What is the mortgage condition precedent?

A protection mechanism of public policy

Arising from the Scrivener Act of 1979, now codified in Articles L.313-40 and following of the French Consumer Code, the mortgage condition precedent applies whenever the deed indicates that the price is paid, even partially, using one or more loans governed by the Consumer Code.

Concretely, the sale agreement or the unilateral sale agreement is concluded subject to your obtaining your financing. If the loan is refused, the sale is deemed not concluded: you are not a buyer and no penalty can be claimed from you. This protection is a matter of public policy: the seller cannot make you waive it, unless you declare, by a very strictly regulated handwritten statement (Article L.313-42 of the French Consumer Code), that you are buying without using a loan.

Duration, content and refund of sums

Article L.313-41 sets a validity period for the condition precedent that cannot be less than one month from the signing of the deed. In practice, the preliminary contract often provides for 45 to 60 days to account for actual banking timelines.

The preliminary contract must specify the characteristics of the loan sought: maximum amount borrowed, duration and maximum interest rate. These statements are essential: they define the scope of the condition. If you obtain an offer that matches these characteristics, the condition is fulfilled and you can no longer rely on it to withdraw.

When the condition is not fulfilled (loan refused), any sum paid in advance by the buyer is immediately and fully refundable, with no retention or compensation of any kind.

• Maximum amount of the loan requested
• Repayment duration envisaged
• Maximum interest rate (excluding insurance) accepted
• Deadline to obtain the loan offer (at least one month legally)

Your obligations to be protected

The protection assumes that you play your part. You must submit a loan application that matches the characteristics stated in the sale agreement and within the deadlines. Case law holds that a buyer who submits no application, requests an amount above the ceiling provided, or deliberately sabotages their financing, may be deemed at fault: the condition is then considered fulfilled and they may lose the benefit of the protection, or even the security deposit.

Keep proof of your efforts (application submission, refusal certificates from the banks). In the event of a refusal, forward the certificate without delay to the seller or the notary to trigger the refund of the sums.