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VEFA sales and the challenge of the final instalment of 5%

In the context of VEFA (vente en état futur d’achèvement) sales, the completion of the building has important legal consequences for both the developer and the purchaser. A difficult problem concerns the payment of the final instalment.

A.  The consequences of the completion of the building

First, it is important to remember that the completion has no impact on the actions that may be brought by the purchaser for defects or conformity issues; the time limits for bringing these actions start on the date of the reception of the building, and not on the date of its completion. The declaration of completion does not have any implications on the purchaser’s actions.

In the case of VEFA sales, the completion gives the seller the right to request the payment of a maximum amount corresponding to 95% of the sale’s price. The remaining 5% is payable upon delivery. It is the payment of the last instalment that has given rise to many disputes.

B.  The challenge of the last instalment

It should be remembered that the staggered payment of the price is one of the major characteristics of VEFA sales. Thus, the purchaser must make partial payments as the construction works advance. Otherwise, the contract is not valid.

The payments are strictly capped according to the different stages of the construction site.

A recurring dispute concerns the payment of the last 5%. Can the buyer withhold the last 5% and under what conditions?

Article 1601-9 of the Civil Code provides that the last instalment may be retained in case of a “dispute over compliance with the contract”.

1.  Conformity issues, defects and delay

Based on the wording of Article 1601-9 of the Civil Code, should we assume that in the event of a defect, the last instalment must still be paid? 

And what about a significant delay in the delivery?

Defects and conformity issues: Nothing in the report of the Legal Affairs Committee of the Chamber of Deputies suggests that the legislator expressly intended to exclude defects from this article, and uses the term “contestation”, which can refer to both a defect and a lack of conformity.

It can therefore be concluded that the legislator’s intention was to allow the purchaser to deposit the last instalment of 5% in order to put pressure on the developer to repair any defects affecting the property quickly, whether they are defects or conformity issues.

The national courts seem to treat both conformity issues and apparent defects the same way, which are both referred to as “désordres”, when it comes to the payment of the final instalment of the sale price of VEFA sale.

Delay: On the other hand, delays always seem to be excluded. Moreover, in most cases, the resulting loss cannot be directly quantified and, in the absence of a specific compensation clause in the sales contract, will have to be assessed by the courts.

2.  Severity of the disorder

Since the completion stage has already been carried out and the consignment only concerns the finishing touches, no condition regarding the severity of the defects or faults is required.

3.  Consignment or retention

In principle, the article only provides for the possibility of a deposit of the last remaining 5%, and not for the possibility to retain this amount.

However, case law seems to consider that the exception of non-performance (i.e. “exception d’inexécution”) under common law is also applicable to VEFA sales and that the purchaser can therefore retain part of the sale’s price if the building is not completed or if it contains issues. In this case, the Luxembourg “Tribunal de Paix” considered that the buyer could retain part of the balance until the work was properly completed.

This was reiterated in a judgment of 19 June 2017, in which the court considered that the buyer could raise the exception of non-performance for construction defects / faults, without however first examining the nature of the contract (VEFA sale or service contract).

Another judgment however found that the buyer had to prove that the building was not suitable for its intended use in order to withhold the last instalment.

The exception of non-performance may therefore be less interesting than the consignment option if one considers that the purchaser must prove that the building is not suitable for its intended use.

(currently only available in french)

[1] Rapport de la commission juridique, discussion générale n°1637, jeudi 8 juillet 1976 (77e séance)

[2] Lux, 11e Ch., 22 décembre 2006, n°293/2006 cité in JurisNews 6/2008, p.61 : « L’exception d’inexécution est définie comme le droit pour chaque partie de refuser de s’exécuter, si son co-contractant n’offre lui-même la prestation due. La mise en demeure n’est pas juridiquement nécessaire. L’exception d’inexécution peut être invoquée même au cas de simple inexécution partielle ou défectueuse. Il échet dès lors d’analyser si les reproches des époux HG quant à l’existence des vices et malfaçons sont fondées et pour voir si la responsabilité du promoteur est engagée »

[3] Civ. 3e, 6 décembre 1972, Bull. Civ. III, n°666

[4] JP Lux, 3 décembre 2001, n°5170/01 ; Lux., 11e Ch., 22 décembre 2006 précité

[5] Lux, 19 juin 2017, n°141.526 du rôle

[6] Lux, 25 avril 2017, n°171.832 du rôle