Disputes between developers and buyers are legion in the sale of buildings to be constructed. While sometimes buyers’ claims are justified, neither is it rare to face baseless, even completely ridiculous, grievances. In any event, it’s better not to give buyers the stick with which to be beaten. However, that’s often what happens when the professionals overlook the fact that numerous VEFA legal provisions are accompanied by criminal penalties.

For example, Article VII para. 1 of the Law of 28 December 1976 on the sale of buildings to be constructed and the obligation to guarantee against construction defects (neither incorporated in the Civil Code, nor the Criminal Code), provides that any person who may have required of or accepted from the buyer, in the context of the sale of a building to be constructed, any payment or deposit whatsoever prior to the signature of the notarized VEFA contract, except for the 2% security deposit, accepted or required an advance on the envisaged construction prior to the beginning of work, accepted or required after the beginning of work payments that are inconsistent with the scope of the work performed, received funds in the context of a reservation other than a security deposit made to a special account opened in the name of the reserving party, or even requested a security deposit exceeding two percent of the provisional purchase price, may be punished by imprisonment of eight days to one year, and a fine of  EUR 251 EUR 2.500, or by only one of these penalties.

Nonetheless, in practice it is not rare to see developers request payments on work not yet executed.

However, professionals should not overlook the rule promulgated by Article 1601-9 of the Civil Code pursuant to which “After the beginning of work, payments related to the construction only become due as the work progresses such that the sums paid correspond at all times with the scope of the work performed.”

Case law has already had the opportunity to decide such a case in which a developer was ordered to pay a fine of EUR 2.000 (Trib. Arr. Lux, 8 January 2008).

Thus, when a developer acts in violation of the legal provisions governing the sale of buildings to be constructed, he ultimately exposes himself, in addition to the risk of criminal penalties, to a considerable weakening of his negotiating position with respect to well-advised buyers.

To avoid such a risk, but also and above all any criminal penalty, it is best to scrupulously comply with the law in all phases of a project.

By Vanessa LOMORO, Counsel.

Article from the Law & Legal Counsel column – NEOMAG 38 accessible online by clicking here.