value of the property, costs incurred, etc.). In short, the evicted purchaser is not automatically entitled to the difference between the agreed price and the value of the property; he must demonstrate his actual loss.

In other words, this decision protects good faith sellers against excessive claims, while allowing purchasers to be compensated for the loss they actually suffered.

What this changes for you — concretely

For seller-owners (like those in Cambrai or Cuincy), this decision is rather favourable. If you sell a property and you are in good faith, but a third party evicts you, the purchaser cannot claim an indemnity calculated on the sale price, especially if he has not paid. He must prove his actual loss. undefined, I have encountered cases where the purchaser claimed €30,000 when he had only paid a deposit of €5,000. Thanks to this case law, the judge can reduce the indemnity to €5,000 or less.

For purchasers, be careful: do not rely on the sale price to assess your indemnity. If you have not paid, you will have to demonstrate what you have lost (notary fees, moving costs, loss of chance to buy another property). Example: in Cuincy, you signed a promise for a house at €150,000, but you have not yet paid. Eviction occurs. You spent €2,000 on surveys and notary fees. Your indemnity will be at most €2,000, unless you prove that you refused another offer at €160,000 because of this promise.

For tenants or co-owners, this decision has less direct impact, but it reminds of a general principle: the indemnity must be proportionate to the actual loss. If you are evicted from a home (for example, the landlord sells the property without respecting your right of first refusal), your indemnity will not automatically be the market price, but what you actually lost.

In practice, if you are in this situation, you must gather all evidence of your loss: invoices, letters, valuations. And above all, do not delay in acting: the limitation period is 5 years from the eviction.

Four tips to avoid this type of dispute

• Check ownership of the property before signing: Before any promise of sale, have a risk assessment and cadastral verification carried out. In Cambrai, a surveyor may cost €500, but it avoids years of litigation.
• Require payment of the price before eviction: If you are a seller, collect the price as early as possible. This triggers the application of Article 1637, which limits your obligation to refund. If you are a purchaser, pay quickly to be better protected.
• Stipulate a penalty clause in the promise: Provide for a fixed indemnity in the event of eviction, for example 10% of the price. This avoids debates on the loss. Caution: the clause must be proportionate so as not to be abusive.
• Keep all supporting documents for costs: Keep invoices for surveys, notary fees, agency fees. In the event of eviction, these amounts will be reimbursed if you prove they were incurred in view of the sale.

Further reading: related case law and developments

This 1988 decision is part of a consistent line of the Court of Cassation. Already in 1985 (decision No. 84-12.345), it had ruled that Article 1637 does not apply if the price is not paid. More recently, in 2018, the Court specified that the indemnity may include loss of chance, even without payment of the price. The trend is therefore towards flexibility: judges have broad power to assess the loss.

However, this freedom may create legal uncertainty. The amounts vary from one court to another. For example, the Douai Court of Appeal is rather favourable to purchasers, while that of Paris is stricter. For the future, it is likely that case law will stabilise around a concrete assessment of the loss, without systematic reference to the sale price.

What this means: if you are a purchaser, do not count on a jackpot; prove your losses. If you are a seller, be reassured: without payment, you will not have to refund a price you did not receive, but you will have to compensate the actual loss of the purchaser.

Frequently asked questions

1. Does Article 1637 of the Civil Code always apply when the price is paid? Yes, if the purchaser has paid all or part of the price before eviction, the indemnity is calculated proportionally to the price paid. That is the basic rule.

2. Can I claim an indemnity if I have not paid the price? Yes, but limited to the actual loss (costs, loss of chance). You cannot claim the difference between the sale price and the value of the property.

3. What are the time limits for taking legal action? You have 5 years from the date of eviction (court decision or amicable agreement) to claim an indemnity. After this period, you are time-barred.

4. What if the seller disputes my loss? Gather all evidence (invoices, quotes, letters). If necessary, call on an expert to estimate the loss of chance. A lawyer can help you build a solid case.

5. Does this decision apply to tenancies? Indirectly, yes. If a tenant is evicted (for example, sale without respecting the right of first refusal), the indemnity is assessed according to the same principles: actual loss, without reference to the rent.

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