Two reported rulings of 2017 set the measure of loss when a building is destroyed or has to be rebuilt. In the first, a block of flats burns down; it cannot be rebuilt as it was on the same site, the mayor refusing a permit because of the dangerous location, and the owners claim the rebuilding cost, over 1.1 million euros, from the tenants’ insurers. The Cour de cassation (the French supreme court for civil matters), on 7 September 2017, approved the court of appeal for using market value: awarding “a new-build reconstruction value in another place would give them an undue advantage since they would obtain an equivalent but better located property”. In the second, the buyers of a cracked house, which an old judgment had already ordered demolished, obtain from the seller both a refund of part of the price and the cost of demolition and rebuilding; on 14 December 2017 the Court quashed: those two sums “both compensated the loss of the usefulness of the thing”. For a valuer quantifying a property loss, two rules to know before writing a figure.
The facts
In the first case, a couple own a building bought in 2001, comprising several flats let to tenants. During the night of 21 to 22 April 2010 the building is destroyed by fire. Their insurer pays them 244 195 €. Claiming that rebuilding would cost 1 132 959 €, they sue the insurers of three tenants, on the basis of the tenant’s liability for fire, for full compensation of their loss. The Versailles court of appeal, on 11 February 2016, limits compensation to the sum already paid: the building cannot be rebuilt as it was, because of the dangerous location and the mayor’s refusal of a building permit; the market value of the property lost can be put at 200 000 € and the demolition and clearing costs at 14 591 €, so the owners do not prove a loss exceeding what their insurer paid. They appeal to the Cour de cassation, invoking the principle of full compensation and a loss of rent of 39 340 €.
In the second, a house with old cracks is sold on 20 July 2007 for 98 000 €. A final judgment of 25 September 1997 had accepted that it should be demolished and rebuilt, because of defects compromising its stability and the refusal of the certificate of conformity; the notary did not attach that judgment to the deed, and the estate agent merely noted in the preliminary contract a “resolved” incident. New cracks and deformations of the structure appear. The buyers, who choose to keep the house, sue the seller under the hidden defects warranty. The Bourges court of appeal, on 21 July 2016, orders the seller, who knew of the defects, to pay 238 291.08 € as refund of part of the price, including 60 000 € for the house excluding the land, and as the cost of demolition and rebuilding, plus various losses; it makes the notary and the estate agent bear 10 % each of those sums.
The decision
First ruling (Cass. 3e civ., 7 September 2017, no. 16-15.257, reported): the court of appeal, “having found that the building could not be rebuilt as it was because of the dangerousness of its location and the mayor’s refusal to grant a building permit, and held that awarding the owners a new-build reconstruction value in another place would give them an undue advantage since they would obtain an equivalent but better located property”, “rightly deduced, without breaching the principle of full compensation, that the loss had to be compensated according to the market value of the building at the date of the fire”. The loss of rent not having been claimed in the submissions, the court of appeal did not have to rule on it. Dismissed.
Second ruling (Cass. 3e civ., 14 December 2017, no. 16-24.170, reported): under the principle of full compensation, the Court quashed the order against the seller, “whereas the refund of part of the sale price and the indemnity awarded for demolition and rebuilding both compensated the loss of the usefulness of the thing”. It also quashed the order making the notary and the estate agent bear part of the price refund: “the refund of the sale price, which a seller is ordered to make following the price reduction provided for by article 1644 of the Civil Code, is not in itself a compensable loss giving rise to damages for the buyer”. It left standing the principle of their liability, the notary having failed to attach the 1997 judgment and the agent having sought no further information on the incident.
What this changes for valuation
Where rebuilding on site is impossible, the loss is the market value. The principle of full compensation forbids loss, but also gain. An owner whose building cannot be rebuilt where it stood does not lose a new building; they lose a property as it was, where it was. Paying them enough to build elsewhere an equivalent, better located, new building would enrich them. A valuer assessing a destroyed building therefore starts with a question of fact: is rebuilding as it was, on the same land, possible in law and in practice? If not, the report establishes the valeur vénale of the property at the date of the fire, in its former condition, building included, from comparable sales of properties of the same kind, and adds demolition and clearing costs where they were incurred. The glossary entry valeur de reconstruction describes the other measure, which remains the rule where rebuilding is possible.
Where it is possible, rebuilding remains the measure. The 2017 ruling does not say that market value always caps the loss. It draws the consequence of an impossibility to rebuild. The article on the hidden defect known to the seller in 2026 shows the other side: where the property can be repaired, the seller in bad faith owes the cost of the works, without the pre-damage market value limiting it. The two rules complete each other, and the report says which applies by first describing what is materially and administratively feasible.
A price refund and rebuilding do not add up. The buyer of a house to be demolished who keeps it may claim a price reduction, measured by the loss of value, or the cost of repair, which also makes good that loss; they cannot obtain both, because each repairs the same loss, that of the usefulness of the thing. A valuer instructed on a hidden defect therefore presents both measures, loss of value of the defective property and cost of works, stating that they are alternatives, and leaves the choice to the court, as explained in the article on the cost of works as the main claim and the price refund in the alternative. Distinct losses, rehousing, removal costs, loss of enjoyment, are added to one or the other.
The price refund is not a loss. A seller who refunds part of the price suffers no damage: they return what they received for a property that was not worth that price. A notary or estate agent at fault cannot therefore be made to guarantee that refund; they answer only for damages properly so called. In a report where several parties are liable, the valuer separates the refund, which follows the price reduction, from compensable losses, which alone can be shared between those liable, as in the article on the hidden defect repaired by a third party and the price reduction action.
What the owner must claim. The loss of rent of the burnt block, quantified at 39 340 € and undisputed, was not compensated because it had not been claimed in the submissions. A valuer listing the heads of loss lists them all, including those outside the main assignment, so that the party can take them up in time. The guide I paid too much, can I challenge the price? describes that approach from the buyer’s side.
What the valuer takes from it
- A destroyed building that cannot be rebuilt as it was on site is compensated at its market value at the date of the event, demolition costs included, not at its new-build reconstruction value.
- The report first establishes whether rebuilding on the land is possible, in law and in practice.
- Where repair is possible, its cost remains the measure of the loss, with no cap at market value.
- A price reduction and demolition-and-rebuilding costs repair the same loss of usefulness; they do not add up.
- The price refund is not a compensable loss; only damages are shared between those liable.
Further reading
The Property loss of value page describes the assignment, its timescale and its fee. The guide I paid too much, can I challenge the price? and the glossary entries valeur vénale, valeur de reconstruction, préjudice immobilier and vice caché complement this article. On the same theme: Hidden defect known to the seller: market value caps nothing and Burnt then expropriated: the lost insurance payout is compensated. The decisions are available on Légifrance: no. 16-15.257 and no. 16-24.170.
What next
A destroyed or badly damaged building, and a loss to quantify without double counting?
I establish the market value of the property before the event, the cost of rebuilding or repair and the value of what remains, then I set out the heads of loss that add up and those that exclude each other, for the insurer, the court or the negotiation.
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