Seller Damages on Buyer Withdrawal
Tuesday 05 October 2021
A property seller is entitled to damages if a buyer does not proceed with the transaction, but in practice that is not always the result.
Buying a property in France is a two-stage legal process; the first stage involves signing of the sale and purchase contract, the compromis de vente, which is then later followed by signing of the deed of sale, the acte authentique.
The initial contract binds both buyer and seller, subject to a statutory cooling-off period to the buyer and any conditional clauses in the contract.
If all the contract conditions are met but the buyer does not proceed, they lose their deposit. The courts can also sometimes order enforcement of the contract. Similarly, if the seller withdraws the buyer is entitled to sue for damages or have the seller comply with the contract.
However, as application of the law is circumstantial, subject to adjudication by the courts, it is not unusual for claims to be rejected.
In a case that was recently heard in the French courts, buyer and seller signed a sale and purchase contract for a property located in the commune of Chatenoy le Royal (Saône-et-Loire ) for a sale price of €304,000.
The sale and purchase contract was signed under the auspices of a notaire, when the parties agreed that a 5% deposit be lodged with the notaire within 15 days, a somewhat unusual arrangement, as the deposit is normally paid on signing of the contract.
The contract also stipulated damages of 10% in the event of non-fulfilment by either party. Completion was subject to the buyer selling their own property.
Subsequently, the seller learnt incidentally from the notaires office that the buyer had not transferred the deposit to the notaire, with no explanation given.
Several months later the notaire invited both buyer and seller to their offices for signing of the deed of sale, when the notaire assumed that the buyer would transfer the full proceeds of the sale to them. The buyer failed to turn up for the signing.
Shortly afterwards the sellers were able to sell their property, although for a lower price.
They sued the buyer for 10% damages, in the process also claiming damages from the notaire for their failure in not seeking payment of the deposit from the buyer or keeping them advised of the lack of payment.
The courts rejected their claim against the buyer on the basis that they had been able to quickly sell their house after the abortive sale, stating:
'Si les époux X peuvent se prévaloir de la perte de chance d’avoir pu trouver un nouvel acheteur durant la période du 20 avril 2015 au 30 juin 2015, force est de constater que leur préjudice est inexistant à défaut d’avoir après conclu effectivement une vente avec un nouvel acquéreur.'
They also rejected the claim against the notaire, whom they stated could not be made responsible for the failure of the buyer to pay the deposit, although they were critical of the notaire for not keeping the seller informed.
The couple lost their claim and were obliged to pay minor damages and costs to the notaire. The buyers were not represented in the proceedings so there was no information on whether they had been able to sell their property.