Service France

Please note that property law is a complex subject and you should not rely on this article without professional advice on the facts of your case.

English buyers will be aware that in France contracts are exchanged early on with a "suspensive condition" allowing them to withdraw and get their deposit back if they have after making all reasonable efforts not been able to get a mortgage. The first contract is called the compromis de vente ) and the transfer deed on completion is called the ' acte authentique de vente' .

The compromis de vente often contains a clause stating that the sale is subject to the buyer obtaining a mortgage which is usually one of the suspensive conditions. Under article L. 312-16 of the French Consumer Code, if the compromis de vente provides that a mortgage is needed, the buyer always has a minimum period of one month to obtain a mortgage. This period is important because if the mortgage is obtained before the expiry of this period of time, the suspensive condition will have been fulfilled and the buyer cannot then rely on this suspensive condition to withdraw from the purchase. However if it is not the case and the buyer has made all reasonable efforts to obtain a mortgage, then the contract of sale can be declared void, or rescinded, and the buyer will be able to recover his deposit.

Other clauses relating to the mortgage condition are often inserted in the compromis de vente one of the most common being that the mortgage application must be made by the buyer to the specified bank within 15 days of signature of the compromise de vente . This is a standard clause in most estate agents printed contracts. The compromise de vente may provide that if the buyer does not do this then the seller may cancel the contract.

Although this time clause is frequently used in practice, it is of questionable validity because it infringes the contractual freedom of the buyer and increases the buyer's obligations. In addition, insofar as home loans are concerned, the buyer is treated as a consumer and consequently is protected by the Consumer Code. As a result, these time clauses have been thought to be unlawful and unenforceable by a seller. The question has been raised recently in litigation in a case in which the time clause was not complied with by the buyer, and the court had to decide whether that resulted in the contact becoming null and void as a result of the buyers negligence enabling the seller to keep the deposit and sell elsewhere.

The Court of cassation (France's equivalent of the House of Lords) in a judgment given on the 6 th of July 2005 replied in the negative. The court decided Article L. 312-16 of the Consumer Code is mandatory and cannot be contracted out of by the buyer and seller. Consequently it is impossible to impose contractual obligations on the buyer if they have the result of increasing the buyer's obligations under Article L. 312-16 of the Consumer Code. As a result, the suspensive condition about obtaining a mortgage will only be regarded as carried out when the bank makes a mortgage offer which complies with the loan set out in the compromis de vente.

This decision should be viewed with some caution as France does not operate the strict rules of precedent which apply in England. The Court of Cassation has yet to confirm its position in other cases. It is safest to ensure that you can meet the time scale for applying for a mortgage before signing a contract with such time sensitive clause. However the decision will be useful if you have obtained a mortgage by the required time even if you made your application later than the contract provides. In these circumstances it will be difficult for a seller to withdraw.

David Anderson , French Lawyer

June 2006