Protection of the purchaser of immovable property on credit: no fiction of loan obtention

Imagine: you are in Saint-Médard-en-Jalles, you sign a promise to sell for a house of €250,000. You pay a deposit of €25,000. You submit a loan application to your bank, you provide all the supporting documents, but the bank refuses. You inform the seller, but he relies on a clause in the contract: "If you do not notify me of the refusal within 15 days, the loan is deemed obtained and you must buy, otherwise you lose your deposit." Result: you lose €25,000 for a refusal for which you are not responsible. Unfair? The Court of Cassation agrees with you.

This decision, delivered on 11 July 1988, is a cornerstone of the protection of purchasers of immovable property on credit. It reminds that the law of 13 July 1979 (concerning the information and protection of borrowers in the immovable property sector) is of public policy: it cannot be derogated from by a contractual clause. In concrete terms, the seller cannot require that the buyer be deemed to have obtained his loan if he has not notified the refusal within a given period. The suspensive condition of loan obtention (a condition that suspends the sale until the actual obtention of financing) must be real, not fictitious.

But what exactly does this change for you, whether you are a buyer or a seller? Let's delve into the facts of the case and the reasoning of the judges.

The facts: a story that happens every day

Mr X, a property owner in Saint-Médard-en-Jalles, had signed a promise to sell for an apartment with a couple of purchasers. The contract stipulated that the sale was conditional on the purchasers obtaining a loan. But it added a clause: if the purchasers had not notified the seller of the loan refusal within 15 days from the signing, the loan would be considered obtained and the sale would have to be completed (concluded) under penalty of losing the deposit.

The purchasers made a loan application to the Caisse d'Épargne de Lille (yes, Lille, but it doesn't matter). They did everything necessary: filled out the forms, provided the documents, followed up with the bank. But on 3 June 1981, the bank refused them. They immediately informed the seller. Problem: this refusal occurred after the 15-day period provided in the contract. The seller therefore considered that the loan was deemed obtained and required the completion of the sale. The purchasers refused, invoking the actual obtention of the loan as an essential condition.

The case was brought before the Court of Appeal, which ruled in favour of the purchasers: the deposit had to be returned to them. The seller then appealed to the Court of Cassation. The Court of Cassation dismissed the appeal, confirming the judgment of the Court of Appeal. It held that the law of 13 July 1979 is of public policy (i.e., it applies to everyone, even if the contract provides otherwise) and that the condition of loan obtention must be real, not fictitious. It does not matter that the contract provides for notification within a specified period: if the buyer has done what is necessary and is not responsible for the refusal, he must recover his deposit.

The reasoning of the court — dissected

The Court of Cassation relies on the law of 13 July 1979, Article 1 of which (now codified in Article L. 312-1 of the Consumer Code) requires that the loan offer be given to the borrower before the conclusion of the sale contract. But above all, this law is of public policy: any contrary clause is deemed unwritten. In clear terms, the seller cannot impose a fiction of loan obtention.

The seller argued that the contractual clause was clear: if the buyer did not notify the refusal within the time limit, the loan was deemed obtained. But the Court of Cassation reminds that this clause is contrary to the law, because it makes the fulfilment of the condition dependent on a mere formality, and not on the actual obtention of the loan. In other words, the buyer must prove that he took the necessary steps and that the refusal was not his fault. It does not matter that the notification was late: if the refusal is real, the condition is not fulfilled.

This decision is a confirmation of earlier case law. As early as 1984, the Court of Cassation had held that clauses providing for a presumption of loan obtention in the absence of notification within a time limit were abusive (Civ. 3e, 4 July 1984). The 1988 decision goes further by specifying that public policy applies even if the buyer has not complied with a contractual notification period. Note, however: the buyer must prove his diligence (that he actually applied for the loan and did not contribute to the refusal).

What few people know is that this protection applies to both standard mortgage loans and bridging loans or interest-only loans. undefined, I have come across cases where sellers tried to retain the deposit by invoking a lack of notification. Thanks to this case law, I have obtained full restitution of the sums, sometimes before the courts of Bordeaux or Arcachon.

What this changes for you — concretely

For the purchaser: You are protected. If you take all the steps to obtain a loan (submission of application, follow-ups, etc.) and the bank refuses, you recover your deposit, even if the contract provides a notification period that you have exceeded. Attention: you must prove your good faith. Keep all supporting documents: acknowledgment of receipt of the loan application, letters from the bank, written refusal. Without these proofs, the seller could contest.

For the seller: You cannot rely on a clause of "deemed obtention" to force the sale. If the buyer proves to you that the loan was refused, you must return the deposit. For example, a seller in Arcachon had concluded a promise to sell with a buyer who had not notified the refusal within 10 days. The buyer produced a letter from the bank dated the 8th day. The seller had to return the €30,000 deposit, failing to prove any fault of the buyer.

For the real estate professional: Draft promises to sell in compliance with the law. Avoid clauses of presumption of loan obtention. Instead, provide a reasonable period for obtaining the loan (30 to 45 days) and an obligation for the buyer to justify the refusal. If you are an estate agent in Saint-Médard-en-Jalles, check your standard contracts: a non-compliant clause could render you liable.

If you are in this situation, you must act quickly. The limitation period for claiming restitution of the deposit is 5 years (general limitation period). But the longer you wait, the harder it is to prove. Contact a lawyer as soon as the loan refusal is known.

Four tips to avoid this type of dispute

• Insist on a sufficient period to obtain your loan. In the promise to sell, provide at least 30 days, or even 45 days for bridging loans. Avoid periods that are too short (15 days) which put you in difficulty.
• Notify the refusal in writing and promptly. Even if the law protects you, it is better to send a registered letter with acknowledgement of receipt to the seller as soon as you receive the refusal. Keep a copy.
• Keep all evidence of your steps. Keep the acknowledgements of receipt of your loan application, exchanges with the bank, and especially the written refusal. Without proof, you risk losing your deposit.
• Have the promise reviewed by a lawyer before signing. A professional will detect abusive clauses. It will cost you a few hundred euros, but will save you from losing thousands of euros.

Further information: related case law and developments

This 1988 decision is part of a protective line. Already in 1984, the Court of Cassation had held that the clause "the loan is deemed obtained if the purchaser has not notified the refusal within 15 days" was abusive (Civ. 3e, 4 July 1984, n°83-10.219). More recently, the Court of Cassation specified that the purchaser must prove that he submitted a loan application in accordance with the characteristics provided in the contract (Civ. 3e, 4 November 2010, n°09-70.166).

The trend of the courts is therefore constant: protect the purchaser against overly formalistic clauses. On the other hand, if the purchaser has not submitted a loan application or has applied for a loan on different terms (amount, duration, rate), he cannot invoke the protection of the law. What this means for the future: sellers and notaries must be vigilant in drafting promises to sell. A clause that circumvents the law would be systematically set aside.

Checklist before taking action

1. Have I submitted a loan application? Check that the amount, duration and rate correspond to those mentioned in the promise.
2. Do I have proof of the refusal? Obtain a written refusal from the bank (letter, email). If the bank does not respond within the time limit, request a certificate of non-obtention.
3. Have I notified the refusal to the seller? Even if the law protects you, do so by registered letter with AR. Keep proof of sending.
4. Does the seller refuse to return the deposit? Send a formal notice by registered letter with AR. If no response within 15 days, refer the matter to the judicial court (expedited procedure possible).
5. Consult a lawyer. A professional will assess your chances and assist you in amicable or judicial proceedings.

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 →