Obtaining a mortgage is often the last and most stressful stage in the process of bringing a life project to fruition. A bank's refusal may seem like an abrupt halt, but when it comes to buying a property, the legal consequences depend very much on how the search for finance was conducted. The suspensive condition of obtaining the loan, a protective clause for the buyer, becomes the focus of all attention. When this search is entrusted to a broker, the broker's role becomes decisive, not only in the search for finance but also in building up evidence in the event of failure. Understanding the obligations of each party and the value of the evidence produced is essential if you are to secure your position, and this is an area in which the broker can play a key role. the legal framework for banking intermediaries is becoming increasingly precise.
The suspensive condition for obtaining a property loan: principles and consequences
In the majority of property sales financed by a loan, the preliminary contract (promesse or compromis de vente) contains a condition precedent for obtaining a loan. This legal mechanism, provided for in the French Consumer Code, makes the final completion of the sale conditional on a bank granting finance. The aim is clear: to protect the buyer who, without this clause, would be obliged to purchase the property even if the loan was refused, with potentially disastrous financial consequences. The deed of sale therefore becomes null and void if the loan is not obtained, and any sums already paid, such as the deposit, must be returned to the purchaser.
The role of suspensive conditions in property sales
By law, the deed of sale must specify the characteristics of the loan that the purchaser must apply for: maximum amount, repayment period and maximum interest rate. These elements define the framework within which the buyer must take the necessary steps. The condition precedent is valid for a period of not less than one month. During this period, the buyer is obliged to actively seek finance in line with the conditions stipulated. If he can prove that he has been turned down by the banks for a loan corresponding to these criteria, he is released from his obligation to purchase without penalty.
Legal consequences of default or realisation
The situation becomes more complicated if the failure to obtain the loan is due to a fault or negligence on the part of the purchaser. Under article 1304-3 of the Civil Code, the condition is deemed to have been fulfilled if it is the debtor of the obligation, in this case the purchaser, who has prevented its fulfilment. In practical terms, if the buyer has not acted in good faith to obtain the loan, the seller can ask the court to deem the sale complete. The buyer may then be obliged to pay the seller the compensation provided for in the penalty clause of the preliminary contract, which generally represents between 5 % and 10 % of the sale price. The key is therefore the buyer's ability to prove his diligence.
The buyer's fault and forced fulfilment of the suspensive condition
Case law has gradually defined the contours of the buyer's fault. Passive behaviour or non-compliant steps may be enough to incur financial liability. The buyer is not free to sabotage his own loan application in order to withdraw from the sale. They are bound by an obligation of loyalty to the seller, which translates into concrete and diligent action. The involvement of an intermediary such as a broker, which is supposed to make the process easier, does not absolve the buyer of his responsibilities, and may even complicate the analysis in the event of a dispute, particularly on questions of risk and solvency assessment.
Non-compliance with loan search requirements
There are several types of behaviour that can be considered culpable. The first is simply failing to submit a loan application, or submitting it late, beyond the deadline set in the compromis. The buyer must act quickly after signing. Similarly, applying for a loan for an amount, term or at a rate that does not comply with the stipulations of the preliminary contract is considered a fault. For example, requesting a loan of €300,000 when the preliminary contract stipulated a maximum amount of €250,000 is not a fair approach. A bank refusal based on such a request will not release the buyer from his obligations.
Unjustified refusal of the loan offer
Another typical fault is when the buyer refuses a loan offer that corresponds in every respect to the conditions set out in the preliminary contract. If a bank issues a compliant offer, the suspensive condition is legally fulfilled. The buyer can no longer withdraw without consequences. Refusing to do so, for example because he has changed his mind about the property project, is tantamount to preventing the fulfilment of the condition of his own free will. In this case, the buyer is directly exposed to the application of the penalty clause for the benefit of the seller.
Credit brokers as key players in proving loan refusals
When buyers appoint a broker, the latter becomes their representative in dealing with the banks. In the event of a refusal, the certificates and letters issued by this professional are often the only documents available to the purchaser to prove his diligence. The question of their probative value is therefore central. The courts take a very close look at the quality of these documents. A certificate that is too vague or unsupported may be deemed insufficient, leaving the buyer defenceless.
Acceptable evidence from the COBSP
To be considered sufficient, a broker's certificate must be precise and detailed. Case law accepts as valid proof a letter from the broker detailing the steps taken, listing the banks approached and enclosing their formal refusals. Ideally, the document should set out the exact characteristics of the loan requested (amount, term, rate) and show that they are consistent with those in the preliminary contract. If the broker can show, with supporting documents, that he has contacted several banks without success within the allotted time, the judge will generally recognise the buyer's good faith.
Proof not admitted: precision requirements
Conversely, the courts systematically reject certificates that are deemed to be purely complacent. A simple letter from the broker stating that "several banks have been contacted and have refused the application" without any further details will be deemed insufficient. The judges require to see concrete evidence of the steps taken: the names of the banks, the dates of the applications and, above all, the proof of refusal. A certificate that does not make it possible to check that the loan application complies with the terms of the compromise will also be rejected. Conflicts of interest, such as a broker who is related to the buyer, can also weaken the credibility of the documents.
Evidence expected from the broker
To build a strong evidence file, the broker must provide a coherent set of documents. This includes:
A detailed certificate summarising the mission and actions undertaken;
copies of the loan applications sent to the banks, specifying the characteristics of the financing;
acknowledgements of receipt or e-mails proving the date of these requests;
and, crucially, the official refusal letters issued by the banks.
Without these supporting documents, the broker's attestation is no more than a simple assertion that has difficulty convincing judges, exposing the customer to significant financial risk.
The credit broker's liability in the event of a loan refusal
In addition to their role in gathering evidence, brokers have their own professional obligations. If they fail to do so, they may incur civil liability. If it can be proved that the failure to obtain the loan or the penalties suffered by the purchaser are the result of a fault on the part of the broker, the latter may be required to compensate for the damage caused. The the broker's duty to advise is a fundamental concept which weighs heavily in the assessment of its responsibility.
Defaults and liabilities
The broker's fault can take several forms. It may involve a lack of diligence, for example if he contacts only one bank or if he lets deadlines pass without taking action. They may also fail in their duty to provide information and advice, for example if they submit a loan application that does not comply with the stipulations of the agreement without alerting their customer to the risks. Similarly, failure to inform the client that he has stopped looking for a loan after an initial refusal, while his mandate is still valid, constitutes a breach of contract. If this fault causes direct damage to the buyer (for example, payment of the penalty clause), the broker may be held liable.
Clauses exempting brokers from liability
Some brokerage mandates contain clauses designed to limit or exclude the professional's liability. For example, a clause may stipulate that the broker is not liable for differences between the terms of the loan requested in the mandate and those set out in the agreement. However, judges assess the validity of such clauses on a case-by-case basis. They are limited by the broker's essential obligations, in particular his duty to advise. For example, a court may set aside an exemption clause if it considers that the broker has failed in his fundamental obligation to inform his client, especially if the client is an inexperienced first-time buyer.
Disputes arising from the breach of a loan condition precedent are complex and can have serious financial consequences. The buyer's good faith and the quality of the evidence provided are crucial. A lawyer's assistance is often essential if you want to secure your purchase or defend your interests in the event of a dispute. If you are faced with such a situation, contact our firm for a personalised analysis of your case.
Sources
- Consumer Code
- Monetary and Financial Code
- Civil Code
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