Sale in the Future State of Completion: When a Refused Loan Does Not Allow Recovery of the Deposit

You have signed a reservation contract for a new flat in Libourne. The developer demands a deposit of 5% of the price. You are relying on a mortgage loan to finance the purchase. But the bank refuses your application. You think you can recover your deposit? Not so fast. The Court of Cassation has ruled: it all depends on what is written in the preliminary contract. This decision from 1977, still relevant today, deserves a closer look.

What exactly does this judgment say? That the loans whose absence allows recovery of the deposit are only those which the seller has undertaken to obtain or transmit. If you have simply mentioned a loan you intended to obtain yourself, without any undertaking from the seller, you cannot invoke the suspensive condition. A nuance that changes everything.

In this article, I tell you the story behind this decision, I break down the judges' reasoning, and I give you practical advice to avoid losing your deposit. Whether you are a buyer in Pessac, a landlord in Bordeaux, or a developer, these rules concern you.

The Facts: A Story That Happens Every Day

Mr. and Mrs. X, a couple from Libourne, wish to buy a flat in a new development in Pessac. They sign a preliminary contract for a sale in the future state of completion (VEFA) with the civil real estate company Y. The contract provides for a deposit of 5% of the price, i.e., €15,000. It is stipulated that this deposit will be refunded if the sale is not completed due to the seller, or if the buyer does not obtain the loans provided for in the contract.

The contract mentions that the buyers will apply for a loan from Crédit Foncier. But the contract does not specify that the seller undertakes to obtain this loan. The X couple submit their loan application, but Crédit Foncier refuses. They then ask the seller for the return of the deposit, considering that the suspensive condition of obtaining a loan has not been fulfilled. The seller refuses, arguing that the loan mentioned was not a loan he had undertaken to obtain.

The dispute is brought before the court. The X couple lose at first instance and on appeal. They appeal to the Court of Cassation. The Court of Cassation, in its judgment of 23 February 1977, dismisses their appeal. It confirms that only the loans which the seller has undertaken to obtain or transmit in the preliminary contract can be invoked by the buyer to request the return of the deposit. In this case, the contract did not contain such an undertaking, so the refusal of the loan did not allow the recovery of the deposit.

The Reasoning of the Court — Explained

The Court of Cassation bases its decision on Article 11 of the Law of 3 January 1967 and Articles 30, 31 and 35 of the Decree of 22 December 1967, relating to sales of buildings to be constructed. These texts, now codified in the Construction and Housing Code, govern preliminary contracts for VEFA. They provide that the deposit may be refunded if the buyer does not obtain the loans provided for in the contract.

But the Court specifies an essential condition: these loans must be those which the seller has undertaken to obtain or transmit. In other words, if the preliminary contract simply mentions a loan that the buyer intends to apply for, without any undertaking from the seller, this loan does not fall within the scope of the suspensive condition. In clear terms, the seller is not obliged to help you obtain a loan that you are seeking on your own.

The Court rejects the argument of the X couple that the mere mention of Crédit Foncier in the contract was sufficient to create an obligation for the seller. The judges consider that the contract did not contain any undertaking by the seller to obtain this loan. In other words, the seller had not promised to transmit the loan or facilitate its obtaining. Consequently, the condition was not fulfilled, and the deposit remained with the seller.

However, note: This decision does not call into question the validity of suspensive conditions. It simply clarifies their scope. What few people know is that this interpretation is still applied today. undefined, I have come across cases where buyers, believing they were protected, lost their deposit because the contract did not mention the seller's undertaking. The lesson is clear: read your preliminary contract carefully.

What This Means for You — Practically

For the buyer in VEFA: You must check that the preliminary contract expressly states that the seller undertakes to obtain the loan for you or to transmit it to you. Without this mention, a loan refusal will not allow you to recover your deposit. Example: in Pessac, a couple reserves a flat for €300,000. The contract mentions "Crédit Foncier loan" but without the seller's undertaking. The bank refuses. The couple loses their deposit of €15,000. To avoid this, ask for a clause specifying the seller's undertaking.

For the seller or developer: This decision protects you. You are not obliged to refund the deposit if the buyer has not obtained a loan he was supposed to apply for on his own. However, if you undertake to transmit a loan, you must do so. Otherwise, the buyer can demand the return of the deposit. Therefore, be precise in drafting the preliminary contract.

For the landlord: If you sell a property in VEFA, the same rules apply. Make sure your preliminary contract is clear about the loans concerned. In the event of a dispute, this decision gives you a solid basis to refuse the refund if the undertaking was not given.

Four Tips to Avoid This Type of Dispute

• Insist on a clear clause in the preliminary contract: Have it stated in writing that the seller undertakes to obtain the loan for you or to transmit it. Do not settle for a mere mention of the lending institution.
• Keep all evidence of the loan application: In case of refusal, you will need to prove that you applied for the loan under the conditions provided in the contract (amount, term, interest rate). Keep the acknowledgements of receipt and the bank's refusals.
• Consult a lawyer before signing: A property law professional can check that the suspensive condition is correctly drafted. The cost of a consultation is negligible compared to the amount of the deposit.
• In case of loan refusal, act quickly: The suspensive condition usually has a time limit (e.g., 30 days). Notify the seller by registered letter with acknowledgement of receipt within this period, attaching the supporting documents. Do not delay.

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Further Information: Related Case Law and Developments

The decision of 23 February 1977 is part of a consistent line of the Court of Cassation. It was confirmed by a later judgment of 6 July 1983 (No. 81-15.566) which reminds that the buyer can only rely on the refusal of a loan if the preliminary contract mentions the seller's undertaking to obtain it. On the other hand, a judgment of 9 July 1997 (No. 95-17.342) specified that if the contract states that the buyer must provide evidence of a loan application that complies with the contract, the seller must then refund the deposit even without an express undertaking. What few people know is that case law has evolved towards increased protection of the buyer, but the condition of the seller's undertaking remains a central element.

The current trend of the courts is to strictly interpret the clauses of preliminary contracts. If the seller has an obligation of means (he must try to obtain the loan), the buyer is better protected. In the absence of such an obligation, the risk lies with the buyer. For the future, I advise buyers to negotiate a clause of the seller's undertaking, and sellers to draft precise clauses to avoid disputes.

In Practice: What to Do

FAQ:

1. Can I recover my deposit if my loan is refused? Yes, if the preliminary contract states that the seller undertakes to obtain the loan for you. Otherwise, no.
2. What if the contract does not specify the seller's undertaking? You can try to negotiate an amendment before signing the final deed. Otherwise, you risk losing your deposit in case of loan refusal.
3. What are the deadlines to act? You must notify the seller of the loan refusal within the time limit provided in the contract (usually 30 to 45 days). After this period, you lose the benefit of the suspensive condition.
4. Can the seller refuse to refund the deposit if I made a non-compliant loan application? Yes. The application must match the characteristics mentioned in the contract (amount, term, rate). If you apply for a different loan, the seller can refuse the refund.
5. Is this decision still applicable today? Yes, it is still cited by the courts. The rules have been codified, but the interpretation remains the same.

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