The completion of the building and the thorny issue of paying the last installment
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03 APRIL 2018 | BY OUR REAL ESTATE EXPERT LEX THIELEN, COURT LAWYER
With regard to the sale of buildings to be constructed, the completion entails significant legal consequences for both the developer and the purchaser. A thorny problem concerns the payment of the last tranche in terms of sales in the future state of completion.
A. The concept of completion
The completion describes the phase where the building is habitable. This transaction takes place between the seller and the buyer. Completion has implications for the release of the completion and repayment guarantee. Thus, the completion may be pronounced even if there are non-compliances with the contract, since they are not substantial, and even if there would be defects, since these do not render the building unsuitable for its purpose.
We must distinguish the completion of two neighboring concepts, reception and delivery.
There is a receipt when the buyer accepts the book while it reflects the intention of the client to approve the work done. Delivery, on the other hand, is the act by which the seller delivers the work to the purchaser. Delivery can only be made in principle after the completion of the works and concomitantly or after receipt; the delivery results in the delivery of the keys and the taking possession of the premises by the purchaser.
Traditionally, it was considered that completion occurs when the works are executed and the items of equipment that are essential for the use of the building in accordance with its purpose are installed. Thus defined, the completion concerns the question of habitability of the building. Everything that was not part of that notion was considered completion.
Consequently, the case law considered that water, gas, electricity, heating, accessibility (stairway, elevator, lighting corridors) and the interior completion of the premises are essential elements to appreciate the habitability of the building. In more original cases, the television antenna -2 and the lack of a rainwater drainage system -3 were considered as an indication of the lack of completion. On the other hand, the alterations of paint, the lack of finishing of the entrance hall and the green spaces were not considered as being likely to prevent the recognition of the completion -4 . Regardless of the standard of the building, the necessary equipment and finishes will remain the same -5 . The level of habitability does not differ depending on the building, whether luxury or more modest.
In this context, and in order to determine whether the building was completed or not, it did not take into account thenon-substantialdefects of conformity, or the poor workmanship, which did not render the building unsuitable for its purpose. destination. Proof of the substantial nature of the non-conformity or the impossibility to live in the premises due to poor workmanship must be reported by the purchaser -6 .
The appreciation lies with the trial judges who have provided numerous examples in case law to determine whether the lack of conformity is substantial or if the poor workmanship renders the building unsuitable for its purpose, and thus if the completion is not achieved.
Substantial nonconformity was considered to be the creation of a garbage room resulting in bad smells or non-compliance of roadways preventing proper access to the building -7 . The malfunction of the ventilation system -8 was considered a malfunction making the house in the building unsuitable.
On the contrary, were considered non-substantial non-conformities:
> the decoration of the lobby -9 ;
> false ceiling cladding, paint finishes, wall coverings -10 ;
> the fence of the private gardens, the absence of gutters to the windows -11 ;
> the glass door and the false ceiling of a staircase, the lack of coating on the walls of cellars, the automatic watering of green spaces -12 .
The poor workmanship resulting in the malfunctioning of the video cameras, the display of elevator floors or the electric entrance gate were deemed not to prevent the completion of the building -13 . This definition of the concept of completion was called into question by an Act of 8 August 1985 "amending Articles 1601-4, 1601-5, 1642-1 and 1646-1 of the Civil Code".
This law has indeed introduced in a new article 1601-5 f of the civil code relating to the only guarantee of completion, the concept of "complete" completion of the building, even though the same law has not changed the definition of the concept of completion as given by Article 1601-6 of the Civil Code. This article therefore always contains the original definition of completion which is based on the simple habitability of the building, as opposed to the complete completion of the building which alone allows to obtain the release of the guarantee of completion. .
It is therefore very difficult for the parties to determine the moment of completion. Should we take into account the complete completion of the building with its finishes or keep the criterion of the habitability of the building?
A decision of the Court of Appeal found that "an immovable is to be considered as completed when the works are executed and are installed the elements of equipment which are indispensable to the use of the immovable according to its contractual destination (cf: Dalloz, January 1994, v ° Sale of building to build Olivier TOURNAFOND, number 156). It goes without saying that the purchaser is entitled to a completed building and not just completed ( cf: same reference, n ° 159 ). In this case, after completion of the construction work in 2003, the company A. s.à.rl had still not conducted a geotechnical study and had not carried out the layout of surrounding according to the building permit issued pat the Municipal Administration of the City -14 ".
The case-law referred to above had to be investigated whether or not the vendor's obligation of delivery had been perfectly fulfilled. The Court, having held that in the context of a building to be constructed, the performance of the seller's obligation to deliver the goods includes - among other things - the completion of the immovable within the contractual period, also went further by stating that "the purchaser is entitled to a completed building and not just completed".
We are therefore of the opinion that section 1601-5f of the Civil Code has not been inadvertently modified and that the notion of completion now refers to a complete completion of the building.
B. The finding of completion
For the sale in the future state of completion, and unlike the forward sale, there is no specific legal procedure, which is regrettable.
Thus and by way of example, the parties are free to provide in the contract to involve a professional, register with a notary the finding, or to notify the other party with specific terms .
In case of absence of agreement between the parties on the completion of the building, they have the option to refer to the judge of interim relief to appoint an expert. The mission of the expert will be to declare whether the building is completed or not.
C. The consequences of completion
First, it is important to remember that the completion has no impact on the actions that may be brought for defects, poor workmanship or lack of conformity by the buyer; the deadlines for bringing such actions are in effect from receipt, not completion. The completion report does not entail any waiver of the actions in apparent defect or recognition of conformity.
The determination of completion terminates the completion and refund guarantee. In principle, the purchaser can no longer act in nullity of the contract for non-compliance with the obligations of the protected sector.
As part of the sale in the future state of completion, the completion carries the payment of a maximum amount corresponding to 95% of the selling price. The remaining 5% will be payable upon delivery. It is the payment of this last installment that has given rise to a lot of litigation.
D. The thorny issue of the last installment
Remember that the phased payment of the price is one of the major characteristics of the sale in the future state of completion. Thus, the purchaser will have to make payments as and when work. Otherwise, the act is null.
The payments are strictly capped according to the different stages of progress of the works. Thus, the first step will be the deposit of a maximum of 2% of the sales price during the preliminary contract. If the sale is concluded, this deposit will be deducted from the selling price.
Then, the seller can request the payment of the price of the land and the existing constructions which can not exceed 10% of the total sum, except if the salesman justifies a higher cost price or a realization value, which is however often the case, considering the price of the grounds.
The developer can then claim the sums corresponding to the construction costs without exceeding certain thresholds:
> 15% at the completion of the foundations of the only main building, except for the buildings related to garages and other separate outbuildings of the main building;
> a proportionate share of the number of slabs to be provided between the foundations and the roof with a maximum of 50% of the total price at the completion of the upper slab;
> 95% at the completion of the building.
The payment of the balance will normally be paid at the time of delivery of the building, subject to a deposit in case of dispute.
A recurring litigation concerns the payment of the last 5%. Can the buyer withhold the 5% and under which conditions?
Article 1601-9 of the Civil Code provides that the balance may be recorded because of a "dispute over compliance with the contract forecast". Doctrine has for a long time considered the interpretation to be given to this provision. Indeed, the article only provides for the assumption of a deposit of the last remaining 5% , and not the possibility of a retention of this money, and the law expressly provides for it only in case of lack of conformity. Thus, should one consider that in case of vice - vice which must necessarily be apparent, considering the time of its discovery - the balance must still be paid? And what about a significant delay in delivery time?
There are in law, in general, three kinds of interpretation of texts , the literal interpretation, that by analogy and finally the so-called teleological interpretation.
The literal interpretation is the reading of the text and its strict application to the word. Thus, if one literally interprets the provision of the last paragraph of section 1601-9, only the defects of conformity would allow the buyer to withhold the payment of the balance. Vices would therefore be excluded from this provision in the same way as delays.
Interpretation by analogy consists in interpreting the article by extending it to a neighboring fact. This would be the case in particular by applying the possibility for the buyer to record the balance in the event of a defect, which is a situation close to the lack of conformity. Interpretation by analogy, however, is very little used by judges.
Finally, the teleological interpretation consists in seeking the will of the legislator. However, nothing in the report of the Legal Committee of the Chamber of Deputies -15 allows to deduce that the legislator wanted expressly to exclude the defects of this provision, it also uses the term dispute which may as well designate a defect that a lack of conformity.
It can therefore be concluded that the intention of the legislator was to allow the buyer to record the balance in order to put pressure on the promoter to repair any defects in the property quickly, whether it is a defect or a lack of conformity.
French jurisprudence, the same problem of interpretation, has already ruled on this point by determining that it was a simple oversight of the legislature and that the existence of defects justified itself as logging -16 . The national courts seem to treat the same way both the lack of conformity and the apparent defect, which they designate under the term of "disorders", as regards the payment of the last tranche of the selling price of a building in a future state of completion -17 .
Delays always seem to be excluded. Moreover, in most cases, the resulting damage is not directly quantifiable and, in the absence of a special indemnification clause in the sales contract, must be assessed by the courts of the merits. .
In any event, it was decided that the delay in the completion of which the promoter imputed the fault exclusively to the purchaser, the refusal of the payment of the last installment by the purchaser did not justify on the part of the purchaser seller of deprive him of enjoyment of the property acquired -18 . Since the completion step has already been completed and the consignment only concerns the finishes, no condition regarding the seriousness of defects or defects is required -19 .
The case-law seems to consider that the exception of non-execution of ordinary law is also applicable to the sale in the future state of completion and that the purchaser can therefore withhold a portion of the price if the building is not completed or if it involves defects. In this case, the Luxembourg Peace Court -20 considered that the buyer could withhold part of the balance until the correct completion of the work.
This solution was reiterated in a judgment of 19 June 2017 -21 , in which the court held that the buyer could oppose the exception of non-performance for defects in construction, without, however, seeking prior to the qualification of the contract (sale building to build or business contract). Another judgment held that the purchaser had to prove that the immovable was unsuitable for its purpose in order to retain the last installment of payment -22 .
The exception of non-performance may therefore be less interesting than the consignment since it does not allow the purchaser to obtain delivery of the goods and requires him to prove that the immovable is unsuitable for its purpose.
The case law has also decided that "if the defects affecting an immovable are apparent, Article 1642-1 of the Civil Code specifies that the seller can not be unloaded before or after the receipt of the work by the buyer, or before the expiry of a period of one month after taking possession. After these two periods, if the seller to whom apparent defects were reported, delayed or refuses to repair, the buyer may oppose a breach of its contractual obligations and seek damages for loss of enjoyment and other harassment -23 " .
Consult all our articles rights and immo laws
By Lex Thielen, Lawyer at the Court and author of the books "The professions of real estate in Luxembourg law", Editions Larcier, 2010, "The lease contract", Editions Promoculture / Larcier 2013, "All about real estate" , Editions Promoculture / Larcier (1st edition 2015, 2nd edition November 2016), "Immobilienrecht in Luxemburg, einfach erklärt" (Editions Promoculture / Larcier 2016) and "Construction law in Luxembourg" (Editions Promoculture / Larcier February 2018).
2- Cass. 3rd civ., 13 April 1988: Bull. Civ. 1988, III, No. 69.
3- Cass. 3rd civ., 24 September 2003, No. 02-14.046, SCI Les Cyprinees and a.
4- Aix-en-Provence Court, October 29, 1975, SCI Le Florence.
5- Rennes Court, 4th Ch., March 19, 2009, n ° 06/08188, Industrial Credit West c / Mutuelle du Mans Insurance.
6- Versailles Court, 4 ch., September 28, 2008, n ° 06/09136.
7- Court Poitiers, 1st Ch. May 22, 2011: JurisData n ° 2001-171093).
8- Grenoble Court, 1st Ch., 25 March 2008, SA Isère Développement Environnement c / AASMAE: JurisData n ° 2008-362491.
9- Rennes Court, 4th Ch., March 19, 2009, No. 06/08188.
10- Rennes Court, 4th Ch., March 19, 2009, No. 06/08188.
11-- Court Aix-en-Provence, 3rd ch. civ., November 30, 2000: JurisData n ° 2000-143398; Constr.-Urb. 2002, comm. 26.
12- Court Aix-en-Provence, 3rd ch. civ., November 30, 2000: JurisData n ° 2000-143398; Constr.-Urb. 2002, comm. 26.
13- Civ. 3rd, 24 March 1997, Epoux Nicoleau c / SCI 4 Avenue Marechal de Lattre de Tassigny, No. 95-19.527, Bull. Civ. III, No. 70.
14- Court, 4th Ch., May 25, 2011, n ° 35465 of the role, BIJ 01/2012, p. 6.
15- Report of the Legal Committee, General Debate No. 1637, Thursday, 8 July 1976 (77th Sitting).
16- Civ. 3rd, 23 May 1978, Bull. Civ. III, No. 209; Civ. 3rd, December 16th, 2010 Fourmois ép. Roques c./Ste Parc de Fomtainieu, n ° 09-67.232.
17- Lux, 11th Ch., December 22, 2006, no. 293/2006 quoted in JurisNews 6/2008, p.61: "The exception of non-performance is defined as the right for each party to refuse to execute, if his co-contractor himself offers the benefit due. The formal notice is not legally necessary. The exception of non-performance may be invoked even in the case of simple partial or defective non-performance. It is therefore necessary to analyze whether the complaints of the HG spouses as to the existence of the vices and poor workmanship are well-founded and to see if the responsibility of the promoter is engaged.
18- Court, 7th ch., 13 February 2002, role n ° 24910 quoted in Jurisnews n ° 5/2008, p. 60.
19- Civ. 3rd, 6 December 1972, Bull. Civ. III, No. 666.
20- JP Lux, December 3, 2001, No. 5170/01; Lux., 11th Ch., 22 December 2006 supra.
21- Lux, June 19, 2017, No. 141.526 of the role.
22- Lux, April 25, 2017, n ° 171.832 of the roll.
23- Court, 7th Ch., February 15, 2006, role n ° 29484, BIJ 2006, p.7.