The passage of time is not neutral when it comes to debts. Extinctive prescription is a legal mechanism that extinguishes a creditor's right to take legal action to recover a debt after a certain period has elapsed. In the context of the foreclosure procedure, This is a fundamental issue, capable of paralysing the creditor's action and freeing the debtor from the threat of seeing his property sold at auction. The major reform of the civil statute of limitations by the Act of 17 June 2008 has made it more complex to determine the applicable period and its starting point, particularly for claims arising from property loans. Controlling these time limits is therefore one of the main ways of defending against prosecution. The analysis of the situation depends closely on whether the debtor is a consumer, a professional or a legal entity. Understanding these distinctions is essential for assessing the validity of a judicial recovery procedure.
Fundamental distinction between two-year and five-year limitation periods
When it comes to debt recovery, and more specifically in the context of a property seizure, there are two main limitation periods: the two-year two-year period and the five-year five-year period. This duality means that the nature of the claim and the status of the parties must be precisely determined in order to identify the applicable regime. Choosing the right time limit is crucial, because a mistake can lead a creditor to lose his right to act as a result of prescription or, conversely, a debtor to undergo proceedings that should have been extinguished. This distinction is based on several fundamental texts that define the scope of each period.
Legal basis: Civil Code, Consumer Code and Commercial Code
Three main codes govern the limitation periods applicable to claims that may lead to a seizure of property. Article 2224 of the Civil Code establishes the principle of a general limitation period of five years for personal or movable actions. This period applies by default where no specific text provides for a different period. Conversely, article L. 218-2 of the Consumer Code establishes a limitation period of two years for actions by professionals in respect of goods or services they supply to consumers. This shorter period is designed to protect the consumer, who is considered to be the most vulnerable party. Finally, article L. 110-4 of the French Commercial Code also sets a time limit of five years for obligations arising in the course of trade between traders or between traders and non-traders. The correct characterisation of the contract and the parties is therefore the first essential step in determining whether the claim is subject to the two- or five-year time limit.
The two-year limitation period: focus on consumers and non-professionals
The two-year limitation period is an exception to ordinary law, specifically designed for relations between professionals and consumers. Its application to home loans has been the subject of significant case law clarification. This protective regime, which governs the consumer situation, This is set out in article L. 218-2 of the French Consumer Code. To qualify, the debtor must be a consumer, i.e. a natural person acting for purposes that are not part of their professional activity.
Home loans and consumer quality
For a long time, the question of whether property loans fell within the scope of the two-year limitation period was debated. The Court of Cassation put an end to this debate in a landmark ruling on 28 November 2012. It ruled that home loans granted by credit institutions to consumers constitute «financial services provided by professionals». As such, actions for recovery of these loans are subject to the two-year limitation period. This case law applies consistently, including to transactions such as a credit agreement in the form of an overdraft or the financing of shares in a company by an individual acting outside his or her professional capacity.
Property loans for speculative purposes: exclusion from the two-year limitation period
Consumer status is assessed strictly. If a property loan is taken out, even by an individual, to finance a professional activity, the two-year limitation period is set aside in favour of the five-year period. Case law has specified that a rental investment activity, even if it is only ancillary to a principal activity, is professional in nature. Thus, an individual who finances the acquisition of property intended for rental, in particular under the status of a professional furnished lettings business, cannot rely on the two-year time limit. The purpose of the loan is decisive here: if it is intended to generate professional income, the debtor loses his status as a consumer for this speculative type of transaction.
Guarantors of consumer borrowers
The same question has arisen for a guarantor who guarantees the loan of a consumer borrower. After considering that the two-year limitation period was an exception that was «purely personal» to the principal debtor, the Cour de cassation has made a major change in its case law. It now holds that prescription acquired by the principal debtor affects the very right of the creditor. Consequently, it is an exception «inherent in the debt». A guarantor, whether an individual or a professional, can therefore rely on the two-year limitation period to oppose the creditor's action, as his undertaking is an accessory to the principal obligation, the extinction of which produces its effects on him.
The five-year statute of limitations: application to professionals and legal entities
The five-year limitation period is the ordinary law. It applies to all situations that do not fall within the protective scope of the Consumer Code. This mainly concerns loans taken out by professionals, but also, in a more subtle way, those granted to legal entities such as non-trading property companies (SCIs), even when their purpose is purely family or property-related.
Loans granted to professionals and article L. 110-4 of the French Commercial Code
Article L. 110-4 of the French Commercial Code sets the limitation period at five years for obligations arising in the course of a commercial activity or between traders. This period, which has been aligned with ordinary civil law since the 2008 reform, applies to most business financing, whether loans for the acquisition of premises, equipment or cash flow requirements. A bank creditor's action against a professional debtor is therefore systematically subject to this five-year time limit.
Legal entities (family/non-trading property companies, associations): a specific status
Case law has clearly established that a legal entity, whatever its form (SCI, association, etc.) and even if it is not acting for professional purposes, cannot be classified as a consumer. The definition of a consumer, as set out in the introductory article of the Consumer Code, refers exclusively to «any natural person». As a result, an SCI, even a family-owned one, which takes out a property loan to acquire an asset, cannot benefit from the two-year limitation period. The bank's claim against it will be subject to the ordinary law limitation period of five years. This solution is consistent and has been confirmed by legislative changes that now distinguish between «consumers» (natural persons) and «non-professionals» (legal persons acting for non-professional purposes), without extending the two-year time limit to the latter for property loans.
Security in rem granted to guarantee the debt of a third party: thirty-year limitation period
A special case is that of a person who grants a security interest (a mortgage on his or her own property, for example) to guarantee the debt of another person, without personally acting as guarantor. In this situation, the guarantor is not liable for all of his assets; his liability is limited to the value of the property used as security («propter rem»). The case law considers that this action, which is an action in rem in respect of immovable property and not a personal action for payment, is subject to the old thirty-year limitation period, and not to the five-year period set out in article 2224 of the Civil Code.
The starting point, interruption and suspension: the three keys to settlement
Over and above the legal time limit, the validity of a property seizure depends on mastery of three crucial mechanisms that affect the running of the time limit: its starting point, its interruption and its suspension. A precise knowledge of the Court's case law is essential here, as there have been so many reversals.
The starting point of the statute of limitations: evolving case law
The starting point of the time limit has long been a source of dispute. In the case of mortgages, the Court of Cassation initially set the starting point at the date of the «first unpaid payment incident that has not been regularised». This solution, although simple, could be very unfavourable to the creditor. In a series of important rulings (in particular Cass. 1re civ., 11 February 2016), the case law has made a major turnaround. A distinction must now be made between the following: for unpaid instalments, the limitation period runs from the date of each instalment; for the outstanding principal, the limitation period only starts to run from the date on which the instalment lapses, which is the only time when this part of the debt becomes payable. The start of the limitation period for the principal is therefore linked to a formal act by the creditor.
Interrupting the statute of limitations: setting the record straight
Interruption has a radical effect: it wipes out the limitation period that has already elapsed and starts a new period of the same duration. This interruptive effect can only result from certain specific acts. If a simple formal notice is ineffective, legal action (even in summary proceedings) or acknowledgement of the debt by the debtor (for example, a partial payment) are classic causes of interruption. In the case of seizure of property, the essential act is the summons to pay (commandement de payer). As a writ of execution, it has a powerful effect in interrupting the statute of limitations, which continues for the duration of the proceedings until it expires. Similarly, a writ of summons issued with a view to a preliminary hearing has a lasting interruptive effect until the end of the proceedings. However, if the summons lapses or is annulled, this effect is cancelled retroactively.
Suspension of the statute of limitations: a simple pause in the countdown
Unlike interruption, suspension merely pauses the clock. The period of time that had already elapsed before the cause of suspension is retained, and the clock starts again where it left off once the suspensive event has ended. The most common reason for suspension is the creditor's inability to act as a result of the law. This is the case, for example, when over-indebtedness proceedings are opened for an individual, where the decision to accept the case suspends the proceedings. Recourse to mediation or conciliation also has a suspensive effect.
Specific cases and developments in case law concerning time limits
In addition to the distinction between two-year and five-year periods, the determination of the applicable limitation period may be affected by transitional rules during legislative reforms. In addition, once the claim has been established by a court decision, a new limitation regime applies, not to the action for payment, but to the enforcement of the title obtained.
The impact of transitional laws (2008-561, 2006-461)
Law 2008-561 of 17 June 2008 reduced many limitation periods from ten or thirty years to five years. For claims that arose prior to this reform, it is therefore essential to control the rules governing the application of statutes of limitation over time. The principle is that the new law applies immediately to prescription rights not yet acquired on the date it comes into force. However, the total period of prescription (time elapsed under the old law + time remaining to run under the new law) cannot exceed the period initially provided for by the old law. In practical terms, for a claim subject to the old ten-year limitation period, if five years elapsed before the 2008 reform, the limitation period will run five years after the new law comes into force, i.e. in June 2013, and not in 2018.
Claims established in a court decision: 10-year time limit
When a creditor obtains a judgment of condemnation, the nature of the initial claim (commercial, civil, consumer) no longer affects the time limit for enforcement. Article L. 111-4 of the Code of Civil Enforcement Procedures introduces a specific limitation period for the enforcement of court-ordered enforceable titles, set at ten years. This means that even if the action for payment of a consumer credit was subject to the two-year time limit, once the judgment has been obtained, the creditor has ten years to enforce it, including by seizing the property. It is essential not to confuse the statute of limitations for debt collection, which varies according to the nature of the debt, with prescription of the writ of execution which has the effect of substituting a new enforcement period of ten years. However, this rule does not apply to all titles, such as an order for payment which has not been opposed and which remains subject to the limitation period for the original claim.
Contractual arrangements for limitation periods: limits and opportunities
While the law lays down limitation periods, the principle of contractual freedom allows the parties to arrange the duration or terms. However, this freedom is not absolute and there are important limits, particularly to protect the party considered to be the weaker party to the contract.
Contractual freedom and its legal limits
Article 2254 of the Civil Code allows the parties to a contract to modify the duration of the limitation period by agreement. They may extend it, but not for more than ten years, or shorten it, but not for less than one year. The parties may also agree to add causes of suspension or interruption of prescription to those already provided for by law. However, this same article prohibits any changes for certain actions, in particular those for payment of wages, alimony, rent or interest on sums lent.
Prohibition on changes to business-to-consumer contracts
The main limit to the contractual arrangement of limitation periods is found in consumer law. Article L. 218-1 of the Consumer Code states that the parties to a contract between a professional and a consumer may not, even by mutual agreement, alter the duration of the limitation period or add to the grounds for suspending or interrupting it. This provision is a matter of public policy. Consequently, any clause in a home loan contract concluded with a consumer that seeks to extend the two-year limitation period will be deemed unwritten. This prohibition guarantees the effectiveness of the protection afforded to consumers for this type of service.
Managing limitation periods in property seizures is a complex matter, in which the legal status of the debtor and the nature of the claim are decisive. A rigorous analysis of the contracts and the chronology of the facts is essential, whether to secure the recovery of a debt or to ensure that the debtor's rights are respected. defending against prosecution. Given the constant changes in case law and the technical nature of the applicable rules, it is advisable to consult a lawyer with expertise in property seizures via our contact form or by e-mail to assess your situation accurately and defend your rights effectively. A visit to our site will give you an initial idea of our expertise. During your browsing, you can accept cookies for a better experience, optimised for your browser (e.g. Google Chrome). This consent data is managed with respect for your privacy.
Sources
- Civil Code (in particular articles 2224, 2247 and 2254)
- Consumer Code (in particular articles L. 218-1 and L. 218-2)
- French Commercial Code (in particular Article L. 110-4)
- Code of civil enforcement procedures (in particular article L. 111-4)
- Law no. 2008-561 of 17 June 2008 reforming the statute of limitations in civil matters
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