Prescription for Notary Liability Action: Time Runs from Final Tax Adjustment

Imagine: you sell your business, confident in the legal structure your notary advised. Then, two years later, the tax authorities notify you of an adjustment of €66,960. You turn against your notary, but he raises the limitation defence. How far can you go? This is the question the Court of Cassation decided on 29 June 2022, in a case that particularly resonates for property owners in Viroflay or Mantes-la-Jolie.

This decision, intended for all those who entrust their assets to a legal professional, sets a clear rule: the limitation period for an action in liability against a notary for breach of their duty to provide tax advice runs from the decision that finally confirms the adjustment. In other words, it is not the notification from the authorities that starts the clock, but the irrevocable outcome of the tax dispute. A distinction that can change everything, as we shall see.

This analysis will guide you step by step through the intricacies of this case law, so that you know exactly when and how to act if you are faced with a similar situation. Because behind the technical terms lies a very concrete question: whether you will be able to obtain compensation for the loss suffered.

The facts: a story that happens every day

Mr X, owner of a business in Viroflay, consulted a notary to sell his business. Keen to optimise his tax position, he followed the advice of his legal professional, who proposed a legal structure intended to allow him to sell the business without being taxed on capital gains. Confident, Mr X signed the sale deed.

A few months later, the tax authorities notified Mr X of an adjustment in the amount of €66,960, considering that the sale should be taxed as a capital gain, the structure being ineffective. Mr X challenged this adjustment before the administrative court, then before the administrative court of appeal. After several years of proceedings, the adjustment was finally confirmed by a decision of the Bordeaux Administrative Court of Appeal dated 30 November 2020.

It was only at that point that Mr X sued his notary for liability and compensation, alleging a breach of his duty to advise. But the notary raised the limitation defence, arguing that the time had started to run from the notification of the adjustment by the tax authorities, several years earlier. The Bordeaux Court of Appeal upheld the notary's argument, holding that Mr X had knowledge of the damage from the notification of the adjustment. Dissatisfied, Mr X appealed to the Court of Cassation.

The reasoning of the court — analysed

The Court of Cassation, in its judgment of 29 June 2022, overturned the reasoning of the Court of Appeal. It recalled that an action in liability against a legal professional, based on Article 1240 of the Civil Code (which requires compensation for damage caused by fault), is subject to the ordinary five-year limitation period provided for in Article 2224 of the same Code. The starting point of this limitation period is the day on which the holder of the right knew or should have known the facts enabling them to exercise it.

In matters of breach of the duty to provide tax advice, the damage does not materialise upon notification of the adjustment, but upon the final decision confirming it. Indeed, as long as the taxpayer can challenge the adjustment before the administrative judge, it is not certain that the damage exists: the authorities could be unsuccessful. It is only after an irrevocable decision that the reality and extent of the damage are finally established. The Court therefore held that the limitation period could only start to run from the date of the final decision of the administrative court.

In doing so, the Supreme Court confirms a jurisprudential development already underway, but clarifies it: it clearly distinguishes the triggering event (the notary's fault) and the manifestation of the damage (the final adjustment). The client is not required to act upon notification, as they may legitimately hope for a favourable outcome. Waiting for the end of the tax dispute is not only understandable, but legally protected.

What this means for you — concretely

If you are a landlord, tenant, buyer or co-owner, this decision concerns you whenever you use a notary or lawyer for a property or tax transaction. Here is what it implies:

For the seller of a property or business: if you suffer a tax adjustment after a sale, you have every interest in challenging the adjustment through all available remedies. It is only at the end of this challenge, if it finally fails, that the limitation period for your action against the notary will begin to run. You then have five years to act. Concrete example: in Mantes-la-Jolie, a client sold a rental property in 2018. The authorities notified an adjustment of €35,000 in 2019. He challenged it until 2022, when the administrative court confirmed the adjustment. He can still sue his notary until 2027.

For the buyer: if your notary failed to alert you to unfavourable tax treatment (e.g., incorrectly calculated transfer duties), your damage is only certain after the final payment of the sums claimed. As long as you challenge it, the limitation period does not run.

For co-owners: in the event of erroneous advice on the tax treatment of a sale of common parts, the same logic applies. Wait for the outcome of the tax dispute before bringing an action.

In summary, do not act too early, but do not delay either: once the final decision is made, the clock starts ticking. Keep all documents carefully (adjustment notice, decisions of administrative courts, correspondence with the notary).

Four tips to avoid this type of dispute

• Demand a prior written consultation: Before any transaction, ask your notary or lawyer to provide you with a detailed note on the tax consequences. Keep this document: it will be evidence in the event of a dispute.
• Clarify the guarantees: When signing the deed, insist that the professional gives a written undertaking on the effectiveness of the tax structure. An indemnity clause can be inserted.
• Systematically challenge an adjustment: Do not pay without a fight. Bring the matter before the administrative court within the time limits (two months). This preserves your position and allows you to clarify the situation before suing the notary.
• Consult a lawyer specialising in property and tax law: Before bringing a liability action, have an expert assess your chances. A lawyer will help you determine the exact starting point of the limitation period.

Further reading: related case law and developments

This decision is part of a line favourable to clients of legal professionals. Already, in a judgment of 18 June 2020 (no. 18-26.654), the Court of Cassation had held that the limitation period for an action in liability against a lawyer for breach of the duty to provide tax advice runs from the final decision of the tax judge. The judgment of 29 June 2022 extends this principle to notaries, thus unifying the regime.

Conversely, some lower courts had previously considered that the starting point was the notification of the adjustment, creating legal uncertainty. The Court of Cassation puts an end to these divergences. Henceforth, the rule is clear: wait for the end of the tax dispute. This solution protects the taxpayer who, in good faith, challenges an adjustment while preserving their rights against their adviser.

In the future, we can expect legal professionals to be more cautious in their tax advice and to systematically inform their clients of the risks and remedies. Case law may still evolve on the question of the information owed to the client about the limitation period itself, but for now, remember this essential rule.

Key points to remember

• When does the limitation period start? On the date of the final decision of the administrative judge confirming the tax adjustment, not the initial notification.
• What is the duration of the limitation period? Five years from that final decision (Article 2224 of the Civil Code).
• What to do if you receive an adjustment? First challenge it through all available remedies. Keep evidence of the notary's fault.
• Can I act before the end of the tax dispute? Yes, but it is risky: the court might consider that the damage is not certain and dismiss your action, or that the limitation period runs from the notification.
• Should I consult a lawyer? Absolutely. A specialist lawyer will help you determine the optimal strategy between tax dispute and 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 →