Property Manager Without Separate Bank Account: Is Your Management Agreement Automatically Void?

Imagine you own an apartment in a residential building in Mont-de-Marsan. You pay your service charges every quarter, you attend general meetings, but one question nags at you: is the co-ownership's money really safe? Does your property manager keep the funds in a dedicated account, or do they mix them with their own finances? This is a legitimate concern I often hear in my practice, whether in Mont-de-Marsan or Parentis-en-Born.

The law is clear: since the ALUR law of 2014, every professional property manager must open a separate bank account in the name of the co-owners' association. But what happens if this is not done? Does the management agreement (the contract binding the property manager to the co-ownership) become automatically void? And crucially, who can act to have this established?

The Court of Cassation has just answered these questions in a judgment of 9 February 2022. This decision, technical in appearance, has very concrete consequences for every co-owner. It specifies in particular that a co-owner who acquired their unit after the property manager's breach can still request the automatic nullity (the automatic cancellation) of the management agreement. In other words, the failure to open a separate account is not a mere formality: it is a serious fault that can call into question the entire management of your building.

The facts: a story that happens every day

The story begins in a provincial co-ownership, similar to many I encounter in the jurisdiction of Mont-de-Marsan. Several co-owners, tired of the management by the company Mallet Guy immobilier (which we will call "the Mallet company" for simplicity), decide to challenge its management agreement. Among them, Mr. Durand, owner of a three-room apartment in Parentis-en-Born since 2018, and Mrs. Legrand, who bought her studio in 2020.

Their main grievance? The Mallet company had never opened a separate bank account in the name of the co-owners' association. Yet the law has required this since 2014. The co-ownership's funds – the service charges paid by all the owners – were mixed with those of the property manager, creating an obvious risk of confusion and misappropriation. Imagine: lift repairs, maintenance of green spaces, water bills… all this went through the property manager's professional account, without clear traceability.

The co-owners therefore applied to the judicial tribunal to request the automatic nullity of the management agreement. The Mallet company raised several arguments: first, that some co-owners, like Mrs. Legrand, had acquired their units after the breach (the failure to open the account) and therefore could not rely on it. Second, that the property manager had committed other minor faults (such as not sending postal copies of certain documents), but that this did not justify nullity. The tribunal ruled in favour of the co-owners, but the Mallet company appealed.

The court of appeal overturned the judgment, considering that the request for nullity could only be made by co-owners present at the time of the breach. Mrs. Legrand, who arrived later, was therefore excluded. The co-owners appealed to the Court of Cassation, and that is where the Court of Cassation ruled, on 9 February 2022. It quashed the court of appeal's judgment, confirming that the automatic nullity could be invoked by any co-owner, even one acquired after the breach. The case was referred to another court of appeal for rehearing.

The court's reasoning – analysed

The Court of Cassation based its decision on an essential principle: automatic nullity. What does this mean? In law, automatic nullity is an automatic sanction that applies when the law is violated on a fundamental point. Here, the legal basis is Article 22-1 of the law of 10 July 1965 (the law on co-ownership), amended by the ALUR law, which requires the professional property manager to open a separate bank account. The Court considers that this obligation is of public policy (it protects the general interest) and that its non-compliance results in the nullity of the management agreement, without a judge needing to expressly pronounce it.

The judges' reasoning breaks down into two steps. First, they recalled that the failure to open a separate account is a serious fault, because it exposes the co-ownership to financial risks. In plain terms, mixing funds is like putting everyone's money in a single wallet: impossible to know who pays what, and misappropriations are facilitated. The Court therefore confirmed that this breach rendered the management agreement automatically void.

Then, and this is the crucial point, the Court analysed who can invoke this nullity. The Mallet company argued that only co-owners present at the time of the breach could act. But the judges rejected this argument. Why? Because automatic nullity affects the management agreement as a whole, from its origin. It renders the contract legally non-existent. Thus, any co-owner, even if they bought afterwards, inherits this situation. In other words, if the management agreement is void, it is void for everyone, including new arrivals. The Court emphasised that the court of appeal had erred in not examining this aspect, as it was required to do.

This reasoning marks a confirmation of prior case law. For several years, the courts have considered that the obligation of a separate account is mandatory. undefined, I have encountered cases where property managers tried to circumvent this rule by using "designated" accounts, but the case law is consistent: only an account in the name of the co-owners' association is valid. This decision therefore strengthens co-owners' security, by extending their right to act.

What this changes for you – concretely

But what exactly does this change for you, owner, tenant, or real estate professional? Here are the practical implications, profile by profile.

If you are a co-owner (whether you occupy your property or rent it out), this decision gives you a powerful lever. From now on, even if you bought recently, you can request the nullity of the management agreement if the property manager has not opened a separate account. Concretely, this means you can challenge their management and possibly replace them, without having to prove other faults. For example, in Mont-de-Marsan, if you acquired an apartment in 2021 in a building where the property manager has managed the funds since 2015 without a dedicated account, you can act. Time limits? The action for nullity is subject to a 5-year limitation period from the discovery of the breach, but consult a solicitor quickly to avoid pitfalls.

If you are a landlord (owner who rents out), this decision protects you indirectly. A property manager who mixes funds risks mismanaging service charges, which can lead to conflicts with your tenants. By being able to have the nullity established, you secure your investment. Imagine: miscalculated charges, unpaid works… this can be costly. In a case I handled, a landlord avoided €8,000 in damages by having a faulty property manager replaced.

If you are a purchaser, always check the property manager's management before buying. Ask to see the co-ownership's bank statement during the viewing. If the seller or property manager refuses, be wary. This decision also allows you to negotiate the price if you discover a breach after acquisition.

If you are a real estate professional (property manager, estate agent), this decision is a reminder of the rules. Opening a separate account is not optional. Sanctions can be heavy: nullity of the management agreement, damages, and even disciplinary proceedings. For a property manager, the cost of litigation can exceed €10,000, not counting loss of clientele.

Be careful however: nullity of the management agreement does not mean the property manager owes nothing. They remain liable to account and repay any misappropriated funds. How to react? If you suspect a breach, gather evidence (management agreement, bank statements) and consult a specialised solicitor.

Four tips to avoid this type of dispute

• Check the bank account as soon as you enter the co-ownership: At your first general meeting, request a copy of the statement for the account in the name of the association. If the property manager hesitates, insist – it is your right.
• Demand transparency in the management agreement: Clearly include the obligation of a separate account, with mention of sanctions in case of breach. This will deter dubious practices.
• Monitor service charge statements: Compare the amounts billed with actual expenses. If inconsistencies appear (for example, abnormal bank charges), investigate.
• Act collectively with the management committee: An isolated co-owner has less weight. If several of you notice a problem, involve the management committee for coordinated action.

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In-depth analysis: related case law and developments

This decision fits into a firm jurisprudential trend. For example, in a judgment of 13 January 2021 (No. 19-21.990), the Court of Cassation had already confirmed that the lack of a separate account resulted in automatic nullity. However, some courts of appeal hesitated on the admissibility of actions by subsequent co-owners. The judgment of 9 February 2022 clarifies this point: from now on, any co-owner can act, regardless of their acquisition date.

What few people know is that this case law is also evolving for voluntary property managers (non-professionals). Although not subject to the same legal obligation, the courts are beginning to apply similar standards to them, in the name of good faith. For the future, this means increased protection for co-owners, but also greater responsibility for property managers. Professionals will have to be irreproachable in financial management, on pain of seeing their management agreement cancelled.

Key points to remember

Here is a checklist of what to do if you are in this situation:

1. Check if your property manager has a separate bank account: Request the statement – if it does not exist, the management agreement is probably void.
2. Act even if you bought after the breach: The decision authorises you to, regardless of your acquisition date.
3. Consult a specialised solicitor quickly: The limitation periods (5 years) can be complex to calculate.
4. Gather evidence: Management agreement, correspondence with the property manager, service charge statements – every document counts.
5. Consider collective action: With other co-owners, you will have more weight and can share costs.

Do you find yourself 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 →