Putting the managing agent out to tender: when lack of competition does not invalidate the contract

Imagine you are an owner in a luxury residence in Sophia-Antipolis, that technological hub where modern buildings house hundreds of co-owners. Your managing committee organises the annual general meeting to renew the managing agent's contract. But here's the thing: you discover that only one contract proposal has been presented, without any tender process having been organised. You wonder: is this procedure valid? Can you challenge the appointment of the managing agent?

This situation is one I encounter regularly in my practice, whether in Grasse where I mainly work, or in the co-ownerships of Valbonne where property issues are often significant. Owners sometimes feel aggrieved when they notice that transparency rules have not been followed. But what does the law actually say on this point?

The Cour de cassation provided a clear answer on 3 June 2021 in a decision that sets a precedent. This supreme court (the highest judicial instance in France) ruled on an issue that concerns many co-owners: does the absence of putting several managing agent contract proposals out to tender automatically lead to the nullity (the cancellation) of the appointment of the managing agent? The answer might surprise you.

The facts: a story that happens every day

The story begins in a co-ownership we'll call "Arcadia Principal", located in a French town. Mr Dupont, owner of a flat in this building, attends the annual general meeting. On the agenda is the renewal of the managing agent's contract (the professional or company that manages the co-ownership). But Mr Dupont notices with surprise that the managing committee (the body elected by the co-owners to represent them) has presented only one contract proposal.

In his usual practice, Mr Dupont knew that the law of 10 July 1965, which governs co-ownerships, requires the managing committee to put several managing agent contract proposals out to tender before submitting a proposal to the general meeting. This tender obligation (the act of comparing several offers) aims to guarantee transparency and obtain the best conditions for the co-ownership. Yet here, no comparison had been made.

Dissatisfied with this situation, Mr Dupont decides to challenge the validity of the managing agent's appointment. He brings the matter before the tribunal judiciaire, arguing that the absence of a tender process made the procedure irregular and should lead to the nullity of the general meeting's decision. The court initially rules in his favour, cancelling the managing agent's appointment. But the managing agent appeals this decision.

The cour d'appel, examining the case at second instance, takes a different position. It considers that while the tender obligation has not been respected, this irregularity does not automatically justify the cancellation of the managing agent's appointment. Mr Dupont, persevering, then files a pourvoi en cassation (an appeal before the highest court to challenge the interpretation of the law). This is how the case comes before the Cour de cassation.

This judicial trajectory, from first instance up to the supreme court, is typical of co-ownership disputes. undefined in Grasse and the surrounding area, I have seen many cases follow this same path, with co-owners keen to enforce their rights against what they perceive as procedural irregularities.

The court's reasoning — analysed

The Cour de cassation, in its judgment of 3 June 2021, confirmed the position of the cour d'appel. Its reasoning rests on a fundamental distinction in law: the difference between a substantive rule and a procedural rule. But what does this mean in practice?

The magistrates (the judges) recalled that Article 18 of the law of 10 July 1965 does indeed require the managing committee to put several managing agent contract proposals out to tender. This legal provision is clear: "The managing committee puts several managing agent contract proposals out to tender". However, and this is the crucial point, the law does not provide any specific sanction for non-compliance with this obligation.

In other words, the legislator (the lawmaker) created an obligation but did not indicate what should happen if this obligation is not respected. The Cour de cassation deduces that this obligation falls under procedural rules (the modalities of the procedure) rather than substantive rules (the essential conditions for the validity of an act).

To understand this distinction, take a simple example: if you buy a flat in Valbonne, certain rules are essential (like the owner's capacity to sell): these are substantive rules. Other rules concern the manner of proceeding (like certain time limits): these are procedural rules. Nullity (cancellation) generally applies only to violations of substantive rules, unless the law expressly provides that a procedural violation leads to nullity.

In this case, the Cour de cassation analysed the arguments of both parties. The co-owner maintained that the absence of a tender process deprived co-owners of an informed choice and harmed the transparency of management. The managing agent, for its part, argued that even in the absence of a tender process, the general meeting had validated its contract democratically.

The supreme court considered that the non-compliance with the tender obligation certainly constituted an irregularity, but that this irregularity was not sufficiently serious to justify the retrospective cancellation of the managing agent's appointment. It thus confirmed consistent case law (the body of court decisions on the same point) on this issue.

What few people know is that this decision fits into a broader logic: avoiding that purely procedural irregularities undermine the stability of contractual relationships, to the detriment of the collective interest of the co-ownership.

What this changes for you — in practice

But what exactly does this change for you, owner, tenant, or property professional? This decision has important practical implications depending on your situation.

If you are a co-owner, like Mr Martin who owns a flat in a residence in Valbonne, this decision means that you cannot have the managing agent's appointment cancelled simply because the managing committee did not put several contract proposals out to tender. However, be careful: this does not mean that the tender obligation has become optional. It remains mandatory, and its non-compliance can lead to other sanctions.

For example, if you notice that your managing committee has not respected this obligation, you can bring the matter before the court to seek the liability (the obligation to repair harm) of the managing committee members. undefined, I have encountered cases where co-owners obtained damages (financial compensation) because the absence of a tender process had caused them harm, such as paying abnormally high managing agent fees.

If you are a tenant, this decision has an indirect impact. A well-managed managing agent generally maintains the building in good condition and manages charges efficiently. If the managing agent's appointment is challenged and potentially cancelled, this can create periods of instability in the management of the co-ownership, which can affect your quality of life. The stability confirmed by this decision is therefore rather good news for tenants.

For property professionals, like the estate agents in Sophia-Antipolis who sell flats in co-ownership, this decision brings legal certainty. When advising a purchaser, you can explain that even if the procedure for appointing the managing agent has procedural irregularities, this does not necessarily call into question the validity of the current contract.

In concrete figures: challenging a managing agent's appointment before the courts can cost between €3,000 and €8,000 in lawyer's fees and procedural costs, depending on the complexity of the case. Knowing that the absence of a tender process alone does not justify cancellation can save you spending this amount for an uncertain outcome.

Four tips to avoid this type of dispute

• Demand transparency from the general meeting: When you participate in a general meeting that must appoint a managing agent, systematically ask whether several contract proposals have been put out to tender. If not, have this irregularity recorded in the minutes.
• Check the managing committee's competence: Before voting for managing committee members, ensure they understand their obligations, particularly that of putting managing agent contract proposals out to tender. In luxury co-ownerships in Sophia-Antipolis, this can make a difference.
• Act preventively rather than curatively: If you notice that the managing committee is not respecting its obligations, first send them a formal notice (a formal letter demanding regularisation) before bringing the matter before the court. This amicable approach often resolves the problem.
• Document everything: Carefully keep all documents relating to general meetings, managing agent contract proposals, and exchanges with the managing committee. In a dispute, this documentation will be valuable.

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In-depth analysis: related case law and developments

This decision of the Cour de cassation fits into consistent case law. Already in 2015, in a judgment No. 14-19.237, the same court had considered that non-compliance with the tender obligation did not constitute a cause of nullity of the managing agent's appointment. The 2021 decision thus confirms and reinforces this orientation.

It is interesting to note that this position has not always been evident. In the 1990s, some first-instance courts had sometimes cancelled managing agent appointments for this reason. But gradually, the cours d'appel and the Cour de cassation have standardised their case law in favour of contractual stability.

This trend in the courts reflects a broader evolution in co-ownership law: a balance between protecting the individual rights of co-owners and the need to guarantee the stability and continuity of collective management. In short, judges consider that the collective interest of the co-ownership justifies not systematically cancelling decisions for purely procedural irregularities.

For the future, this case law means that co-owners wishing to challenge a managing agent's appointment will need to find other arguments than the simple absence of a tender process. They could for example demonstrate that this absence caused concrete harm, such as excessive fees or proven poor management.

In practice: what to do

Faced with this decision, here is what to do in practice:

1. If you notice that your managing committee has not put several managing agent contract proposals out to tender: Do not rush to bring the matter before the court seeking cancellation. This action has little chance of success. Prefer a more constructive approach.

2. If you believe that this absence of a tender process causes you harm: Gather evidence of this harm. For example, compare your managing agent's fees with those charged in similar co-ownerships in Valbonne or Sophia-Antipolis.

3. If you are a managing committee member: Scrupulously respect the tender obligation. Even if its non-compliance does not automatically lead to nullity, it exposes the managing committee to liability actions.

4. If you participate in a general meeting to appoint the managing agent: Systematically ask about the tender process. Your vigilance contributes to the transparency of management.

5. If you are considering buying a flat in co-ownership: Check how the current managing agent was appointed. Even if a procedural irregularity does not call into question the validity of the contract, it can reveal governance problems in the co-ownership.

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