Member Article

This newsletter explains the consequences of the texts adopted by the government on the withdrawal period granted to the non-professional buyer (i), the fulfilment of the conditions precedent provided for in the sale commitment (ii) and the notarial deed of sale (iii).

(i) THE WITHDRAWAL PERIOD

When the legal withdrawal period of 10 days which the non-professional purchaser has following the signature of a sale commitment (Article L. 271-1 of the Construction and Housing Code) expires between 12 March 2020 and the end of the state of health emergency to which a period of one month is added, i.e. 24 June 2020, the question arises as to whether or not this withdrawal period falls within the scope of Order No. 2020-306 of 25 March 2020 “on the extension of the periods due during the period of health emergency and the adaptation of procedures during this same period“.

In accordance with this text, the withdrawal period for the non-professional purchaser would then be “deemed to have been done in time if it was done within a period that cannot exceed, from the end of this period, the legally prescribed period for taking action, within a limit of two months“.

In the event that the Order would apply, the purchaser’s withdrawal period would therefore be extended until 3 July 2020, this date corresponding to the end of a 10-day period starting on 24 June 2020.

French notaries asked the Government whether the withdrawal period fell within the scope of the Order. So far, the government has not provided an answer.

(ii) THE FULFILMENT OF CONDITIONS PRECEDENT TO A REAL ESTATE SALE

The conditions precedent stipulated in a sale commitment shall be fulfilled within a contractually agreed period.

Article 4 of Order No. 2020-306 of 25 March 2020 freezes the application of some contractual clauses seeking to sanction the debtor’s failure to perform.

“Penalties, penalty clauses, termination clauses and clauses providing for forfeiture, when their purpose is to sanction the non-performance of an obligation within a specified period, are deemed not to have taken effect or to have taken effect, if this period has expired during the period defined in Article 1(I)”.

The conditions precedent are not expressly referred to in this article, nor in the circular of 26 March 2020 presenting the provisions of Title I of Order no. 2020-306 of 25 March 2020, so that there is some doubt as to the application of Article 4 of this provision to their deadline.

Hypothesis 1: Article 4 of the Order is not applicable to conditions precedent

In this case, the condition precedent not fulfilled within the contractually agreed period will have failed and the promise will become null and void (Cass. Civ. 3, 9 March 2017, no. 15-26.182).

However, article 1304-4 of the French Civil Code allows a party to “waive the condition stipulated in its exclusive interest, as long as it is not fulfilled or has not failed“, that is to say, during the period of fulfilment of the condition precedent.

The obtaining of a bank loan is, for example, stipulated in the exclusive interest of the purchaser (Cass. Civ. 3, 8 July 2014, no. 13-17.386).

In addition, a party could attempt to invoke the force majeure provided for in Article 1218 of the French Civil code in order to suspend the time limit for the fulfilment of the condition precedent.

For example, it may not be possible, within the time limit provided for in the commitment, to purge third parties’ recourse against a building permit whose deadline for contestation expired in principle between 12 March 2020 and 24 June 2020, since under the above-mentioned Order, third parties may now contest this building permit within an extended period of 2 months from 24 June 2020, i.e. until 24 August 2020.

Rectifications are expected on this issue, as the Minister in charge of Housing Julien Denormandie has agreed that the extension of the deadlines for purging the right of appeal against building and development permits went too far. He said he was “working on it to make corrections“.

Hypothesis 2: Section 4 of the Order may apply to conditions precedent

Judges might consider that some conditions precedent fall within the scope of “forfeiture clauses“, in particular where they sanction a debtor’s non-performance before a certain date (e.g. his failure to act to obtain a building permit or a bank loan).

In this case, conditions precedent assimilated to forfeiture clauses would then produce their effects “as from the expiry of a period of one month after the end of that period if the debtor has not performed his obligation before that time“. In other words, the deadline for the fulfilment of the condition precedent would be extended to 24 July 2020, as the texts currently stand.

(iii) SALE BY NOTARIAL DEEDS

Decree no. 2020-395 of 3 April 2020 “authorizing remote notarial deeds during the period of health emergency“, published in the OJ on 4 April 2020, allows the notary to “draw up a notarial deed on an electronic medium when one or all of the parties or any other person involved in the deed are neither present nor represented“.

This decree has been adopted under Articles 1363 to 1371 of the Civil Code, so that it concerns both private deeds and notarial deeds.

The notarial deed of sale of a real estate property may then be drawn up remotely until the expiry of a period of one month from the date of cessation of the state of health emergency, i.e. until 24 June 2020.

The decree provides for a dematerialized procedure but guaranteeing the identification of the parties, the integrity and confidentiality of the content, as well as a reliable electronic signature.

The notary must be equipped with a secure videoconferencing system, which is not the case for all notary offices.