Reference decision: cc • N° 89-12.518 • 1990-10-23 • View the decision →
Have you just bought a plot of land in Mandelieu-la-Napoule, with your feet in the water? Or perhaps a nice building plot in Valbonne, in the heart of Sophia Antipolis? The tax authorities granted you an exemption from registration fees (taxes paid on purchase) on condition that you build within four years. You sign, you are safe. But what happens if, for one reason or another – a neighbour's appeal, a planning permission problem, a crisis – you don't finish the works in time? Can the authorities claim the fees from you, and until when? This question, commonplace for many, was decided by the French Supreme Court (Cour de cassation) in 1990. And the answer is not what you might think.
Imagine: you are Mr X, a property owner in Mandelieu. You buy a building plot benefiting from Article 691 of the French General Tax Code, which reduces or exempts registration fees if you undertake to build within a certain period. You sign a deed, you promise to file a building permit application and to complete the works within four years. But the works drag on, the permit is challenged, and ultimately you don't build. The authorities claim the fees four years and one day after the deadline. You think it is too late because the limitation period (the period after which the authorities can no longer act) is four years from the date of the deed. Wrong! The Court of Cassation said: the limitation period starts the day after the day you were required to provide proof of completion of the works. In other words, as long as you have not performed your obligation, the clock does not start ticking. A decision that changes everything.
In this article, we will dissect this story, understand the judges' reasoning and see what it implies for you, whether you are a property owner, purchaser or professional. And I will give you, with my field experience in Grasse and Mont-de-Marsan, practical tips to avoid being caught out.
The facts: a story like those that happen every day
We are in the 1980s. A property company (SCI) – let's call it SCI Les Pins – buys a building plot in Mandelieu-la-Napoule. To benefit from the exemption from registration fees provided for by Article 691 of the General Tax Code, it undertakes in the acquisition deed to carry out construction within four years. The tax authorities accept the exemption. But here's the thing: the works do not progress. The SCI does not provide proof of completion of the construction within the allotted time. The authorities, after waiting, notify it of an adjustment (claim for unpaid fees) and claim the registration fees plus late payment interest.
The SCI contests. It puts forward an argument: the authorities had, through an administrative instruction, relaxed the conditions for applying Article 691. In particular, they no longer required the production of the building permit at the time of registration of the deed. The SCI infers that it was dispensed from the obligation to build itself, or at least that the authorities could not blame it for not having built. In other words, it hides behind the administrative tolerance to say: 'You relaxed one condition, so you cannot require another one from me.'
The case goes to court, then to the Court of Cassation. The court rules in favour of the authorities. The SCI appeals to the Court of Cassation, but the Supreme Court dismisses its appeal. It confirms that the authorities may interpret a condition favourably without thereby waiving the others. In short, the SCI still had to build or provide proof of completion of construction. And that is where the problem lies: the limitation period for the recovery action does not run from the date of the acquisition deed, but from the first day following the expiry of the period given to the purchaser to provide proof of completion of construction. As the SCI had never provided proof, the period had not started to run, and the authorities were entitled to claim the fees.
This case, typical of tax disputes relating to planning law, illustrates a classic trap: one thinks that the limitation period runs from the deed, but the Court of Cassation reminds us that it is the obligation to do something (build) that triggers the period, not the deed itself. A nuance that cost the SCI dearly.
The reasoning of the court – explained
The central legal question is: from when does the limitation period for the recovery of registration fees avoided (not paid) due to non-fulfilment of exemption conditions start to run?
The legal basis is Article 691 of the General Tax Code (CGI), which allows an exemption from transfer taxes (tax on sale) on condition that the purchaser carries out construction within a specified period (usually four years). If the condition is not met, the fees become payable. But the authorities must act within the limitation period.
The SCI argued that the limitation period had expired because the four-year period had started to run on the date of the acquisition deed. However, the authorities claimed the fees more than four years after the deed. According to the SCI, it was too late.
The Court of Cassation, in a rigorous reasoning, rejects this analysis. It recalls that Article 691 imposes conditions 'placed on the taxpayer who wishes to benefit from these provisions'. One of these conditions is to provide proof of completion of construction within the allotted time. As long as the taxpayer has not performed this obligation, or has not proved that he has performed it, the authorities cannot know whether the fees are due. The limitation period can therefore only run from the moment the obligation to provide proof is in default. The Court specifies: 'the limitation period begins to run from the first day following the expiry of the period given to the purchaser to provide proof of completion of the construction.'
In other words, if the purchaser does not provide proof, the period does not run. And when it does run, it is from the day after the deadline for providing proof. In our case, the SCI had never provided proof. Did the authorities wait four years after the deadline to claim? No: they claimed within four years of that deadline. So the limitation period had not expired.
The Court adds that the authorities may, by an instruction, relax certain conditions (for example, not requiring the building permit at the time of registration), but this does not deprive them of the right to require compliance with other conditions, in particular the completion of construction. In other words, tolerance as to a formality does not amount to a waiver of the substantive obligation.
This reasoning confirms previous case law, but has the merit of clarifying the starting point of the limitation period. It is a decision that protects the authorities, but also bona fide taxpayers: it prevents the authorities from waiting indefinitely, but also prevents the taxpayer from hiding behind his own default.
What this means for you – in practice
This decision has immediate practical consequences for several profiles.
For the purchaser of a building plot: If you benefit from the Article 691 exemption, you must strictly comply with the construction deadline and, above all, provide proof of completion of the works to the authorities. Not doing so risks the authorities claiming the fees from you years later, even if you thought the limitation period had passed. Imagine: you buy a plot in Valbonne in 2020, with an undertaking to build by 2024. You do not build. In 2028, the authorities claim the fees. You think it is time-barred because eight years have passed since the deed. Wrong: the limitation period started in 2024, and the authorities have until 2028 to act. If they claim in 2028, it is within time. So you must pay, with interest.
For the landlord owner: If you let a property acquired under Article 691, ensure the conditions are fulfilled. In case of a resale before completion, the benefit of the exemption may be challenged. The authorities may then claim the fees from the seller (you) even several years later, if you have not provided proof.
For the real estate professional (agent, notary, developer): You must inform your clients of this rule. Many think that after four years, the authorities can no longer claim anything. This is false. The limitation period runs from the deadline for providing proof, not from the deed. I regularly see cases where developers, after abandoning a project, are caught by the tax authorities ten years after the acquisition. undefined, I came across a case in Mandelieu where a developer bought a plot in 2005, did not build, and the authorities claimed the fees in 2015, successfully.
For the co-owner in joint ownership: If you buy as joint owners, the obligation to build rests on all co-owners. A single failure can lead to the loss of the exemption for all. Be vigilant.
In summary, never neglect the obligation to provide proof. Keep building permits, certificates of conformity, completion certificates carefully. And if you cannot build, it is better to renounce the exemption from the outset or ask the authorities for an extension.
Four tips to avoid this type of dispute
- Tip 1: Anticipate the construction deadline from the purchase. Before signing the deed, realistically assess your ability to build within four years. Take into account possible appeals (neighbours, associations), permit processing times, climatic hazards. If the deadline is too short, negotiate a clause renouncing the exemption or an undertaking to pay the fees if the works are not completed.
- Tip 2: Provide proof of completion of works as soon as possible. As soon as construction is finished, send a completion declaration with supporting documents (building permit, certificate of conformity, photos) to the tax authorities. Do not delay: each day that passes after the deadline is a day when the limitation period does not run, but it is also a day when the authorities can claim the fees.
- Tip 3: Keep all documents for at least 10 years. The limitation period can be long. Keep deeds, correspondence with the authorities, proof of construction. In case of an audit, you can prove that you have fulfilled your obligations.
- Tip 4: In case of difficulty, ask the authorities for an extension. If you cannot build in time, send a written request to the tax authorities for an extension. They may grant it, especially if you can show force majeure (litigation, natural disaster). Do not remain passive.
Further reading: related case law and developments
This Court of Cassation decision is part of a consistent line of authority. Already, in a judgment of 12 July 1988 (No. 87-14.236), the Court had held that the limitation period for the recovery of registration fees runs from the expiry of the period given to provide proof of completion of construction, and not from the date of the deed. The 1990 decision confirms and clarifies this.
More recently, the Marseille Administrative Court of Appeal (in a judgment of 15 March 2018) applied the same rule regarding Article 691 bis (exemption for social housing). It recalled that the limitation period only starts to run from the date on which the authorities became aware of the non-fulfilment of the building undertaking.
The trend is therefore clear: the courts protect the tax authorities against taxpayers who try to evade their obligations by invoking the limitation period. For the future, it is likely that the case law will remain stable, unless the legislator intervenes to amend Article 691. But to date, no reform is in sight.
What this means for you: do not play with time. If you have benefited from an exemption conditional on building, consider that the authorities have a period of four years from the deadline for providing proof to act. But in practice, they may act much earlier. Better to be in compliance.
What you must absolutely remember
FAQ:
- Q: Does the limitation period run from the date of the purchase deed?
R: No, it runs from the day after the date on which you were required to provide proof of completion of construction. If you do not provide proof, the period does not start. - Q: Can I rely on an administrative instruction that relaxes the conditions?
R: Yes, but only for the condition that is relaxed. The other conditions (in particular completion) remain due. You cannot hide behind a tolerance to avoid building. - Q: What should I do if I cannot build within the deadline?
R: Ask the authorities for an extension in writing. If it is refused, you can renounce the exemption and pay the fees, or challenge the refusal before a court. - Q: Can the authorities claim the fees more than 10 years after the deed?
R: Yes, if you have never provided proof of completion. The limitation period does not run as long as the obligation to provide proof is not in default. In practice, the authorities can act within four years of the deadline, even if that deadline is far removed from the deed. - Q: What are the risks if I do not provide proof?
R: The authorities can claim the avoided fees, plus late payment interest (0.20% per month) and, in case of deliberate non-compliance, penalties of 40%.
Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.
In summary: Article 691 of the CGI is a favour, not a right. To benefit from it, you must build and provide proof. If you fail in your obligations, the authorities have plenty of time to catch up with you. Do not let the limitation period lull you into a false sense of security.
Are you in a similar situation? A 30-minute initial consultation with Maître Zakine (£45) can save you months of proceedings – and often much more. Book an appointment →
