Seller Must Disclose all Facts
Tuesday 18 May 2010
A seller who did not disclose to a buyer that their property had flooded in the past has had the sale annulled by a French court.
The judges in the French Cour de Cassation (highest court in the land) considered that there was a deliberate intent on the part of the sellers to hide this information, as a result of which they considered annulment of the sale was justified.
In this case, in 2002 Madame Abbadie and Madame Dal Pozzo sold a property to Mademoiselle Sans for €75,000, via the auspices of estate agents ERA Immobilier.
In 2003 Mademoiselle Sans agreed terms for the subseqent sale of the property to a new buyer for €89,000.
The existence of a flood risk was discovered during the formal searches for this subseqent sale, which were undertaken by a different notaire.
They revealed that, although the property was not in an area zoned at risk of flooding, the local council advised that it had flooded twice in the last five years.
In the light of this information, the new buyer decided to withdraw from purchase of the property.
With the sale lost, Mademoiselle Sans brought a legal action against both the former owners and notaire.
She stated to the court that the flooding incidents had not been disclosed to her on the original purchase one year previously, either by the seller, or by the notaire who had dealt with that sale.
The court found the owner guilty of dissimulation and the notaire guilty of professional negligence.
During the proceedings the court received a statement from the estate agents who acted in the original sale testifying that Mademoiselle Sans had been informed verbally of the flooding incidents that had occurred at the property, but this statement was not accepted by the court as sufficient proof.
The notaire also argued that as Mademoiselle Sans had been informed of the flood risk, this relieved them of any obligation to convey this information, a defence that was equally not accepted by the court.
As a result, the sale of the property was annulled, and both the owner and notaire obliged to pay damages, in addition to reimbursement of the sale proceeds.
The case illustrates the general principle in French law that a seller is obliged to disclose to the buyer all material facts about the property, or risk that the buyer can later claim a reduction in the purchase price, or seek annulment of the sale.
Moreover, it also seems from the case that there needs to be sufficient evidence that the information was given to the buyer, presumably by making it clear in the sale contract that they had been informed.
Although formal reporting procedures on the disclosure of risks has since been tightened up in the last few years, as the property was not in an area zoned at risk of flooding, this information may not have actually come to light through these new procedures, as they only cover designated risk zones.
In the above case it came to light through a supplementary enquiry from the notaire to the local council.
The case also illustrates the risk of relying entirely on the seller’s notaire to undertake the formalities.
We always recommend that a buyer engages their own notaire or solicitor, and that the sale contract should make clear the conditions on which the sale will take place.
We examine in some detail the conditions that can apply, and the pre-contract enquiries that need to take place, in our guide to the legal process of Buying Property in France.