What responsibility does an estate agent in France owe the seller that a prospective purchaser has the funds to undertake the transaction?

Not unlike other professionals, estate agents owe a duty of care to their clients. In their case, the primary obligation is to find a buyer for the property on the best possible terms.

Under French law this responsibility extends to making appropriate enquiries regarding the credit status of a prospective purchaser to ensure that, as far as possible, they are in a position to purchase the property.

This principle is one that has been established over many years and it is one that exists irrespective of what may be stated in the contract between the agent and the seller.

However, it is one that is sometimes the subject of litigation, due to the fact that it cannot be an open-ended obligation; the estate agent cannot be the guarantor of the creditworthiness of the buyer and there are limits on the level of reasonable care that can be taken.

Nevertheless, the agent must undertake a minimum level of enquiries. Indeed, whatever their legal obligations, as an estate agent only receives commission if the sale actually takes place, it is in their commercial interest to ensure that the buyer is solvent.

One of the most famous cases occurred in 2009 when a couple successfully sued an estate agent who had failed to investigate whether a prospective buyer of the property had the funds in place to complete the purchase.

In that case, a 77 year old buyer introduced by the agent signed a sale and purchase contract in a sum of €225,000. Completion of the sale was not subject to any mortgage condition.

No deposit was paid on signing of the contract, as the buyer refused to agree to pay one, a position that was accepted by the seller, who was keen to sell the property as quickly as possible. Clearly, it was a difficult property to sell, at least at the price.

When the seller refused to complete on the sale, by signing of the acte authentique, the sellers sued both the buyer and the agent for the penalty sum stated in the contract of €11,750.

The agents argued that transfer of the property was subject to a deed of sale, which protected the sellers, as if the buyer failed to complete they could put the property back on the market.

They similarly argued that the sellers had suffered no great financial prejudice as no other buyer presented themselves during the three months between signing of the compromis and the date due for signing of the deed of sale, and that the property was not actually sold until two years later.

The court found that the buyer was never really in a position to buy the property, which the estate agents might well have discovered by some elementary enquiries, perhaps by no more than a question to the buyer as to whether they actually had the funds to buy it. When the notaire later questioned the buyer about the issue, it was clear from the response that the buyer was not fully in touch with their financial position!

In their ruling the court stated that the estate agent failed in their contractualliability tothe seller by suggestingthat she had aseriousbuyer andshe wasable tosell the property on the terms proposed.

They considered the agent had failed in their legal obligation to provide appropriate advice to the seller and to act with vigilance in not investigating the creditworthiness of the buyer, and not drawing the seller's attention to the risk they took in not taking a deposit.

Accordingly, the agent and the buyer were held to be jointly liable for the penalty of €11,750.