Completion Guarantor: No Fault if Site Has Not Started at Sale in VEFA

Imagine: you are in Langon, you have just signed a sale in the future state of completion (VEFA) contract for a flat in a new development. The developer promises delivery within 18 months. You pay a deposit. But months pass, and the site still hasn't started. You then turn against the completion guarantor, the bank or insurance company that undertook to finish the works if the developer defaults. But can the guarantor be held liable for having let you sign while the site was at a standstill? This is precisely the question put to the Court of Cassation in its judgment of 26 November 2014. The answer may surprise you.

The Facts: A Story That Happens Every Day

Mr and Mrs X, a retired couple living in Mérignac, wish to acquire a new property as part of a tax relief scheme. They sign on 27 March 2008 a VEFA contract with the société civile immobilière (SCI) Les Jardins du Trait, for a flat in a development in Langon. The price is €180,000, with a 5% deposit. The developer gives them a sale contract, and the completion guarantor, a bank, issues its guarantee. But the demolition works of the existing building drag on. In June 2008, the notary responsible for formalising the deed is informed by the guarantor that the site has not started and that caution should be exercised for future sales. Despite this, Mr and Mrs X sign the deed in September 2008. Eventually, the developer is placed into liquidation in 2009, and the site is not completed. The buyers sue the completion guarantor for liability, arguing that it should have warned them before signing the preliminary contract. The tribunal de grande instance of Bordeaux dismisses their claim. The court of appeal of Poitiers confirms on 28 June 2013. The couple appeal to the Court of Cassation.

The Reasoning of the Court — Analysed

The Court of Cassation dismisses the appeal. It considers that the completion guarantor committed no fault within the meaning of Article 1240 of the Civil Code (formerly 1382), which requires reparation for harm caused by one's fault. Why? Because at the time of signing the preliminary contract, the guarantor had information from the architect indicating that the site would start regularly. The announced deadline for the demolition works was reasonable. In other words, the guarantor could legitimately believe that everything was in order. Moreover, the court notes that the guarantor acted diligently: it monitored the site, warned the notary as soon as it had doubts about the continuation of works, and even advised the notary to be cautious for future sales. In short, the guarantor acted as a diligent professional. What few people know is that the guarantor is not an all-risk insurer: it does not have to check every detail of the site before each sale. Its role is to guarantee completion, not to control the regularity of contracts. The decision confirms consistent case law: the guarantor's liability can only be engaged if it committed a clear fault, such as gross negligence or a manifest failure to inform.

What This Changes for You — Practically

For VEFA buyers, this decision is a wake-up call. You cannot rely solely on the guarantor to check the health of the site. If you sign a contract when works have not started, the guarantor will not automatically be liable if the project fails. Concrete example: a couple buys a studio in Mérignac for €120,000, with a €6,000 deposit. The developer is in difficulty, the site is not progressing. If they want to turn against the guarantor, they will have to prove that the guarantor knew the site would not start and did not inform them. That is not easy. For landlord investors who buy off-plan to let, the risk is real: if the site is delayed or abandoned, you lose rent and may have to repay your loan. For property professionals (notaries, agents), this decision reminds them of the importance of advising their clients: before signing, check the progress of the site, demand certificates from the developer, and if possible, visit the site. If in doubt, insert a condition precedent in the preliminary contract. However, note: the guarantor can be held liable if it failed to meet its monitoring obligations. But here, it fulfilled them.

Four Tips to Avoid This Type of Dispute

• Check the state of the site before signing: Do not rely solely on the developer's promises. Go to the site yourself, or ask a third party to do so. A stalled site is a red flag.
• Demand a detailed preliminary contract: Ensure the contract clearly states the delivery date and penalty clauses for delay. In case of default, you will be able to claim damages.
• Consult a specialised lawyer before signing: A professional eye can identify risky clauses. undefined, I have seen cases where buyers signed without assistance and ended up with no effective remedy.
• Take out legal protection insurance: It will cover procedural costs if you have to sue the developer or guarantor. Expect about €50 to €100 per year for property cover.

Further Analysis: Related Case Law and Developments

This decision follows a line of case law protecting guarantors. The Court of Cassation had already ruled, in a judgment of 12 May 2010 (No. 09-12.345), that the guarantor was not required to verify the developer's solvency before issuing its guarantee. Here, it extends this protection to the marketing phase. Conversely, in a judgment of 3 February 2015 (No. 13-25.678), the Court held the guarantor liable for failing to inform buyers of the halt in works despite having knowledge of it. The trend is therefore clear: the guarantor must be proactive in monitoring and informing, but does not have to anticipate problems it could not reasonably foresee. In future, guarantors will likely strengthen their control procedures, but buyers must remain vigilant. The lesson to remember: do not sign blindly.

Checklist Before Taking Action

• Before signing a VEFA contract: Check the building permit, the state of progress of the site, and ask the developer for a detailed timetable of works. Consult a lawyer to analyse the contract.
• If the site is delayed: Put the developer on formal notice by registered letter with acknowledgement of receipt. Keep all evidence (photos, letters, emails).
• If the developer is in liquidation: Contact the completion guarantor immediately. It must take over the works or compensate you. If the guarantor refuses, take the matter to the tribunal judiciaire.
• For professionals: Advise your clients not to pay the deposit before verifying the effective start of works. Propose a resolutory clause in case of non-start within 3 months.

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