The duty of information in real estate sales: vigilance is required for all parties involved in the sale
The information of the parties to the real estate sale contract constitutes an obligation as of the signature of the “pre-contract”, i.e. the promise to sell or the preliminary sales agreement, and extends to the act of reiteration of the sale.
Recent decisions of the Court of Cassation have reaffirmed this requirement and clarified its contours.
What information is likely to be included in the contractual or pre-contractual field?
It is information whose importance is decisive for the other party’s consent.
One of the parties must inform the other if the latter is legitimately unaware of this information or trusts his co-contractor.
Article 1112-1 of the Civil Code specifies that, nevertheless, this duty to inform does not relate to the estimated value of the performance.
There is therefore no general duty to inform, but the information must be relevant to the subject-matter of the contract and useful to the parties.
It is this information that ensures the free and informed consent of the contracting party.
If information is withheld from him, his consent may be called into question.
There is therefore a duty to inform oneself of the motivations and interests of one’s co-contractor.
In conclusion, the information of the contracting parties is justified by the obligation of loyalty which prevails in the contract.
The Court of Cassation has had occasion to recall that in the case of a unilateral promise to sell where only the promisor undertakes to sell and the beneficiary does not undertake the obligation to buy, the obligation of loyalty, good faith and sincerity is assessed at the time of the final sale [Cass. 3e civ. 19-1-2022 n° 20-13.951 F-D].
Who is concerned by the duty to inform?
The buyer and the seller:
Obviously in the context of a sale by a real estate professional, the latter will be considered as the natural debtor of the information towards the lay buyer.
This is the case in VEFA (sale in the future state of completion) where the law is particularly protective towards the purchasers since the sale act must contain:
- an exact and detailed description of the housing (consistency, technical characteristics, materials used…) as well as its exact location in the building or the real estate complex,
- the price and the payment schedule according to the progress of the work,
- the terms of the sale,
- the date of completion of the property and the date of delivery,
- the financial guarantees of completion of the work and/or reimbursement as well as all construction insurance (biennial, decennial…),
- a reminder of all administrative authorizations obtained, in particular the building permit.
The VEFA project accompanied by the documents (mentioned above) must be communicated to the purchaser at least one month before the date scheduled for the signing of the final sale to allow him to examine them.
The obligation to inform also concerns individuals in the context of a sale between them.
For example, the Court of Cassation has specified that the buyer of an occupied property who, after the signature of the unilateral promise to sell, concludes an agreement to vacate the premises with the occupant, without informing the seller at the time of the signature of the notarial deed, is in breach of his or her obligation of information and loyalty.
[Cass. 3e civ. 19-1-2022 n° 20-13.951 F-D].
Advisors and agents:
- The notary is bound by a duty to inform and advise:
The notary is professionally bound to inform the parties of the tax implications of the deeds he has received and to ensure their validity and effectiveness.
Buyers claimed that the notary had failed in his obligation to inform and advise on the legal conditions for granting a tax advantage and had not drawn their attention to the fact that the legal conditions were not met on the day of the sale.
The Court of Cassation considers that the purchasers were fully informed of the legal conditions based on the information contained in the deed of sale.
[Cass. 1re civ., Feb. 2, 2022, n° 20-14.296, D]
- The real estate agent is required to inform…
The real estate agent had published an advertisement mentioning that the property had a living area of 110 m2 and had drafted the promise to sell in view of the building permits which included a living area half that amount and on which the veranda, the garage and a third room were obviously missing, even though he had knowledge of the premises and the documents. As a result, he was liable for failure to comply with his duty to inform.
[Cass. 1re civ., 2 Feb. 2022, n° 20-18.388, D]
But he is not a consultant and his duty to inform has its limits:
When the buyer is warned of potential risks of merula, informed by the notarial deeds of the damage that could be caused by its presence and has renounced to ask the seller to carry out a diagnosis, the real estate agent is not obliged to advise him to carry out such a diagnosis.
[Cass. 1re civ., March 16, 2022, n° 20-22.341, D]
- Unlike the asset management consultant:
For example, in the case of an investment in a tourist residence, the information provided to the purchasers presented the project as risk-free with the security of guaranteed rents for 9 years without including the slightest reservation on the risks related to the possible default of the lessee.
The Court of Cassation confirmed the decision of the Court of Appeal insofar as it held that security was a determining factor in the consent of the purchasers and that they had not been informed of the risk of non-collection of rents, so that the asset management consultant had failed in his duty to inform.
[Cass. 3rd civ., Feb. 2, 2022, n° 21-10.193]
What are the penalties for breach of the duty to inform?
In addition to the liability of the party who was bound by the duty to inform and, consequently, the award of damages, which may be substantial [for example, the loss caused by the breach of the duty to inform corresponds to the entire loss of rent suffered, see below, Cass. 3e civ., February 2, 2022, No. 21-10.193], the breach of the duty to inform may lead to the annulment of the contract under the conditions provided for in Articles 1130 et seq.
Thus, a breach of the duty to inform may constitute a defect in consent such as error or fraud.
Without this, one of the parties would not have contracted or would have contracted on substantially different terms.
This finding alone can justify the annulment of the contract.
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