Beneficiaries of the decennial warranty: the situation of tenants

As the cornerstone of the specific liability applying to builders, subparagraph 1 of article 1792 of the French civil  Code provides that "Any builder of a work is liable ipso jure, towards the project owner or purchaser of the work, for damages, even resulting from a defect of the ground, which imperils the solidity of the work or which, affecting it in one of its constituent parts or one of its items of equipment, render it unsuitable for the purpose for which it was intended.”

This fundamental article is part of a dense and widely scattered body of legislation relating to statutory warranties throughout the French civil Code or the French construction and housing Code, which addresses in particular the material issue of the identity of beneficiaries of the statutory warranties, which are: the decennial warranty (ten years), the warranty covering proper working order (two years) and the warranty covering faultless completion (one year).

In application of subparagraph 1 of article 1792 of the French civil Code, the project owner/proprietor and "the purchaser of the work" are the exclusive beneficiaries of the aforementioned statutory warranties, to the extent the legal action based on the provisions of this statute is attached to ownership of the work (Cour de cassation, 3^rd civil chamber, 16 December 2008, no. 07-20.738).

Relying on the assumption that decennial warranty claims are attached to ownership of the work, the Cour de cassation considered that this warranty, as an accessory to the item sold, was transferred to the assigns of the project owner and proprietor, in particular to the successive purchasers of the work, even if they are not expressly mentioned in article 1792 of the French civil Code which only mentions the "purchaser of the work" (Cour de cassation, 3^rd civil chamber, 23 September 2009, no. 08-13.470).

It results from this principle that a right of enjoyment over the building does not confer, per se, upon its beneficiary the status of project owner/proprietor, enabling the latter to bring an action based on the decennial warranty set out in article 1792 of the civil Code. 

This idea has fuelled and continues to give rise to a substantial amount of litigation which has provided the Cour de cassation with the opportunity to consider extremely explicitly and strongly that the tenant of the project owner/proprietor, as a mere creditor of the latter and not as its assign, and a third party to the building contract, does not, as a matter of principle, benefit from the legal standing to bring a decennial warranty claim against the builder on the grounds of articles 1792 et seq. of the French civil Code, whatever the nature of its intervention within the framework of the building operation vitiated with disorders (Cour de cassation, 3^rd civil chamber, 22 May 1997, no. 95-17.879).
 
The third civil chamber of the Cour de cassation however seemed, in a decision of 4 April 2007, to express the desire to qualify the stringency of its previous case law by taking a look at the contents of the lease agreement, in particular regarding the issue as to whether the rent-to-own clause with respect to the work developed by the tenant had inured to the landlord, thus becoming the proprietor or not (Cour de cassation, 3^rd civil chamber, 4 April 2007, no. 06-11.154).

Nevertheless, and since then, the Cour de cassation has, on several occasions, considered unambiguously and consistently that the tenant benefits “only from a mere right of enjoyment over the work that it does not own” and therefore its decennial warranty claim was not admissible against the builder on the grounds of articles 1792 et seq. of the French civil Code (Cour de cassation, 3^rd civil chamber, 23 October 2012, no. 11-18.850 and no. 11-19.650), even if it has itself entered into a works contract with a contractor for the purpose of carrying out works on the existing structure (Cour de cassation, 3^rd civil chamber, 1^st July 2009, no. 08-14.714).

This solution, in addition to having to be transposed to the warranties covering proper working order and faultless completion, in application of the aforementioned principle according to which these statutory warranties are accessory to ownership of the work, was also applied to a financial-lessee (Cour de cassation, 3^rd civil chamber, 8 September 2010, no. 09-14.967) or alternatively to a tenant benefitting from a right to buy granted by a low rent housing corporation (Cour de cassation, 3^rd civil chamber, 6 December 1989, no. 88-11.982).

It should however be underlined that an exception was made to the application of this case law to the tenant under a ground lease, which is the proprietor of the work until the expiry of said lease, who was recognized a right to bring an action based on the decennial warranty of articles 1792 et seq. of the French civil Code against the builders, on the grounds that it had acted as a project owner, by entering itself into the building contracts having given rise to the litigious damage (Cour de cassation, 3^rd civil chamber, 7 October 2014, no. 13-19.448).

To this extent, and even if a marginal decision seems to recognize in favour of a tenant the right to act directly against the insurance company for the compensation of the consequential loss consecutive to the disorders of a decennial nature that it was invoking (Cour de cassation, 3^rd civil chamber, 17 April 2013, no. 11-25.340), the firm stance of the Cour de cassation forces tenants to incur the liability of the statutory warranty obligor from the standpoint of torts (French civil Code, articles 1240 and 1241) or alternatively that of the landlord on the grounds of its obligation to ensure the peaceful enjoyment of the rented premises (French civil Code, article 1721).

For all that, and where the tenant is unable to provide evidence:

• of its status as owner of the work at the date of implementation of one of the aforementioned statutory warranties (for instance: the financial-lessee has exercised the option to purchase mentioned in the financial-lese agreement) ; 
• of a subrogation to the rights of the landlord (Cour de cassation, 1^st civil chamber, 24 March 1992, no. 89-13.756) ;
• of a derivative action (action oblique) within the meaning of article 1341-1 of the French civil Code, due to the landlord’s failure to implement one of the aforementioned statutory warranties (Cour de cassation, 3^rd civil chamber, 16 July 1986, no. 84-17.492) ; 
• or alternatively that the works contract entered into by the landlord applies to works carried out on behalf of the tenant (Cour de cassation, 3^rd civil chamber, 15 January 2003, no. 01-15.317).

one could consider inserting into the lease agreement a contractual stipulation contemplating that the works carried out by the tenant would remain its property until the end of the lease or the end of enjoyment over the rented premises, according to the term-end which is contemplated contractually for landlord’s accession to ownership, and granting it, in this respect, the right to bring the decennial warranty action on the grounds of articles 1792 et seq. of the French civil Code (Cour de cassation, 3^rd civil chamber, 22 May 1997, no. 95-17.879).

However, in the event where the rented premises should have been accepted less than ten years ago, the parties to the lease agreement will have to make, at the time of implementing the decennial warranty claim, a distinction that may prove difficult from a technical standpoint, between those disorders affecting the works carried out by the tenant (the latter benefits from the statutory warranties) and those impacting the existing structure (the landlord benefits from the statutory warranties).

To this extent, and on account of the risk of technical impossibility to make the aforementioned distinction, the stipulation of an express mandate granted by the landlord enabling the tenant to act against the builders in the name and on behalf of the landlord on the grounds of articles 1792 et seq. of the French civil Code seems preferable (See Cour de cassation, 3^rd civil chamber, 12 April 2012, no. 11-10.380).

Under these circumstances, the firm stance adopted in the case law of the Cour de cassation should urge drafters of leases to apply greater care and to be more creative concerning the wording of clauses relating to tenant’s works.