Notaires must confirm sellers are not bankrupt

24 July 2019
By

Notaires have a duty to inform property buyers if the person they are buying from has gone bankrupt.

This rule, which has existed since 2009, is an important protection.

Prior to that date, buyers took something of a gamble when purchasing a property. If the vendor was subject to collective proceedings from creditors due to bankruptcy, they ran the risk of losing the property they had bought in good faith.

In one case, a couple who had bought an apartment in the Gironde with a sea view for €162,000 in 2002 were only informed in court seven years later that liquidators could seize their home due to bankruptcy proceedings against the vendor that had started in 1996. He had no right to sell the property to them as it was an asset that could be used to pay off creditors.

The notaire tried in that case to argue that the requirement to check systematically only dated from 2009.

Luckily for the buyers, the court decided in this particular case there were circumstances that should have made the notaire wary about the sale, which he had ignored.

The notaire was ordered to pay the couple a sum which covered in full the current value of the home, including renovations they had made.

Article L 641-9 of the Com­mercial Code states: “The judgment which opens or pronounces judicial liquidation shall automatically entail, as from its date, relinquishing for the debtor of the administration and disposal of his property... as long as the judicial liquidation has not been completed.”
According to case law, acts performed by the debtor in violation of this rule (eg. selling a property) are legally unenforceable.

Get news, views and information from France
You have 2 free subscriber articles left
Subscribe now to read unlimited articles and exclusive content
Already a subscriber? Log in now