Reference: Court of Cassation, 3rd Civil Chamber, Judgment No. 21-23.156 of 25 January 2023
Introduction: The Stakes of VEFA for Non-Resident Purchasers
Sale in the future state of completion (VEFA) is a highly popular method of acquisition in France, particularly among foreign investors. It allows the purchase of a property off-plan, with staggered payments based on the progress of construction works. However, for a non-resident, the risks are heightened: geographical distance, unfamiliarity with French law, and difficulties in monitoring the construction site. The developer's default can lead to significant financial losses. The judgment of the Court of Cassation of 25 January 2023 clarifies the seller's obligations and the guarantees offered to the purchaser, including non-residents.
I. The Legal Framework of VEFA and Completion Guarantees
A. The Developer's Obligations
The developer must provide the purchaser with financial completion guarantees, in accordance with Articles R. 261-17 et seq. of the Construction and Housing Code. These guarantees may be:
- An intrinsic guarantee: the developer demonstrates sufficient financial capacity (equity, loans).
- An extrinsic guarantee: a bank or financial institution acts as surety.
The non-resident purchaser must demand disclosure of these guarantees prior to signing. In the event of a deficiency, the contract may be void.
B. Specific Protection for Non-Residents
Non-residents often face difficulties in verifying the reality of the guarantees. French law requires that the VEFA contract be drafted in French and clearly mention the guarantees. The 2023 judgment recalls that the developer must inform the purchaser of any modification affecting the guarantee, even after the signing.
II. Analysis of Judgment 21-23.156 of 25 January 2023
A. Facts and Procedure
A purchaser of foreign nationality, residing outside France, had signed a VEFA contract for an apartment in Paris. The developer encountered financial difficulties and did not complete the works. The purchaser sued the developer and the guarantor bank. The Court of Appeal had dismissed the claim, holding that the guarantee was not enforceable because the purchaser had not complied with certain formalities.
B. The Decision of the Court of Cassation
The High Court quashed the appellate judgment, ruling that:
- The developer cannot assert against the non-resident purchaser formalities which it itself has not observed.
- The completion guarantee must be activated as soon as the developer is in default, without any condition of residence or nationality.
- The purchaser may claim damages for the loss suffered, including the loss of opportunity to rent the property.
This decision strengthens the protection of foreign purchasers in VEFA, aligning their rights with those of French residents.
III. Remedies in the Event of Developer Default
A. Judicial Avenues
In the event of non-completion, the purchaser may:
- Serve formal notice on the developer to complete the works, subject to a penalty payment.
- Seek judicial rescission of the contract, with restitution of sums paid and damages (Article 1184 of the Civil Code).
- Enforce the completion guarantee against the surety (bank).
For non-residents, the writ of summons may be served at the developer's registered office in France. The jurisdiction of the French courts is exclusive (Article 14 of the Civil Code).
B. Tax Aspects
Sums received as damages may be taxable in France. The applicable tax treaty should be consulted. Article 164 B of the French General Tax Code sets out the rules for non-residents. In the event of restitution, notarial fees may be recoverable.
IV. How Maître Zakine Can Assist You
As a lawyer lawyer in property law and private international law, I offer tailored support:
- Verification of guarantees prior to signing: analysis of documents, negotiation of clauses.
- Monitoring of the construction site: correspondence with the developer, follow-ups.
- Remedies in the event of default: formal notice, legal proceedings, negotiation with banks.
- Tax optimisation: advice on the taxation of property investments in France for non-residents.
- Representation before the courts: I can act
Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.
