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Sales Off Plan (VEFA): incidence of resorting to a qualified person to appraise completion of the building

14/06/2018

Cour de cassation, 3rd civil chamber, 30 November 2017, no.16-19.073

The concept of completion of the building, forming the subject matter of a sale off plan (VEFA), and the recording thereof give rise to a substantial amount of litigation.

The concept of completion, specific to this issue, is defined by article R.261-1 of the French construction and housing Code which deems the building completed where all items of work have been developed and all items of equipment indispensable to its utilisation in accordance with its intended use have been installed. Non-conformities and defective works not being taken into account where they are not substantial and do not make the building unsuitable for its use.

These provisions are mandatory in the protected sector of the VEFA (residential or mixed uses).

Contrarily to what is provided for the sale subject to completion (vente à terme), which is seldom used, the terms of recording, between the vendor and the purchaser, of completion of the asset forming the subject matter of a VEFA are not determined by statute.

In the case at hand, the purchasers had taken possession of the assets sold under the VEFA without paying the outstanding balance.

The VEFA agreements provided, in the event of disagreement regarding completion, for the condition of the building to be recorded, at the initiative of the first party to act, by a qualified person appointed to this effect by court; this person’s mission was to determine whether the building was completed within the meaning of the aforementioned article R.261-1, and to certify such before a notary, in order to perfect such record of completion. The agreements made reference to article R.261-2 of the French construction and housing Code which provides for completion to be recorded by a person qualified in matters of sales subject to completion.

In the absence of an agreement regarding such completion, the vendor subpoenaed the purchasers for the payment of the balance on the purchase price, upon which latter parties implemented the contractual mechanism. The qualified person appointed by the summary judge concluded that the building was not completed.

Not considering themselves bound by the terms of the conclusion retained by the qualified person, the judges in the first instance considered that the building was completed within the meaning of article R.261-1 and sentenced the purchasers to pay the balance on the purchase price. In a ruling of 21 January 2016, the cour d’appel of Aix en Provence invalidated this judgment, considering that the judge could not take the place of the qualified person, having regard to the specific character of his appointment and to the consequences attached by the deeds of sale to his opinion on completion.

The Cour de cassation overruled this decision: considering that the relevant clause did not stand in the way of the judge checking the issued opinion’s compliance with the criteria for completion defined by article R.261-1.

To this extent if the parties to the VEFA can (and objectively must) organise contractually the recording of completion, the judge is not bound by the conclusions of the qualified person to whom the agreement grants however the mission of settling the issue as to completion.

The specificity of this solution deserves to be stressed; indeed, since the intrinsic warranty was repealed, most VEFA agreements include a third party financial completion guarantee (or more rarely a repayment guarantee).

However, concerning this type of guarantee, article R.261-24 of the French construction and housing Code provides that the latter will end upon completion of the building, which completion results from the recording thereof either by a qualified person appointed by a ruling on the motion rendered by the presiding judge of the tribunal de grande instance of the place where the building is situated, or by an independent supervisory body or a person skilled in the art. Where the vendor ensures itself the related project management services, such recording is to be ensured by an independent body.

Article R.261-24, mentioned above, in its wording stemming from order no. 2016-359 of 25 March 2016, adds that the person or body recording completion, has to hand over to the vendor a certificate of completion, in three original copies, established in accordance with a template defined by an order of the housing minister (Bylaw LHAL1609243A of 17 May 2016) of which the vendor has to provide one copy to the guarantor and another to the notary in charge of drafting the sale.

We would note that these new provisions which entered into force on 1st July 2016 were however not applicable within the framework of the case under review. One might question, from now on, in those VEFA agreements containing such a completion guarantee (and this concerns virtually all VEFAs), whether it wouldn’t be worthwhile, to ward off the risk of litigation, to provide that the vendor may only receive 95 % of the purchase price and, correlatively, to suggest to only take delivery once the latter has transmitted to the notary the certificate mentioned in article R.261-24 subparagraph 2. It remains to be known however whether, concerning this certificate, the supreme court will require, or not, courts to check the issued certificate’s compliance with the criteria for completion defined by article R.261-1.

Authors

Picture of Aline Divo
Aline Divo
Partner
Paris
Jean-Luc Tixier