Court of Cassation, 3rd Civil Chamber, May 11, 2023 – No. 22-13.696
A developer constructed a residential building in French Polynesia and sold units in the future state of completion to a Property Management Company. A completion guarantee was taken out in the form of a bank guarantee with a bank, in accordance with the provisions of Article L.261-10-1 of the Construction and Housing Code.
Following the emergence of difficulties, the developer, the bank, and the Property Management Company concluded a protocol to achieve the completion of the work. Subsequently, the developer entered into administration and then liquidation. The works mentioned in the protocol were financed partly by the completion guarantee and partly directly by the Property Management Company.
On appeal, the court had ordered the Property Management Company to pay the entire remaining balance of the sale price to the bank, holding that it had not been established that the remaining works had been undertaken by the purchasers directly and not under the execution of the completion guarantee.
The Court of Cassation overturned this decision on the grounds that the guarantor's claim on the remaining sale price held by the purchasers, as a counterpart to the implementation of the guarantee, is limited to the portion of the price corresponding to the works financed by the guarantor. It was, therefore, the responsibility of the guarantor, who is claiming payment of the balance of the sale price from the purchaser, to prove that this balance is the counterpart of works that they financed to achieve the completion of the building.
Key Point: The completion guarantor of a construction sold in the future state of completion, who completes or arranges for the completion of works abandoned by the defaulting builder, must retain proof of the works carried out in order to subsequently request reimbursement from the purchaser.
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