A few years after selling a property, you realise that the price you accepted was far below its value. “I was taken advantage of” is not a legal concept, but it describes a real situation. What remedies does French law offer to cancel the sale, and on what conditions do the courts grant them? A decision of the Paris Court of Appeal of 15 December 2017 reviews the three possible grounds and shows the decisive role of a valuation report.
The facts
In 2008, the X. family sold two shops of 22 m² and 38 m² and a flat of 25 m², all in the same building on rue de Ménilmontant in Paris (20th arrondissement), for €75,000. The buyer was a company whose chairman was also the sellers’ agent and had been their usual adviser for many years.
In 2013, considering that they had sold at a derisory price, the sellers brought the matter before the Paris tribunal de grande instance (the court of first instance at the time).
First ground: the price must be serious
The price of a sale must be determined and stated by the parties (French Civil Code, article 1591). A derisory price amounts to no price at all and makes the sale void; for contracts concluded since 1 October 2016, article 1169 of the Civil Code says so expressly.
The court held that €75,000 was a serious sum, even if it was below the market value of the properties. A low price is not a derisory price. This first ground failed.
Second ground: lesion, confined to a two-year limit
It is under rescission for lésion (gross undervalue) that French law looks most directly at market value: “If the seller has suffered a lesion of more than seven-twelfths in the price of a building, he has the right to seek rescission of the sale” (Civil Code, article 1674).
The sellers had their properties valued by an expert. The report concluded to a market value of €335,000. The lesion is then calculated as follows:
- seven-twelfths of €335,000 is €195,416;
- the sale is lesionary if the price is below €335,000 − €195,416 = €139,583;
- the price paid, €75,000, is well below that threshold; the gap with the value reaches €260,000.
Lesion was therefore established. But the action must be brought within two years of the day of the sale (article 1676), and that period had expired in 2010. The sellers did not rely on it; the calculation nevertheless measures the loss.
A valuation report is not a mere opinion of value
To support their claim, the sellers produced a valuation report based on two methods:
- the income method, by capitalisation of the rents: €316,525;
- the comparison method, from prices per square metre in the neighbourhood: €354,816.
The valuation was carried out as a joint private valuation (expertise amiable conjointe), and the expert first proposed a capitalisation rate range of 5 to 7.5 % before settling on 4 % in the light of the parties’ observations. The value adopted, €335,000, sits between the two approaches. Cross-checking several methods is consistent with the recommendations of the Charte de l’expertise en évaluation immobilière (French property valuation charter, 6th edition, Title III, chapter 2), since no single method applies to every property.
The first-instance court had found the report “insufficiently probative”. The Court of Appeal took the opposite view: the report had been drawn up by a “particularly qualified professional” and was admitted to assess the fraud. The difference between the two readings lies in the nature of the document: a report that justifies and demonstrates the value according to a methodology, and engages the liability of its author, is distinct from an opinion of value that asserts it without demonstration (Charte, Title I, §1.1).
Third ground: fraud
The undervaluation of the price was beyond doubt. But a low price is not enough: it must also be shown that consent was obtained by deceit or lies (Civil Code, article 1137; former article 1116 for contracts signed before 1 October 2016). The limitation period runs from the day the fraud was discovered (article 1144).
The Court noted that the head of the purchasing company was both a property professional and the sellers’ usual adviser, so that he was able to “deceive his co-contractors, both as to the value of the properties sold and as to the options open to them for fixing that value”. In concrete terms, he had presented the sale at €75,000 as the best way to avoid a tax reassessment on an inheritance and on the wealth tax then in force.
Fraud being established, the sale was cancelled.
What the decision teaches
Three lessons emerge for the seller of a property, particularly of commercial premises whose value is less intuitive than that of a home.
Time limits govern everything. Two years for lesion from the sale, five years for nullity from the discovery of the defect in consent. Once these periods have passed, the mere finding of a very low price is no longer enough.
Value is proved by a report. Without the valuation report, the Court could not have measured the scale of the deception. A report drawn up by an independent expert, using several methods, was decisive where the first-instance court had initially doubted.
The agent’s advice does not replace an independent opinion. The agent instructed to sell may give an estimate, but he is a party to the transaction. Where large sums are at stake, or where the agent offers to buy, a second opinion is called for: that of a notaire (French civil-law notary) or a lawyer on the structure, and that of a property valuation expert on the value. The Charte (Title I, §4.1.3) requires the expert to declare and manage any conflict of interest, which assures the seller that the valuation is tied neither to the buyer nor to the intermediary.
The cost of a report, billed on time spent, bears no comparison with the gap seen here between €75,000 and €335,000.
Further reading
The Property loss of value page describes the assignment of quantifying a sale concluded below value. Two related decisions are discussed on this site: the seller is deemed to know the value and the area of the property and cancelling an off-plan purchase for an overvalued price.
What next
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Neighbouring construction, hidden defect, wrong floor area, overpayment at purchase: the loss of value and the loss of enjoyment quantified with the method accepted by French courts.
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