A buyer who did not seek a mortgage in the form set out in the sale and purchase contract has lost their deposit when the mortgage was refused.

If you are buying a property in France that is to be funded in whole or part by a mortgage it is necessary to include an appropriately worded conditional clause to that effect in the sale and purchase contract.

In the event that the mortgage application is not successful, or is not offered on the terms stated, then the condition is not fulfilled and the deposit is refunded.

The clause will need to state the amount of the mortgage being sought, the maximum interest to be payable, and the latest date by which an offer must be received.

In the vast majority of cases such clauses operate without any difficulty.

However, where the application is not made within the terms set out in the contract, in the event that the mortgage application is turned down the buyer risks losing their deposit.

In a recent case before the Cour de Cassation, the French Supreme Court, a couple signed a contract for the purchase of building land.

The contract was conditional on them obtaining a mortgage in the sum of €45,000, reimbursable over a period of 15 years, at an interest rate no higher than 4.65%.

Subsequently, the couple advised the notaire that they had been unsuccessful in obtaining the mortgage, in the process producing a letter of refusal from their bank. The couple sought resolution of the contract and reimbursement of their deposit.

The sellers contested reimbursement of the deposit as it was evident from the documentation produced by the buyers that the mortgage application had not been made in their name, but in the name of a Société Civile Immobilière (SCI) that the couple were in the process of establishing as the legal vehicle for purchase of the land.

The matter went before the French courts, with the Court of Appeal sitting in Bordeaux judging that, as the mortgage application did not display the characteristics set out in the promesse de vente, the buyers forfeited reimbursement of the deposit.

This decision was subsequently upheld by the Cour de Cassation, to whom the buyers had made an appeal.

The buyers had argued that the name of the applicant was not material to the mortgage application, and that, in any event, the sale and purchase contract included a substitution clause within it, so enabling then to use the SCI.

These arguments were rejected by the judges, who stated that a change of name was a material consideration, and that the substitution clause had not been invoked during the process.