Financial guarantee of the property manager (administrateur de biens): using it when rents are not paid over

An institutional landlord entrusts the letting management of a residential or commercial portfolio to a property manager (administrateur de biens), then notices that management reports are becoming less frequent, that the monthly payments over to it are becoming partial, and then that they stop. The tenants, for their part, keep paying. The issue is no longer rent recovery but the recovery of funds collected on behalf of third parties and not paid over, from a professional whose solvency is uncertain at best. The financial guarantee required by Law No. 70-9 of 2 January 1970, known as the Hoguet Law, is the tool designed for this situation, provided that one knows the exact conditions for triggering it and the timetable, the detail of which is set by Decree No. 72-678 of 20 July 1972. This guide sets out, from the principal's point of view, the scope of the guarantee, the amount that can actually be claimed, the three conditions for calling on it, the documents to assemble, the two three-month periods that must never be confused, and how the claim fits with an action for liability against the manager.

What the Hoguet financial guarantee covers, and what it does not

The financial guarantee required of the holder of the professional licence (carte professionnelle) is not a civil liability insurance. It is a guarantee for the return of funds held on behalf of others. Article 39 of the Decree of 20 July 1972 sets its scope without ambiguity:

The financial guarantee covers any claim arising from a payment or handover made in connection with a transaction referred to in Article 1 of the aforementioned Law of 2 January 1970.

Two practical consequences follow for a landlord. First, the claim must be linked to a flow of funds that passed through the professional in connection with an activity falling within the Hoguet Law, first and foremost property management. Second, the basis of the claim is not the manager's fault but the failure to return the funds. The landlord therefore does not have to prove a clear breach, negligence or fraudulent intent in order to call on the guarantor: it must prove a payment or handover, and an unpaid claim for return.

This distinction governs the whole strategy. A loss resulting from misappropriation of rents by the manager falls by its nature within the scope of the financial guarantee, provided that the rents were in fact collected by the professional on behalf of the principal. By contrast, a loss resulting from a management fault with no misappropriated flow of funds, for example the signing of a lease at a manifestly undervalued rent, failure to recover an arrear until it became time-barred, or failure to notify the building's insurer of a claim, falls under the professional civil liability insurance, which is also required of the licence holder, and not under the financial guarantor. A single case may call for both actions, directed against two different parties, on two different bases. The same division between financial guarantee and professional civil liability is examined, for co-ownerships (copropriétés), in our article on the financial guarantee of the property manager (syndic) where the manager defaults.

One difficulty must finally be reserved, which the texts do not settle and which guarantors exploit in practice: the treatment of sums whose collection by the professional is disputed or poorly documented. Where rents were paid directly to the manager by transfer to a principal's account, traceability is established. Where the trail is less legible, for example payments in cash, set-offs made by the manager against works invoices, or rents that the manager claims never to have received, the discussion moves onto the ground of evidence. At that stage, the quality of the rent receipts and of the management reports determines the outcome.

The amount that can be claimed: €110,000 is a floor, not a ceiling

Article 30 of the Decree provides that the amount of the financial guarantee must be at least equal to the sum of €110,000. This figure is frequently presented, including by some guarantors, as the compensation ceiling. That is a mistaken reading of the text, and it is costly for a landlord holding a significant portfolio.

The amount actually guaranteed results from the guarantee agreement, which is itself governed by two calculation rules. Article 28 requires the licence holder, or the applicant for a licence, to seek a guarantee of an amount at least equal to the maximum amount of funds that it plans to hold. Article 29 adds that the amount set by the agreement may not be lower than the maximum amount of the sums for which the holder remains accountable at any time in respect of payments and handovers received, and that, save for duly justified special circumstances, it may not be lower than the maximum amount of the sums held during the previous guarantee period.

For the landlord, the first step is therefore to obtain the guarantee certificate in force and to identify the real guaranteed amount, which may greatly exceed the regulatory floor for a property manager managing several hundred units. The second is to anticipate competing claims: the guarantee benefits all principals and all persons who made payments. Article 42 provides that if several claims are received during the three-month period, a pro rata distribution (marc le franc) takes place where the total amount of the claims exceeds the amount of the guarantee. In other words, a collective loss at a manager with many principals turns the guarantee into a pool to be shared. A landlord that files late, or that files a poorly quantified claim that is partly rejected, sees its share mechanically reduced in favour of the other creditors. Speed and rigour in quantifying the claim are not merely formal qualities here: they determine the amount received.

The three conditions for calling on the guarantee, and the absence of prior proceedings

Article 39 sets out the three-part test for opening the right to payment. The guarantee

takes effect on the sole evidence that the claim is certain, liquidated and due and that the guaranteed person is in default, without the guarantor being able to require the creditor to take prior action against the debtor professional with a view to recovery.

This wording, in force since 2006, governs the procedural strategy. The landlord does not have to obtain a judgment against the manager before approaching the guarantor. Nor does it have to show the failure of an enforcement measure, or wait for the opening or closing of collective proceedings. The guarantor has neither the benefit of discussion nor a right to require prior recovery action. Any contrary position taken by a guarantor, making its intervention conditional on the production of an enforceable title, runs up against the text.

The three qualities of the claim and the default remain.

The certain character requires establishing the very existence of the claim for return: a management mandate in force, collection of the rents by the professional, absence of payment over. The liquidated character requires a quantified and verifiable amount, line by line, unit by unit, period by period. This is the condition most often lacking in poorly prepared files: a landlord that claims a lump sum, without a statement of account that can be relied on against the guarantor, gives the guarantor a convenient ground for dispute. The due character results from the date on which the payment-over obligation falls due as the mandate organises it, generally a monthly or quarterly frequency accompanied by a management report.

As for default, Article 39 gives a precise and readily available means of proof: for the guarantor, it may result from a formal demand for payment followed by refusal or left without effect, for a period of one month from service of the demand on it. The formal demand for payment (sommation de payer) served on the manager by a commissaire de justice (bailiff) is therefore the pivotal act. It must refer to the mandate, the period and the detail of the sums claimed, and be served with a certain date, since the one-month period runs from that service. Dispensing with this act, and relying on a formal notice by registered letter, exposes the landlord to a pointless discussion about whether default is established.

Where the guarantee takes the form not of a surety but of a deposit (consignation), Article 40 adds a mechanism favourable to the creditor: the Caisse des dépôts et consignations immediately informs the president of the competent chamber of commerce and industry of any claim for payment, judicial or otherwise, and the guaranteed person may be regarded as having acquiesced in the claim if, within one month following service of the formal demand, it has not contested in court the cause or amount of the claim or produced a waiver by the claimant.

Building the file: the chain of evidence from the mandate to the statement of account

The texts read do not fix the list of documents required, which is a matter of each guarantor's practice. The reasoning to follow is nonetheless dictated by the conditions of Article 39: each document must serve one of four demonstrations, namely the entitlement to return, the collection, the failure to pay over and the default.

Documents showing entitlement and collection

• the written management mandate and its amendments, together with the registration number in the register of mandates provided for in Article 65 of the Decree, which in principle appears on the mandate
• the manager's professional licence and the financial guarantee certificate covering the period of the disputed flows, with the name of the guarantor and the guaranteed amount
• the successive management reports, which constitute the professional's acknowledgement of the sums collected on behalf of the principal
• the rent receipt statements and rent calls by unit, checked against the proof of payment held by the tenants
• the statements of the principal's account where the landlord has access to it, and the transfer advices received for the periods regularly paid over, which serve as a reference for the normal cycle

Documents showing failure to pay over and default

• a detailed statement of the claim, by unit and by due date, distinguishing rents, recoverable charges, security deposits held and any sums applied to works
• the correspondence making the claim and the written reminders, which place the breakdown in payments over in time
• the formal demand for payment served by a commissaire de justice and proof of service, together with any reply from the manager
• the payment certificates obtained from the tenants, a decisive document where the manager denies having collected the sums

Two recent documents deserve particular attention, because they shift the balance of power with the guarantor. Since 1 January 2022, Article 38-1 of the Decree, introduced by Decree No. 2021-1420 of 29 October 2021, requires financial guarantors to have a system for monitoring the guaranteed funds, instruments or securities, with sufficient human resources and adapted to the volume of those funds, comprising document-based monitoring procedures and, where necessary, on-site checks, together with criteria and thresholds for identifying points of non-compliance and measuring their seriousness. The text provides that the summary of the points of non-compliance found during the checks is given to the guaranteed persons. The principal landlord therefore has an interest in requesting this summary from the manager, then from the guarantor, and in checking whether anomalies on the principal's account had been noted before the loss. Article 38-2 also provides for the annual transmission by the professional of its annual accounts to its guarantor. These elements do not in themselves create a right to additional compensation, but they shed light on the chronology of the loss and, where relevant, on the guarantor's conduct.

The two three-month periods, never to be confused

This is the most frequent error in handling these cases, and it costs either a forfeiture or lost time.

The first period is a waiting period before payment. Article 42 provides that payment is made by the depositary or the guarantor on expiry of a period of three months from presentation of a written claim accompanied by supporting documents. This period does not weigh on the creditor: it organises the clearing of competing claims and allows the pro rata distribution (marc le franc). Its starting point is the presentation of the complete claim, which is why it is important not to send the guarantor a partial file that will not start the period running. Where the guarantee ceases before this period expires, Article 42 postpones its starting point to the date of publication of the notice provided for in Article 45.

The second period is a filing period, on pain of losing the benefit of the guarantee. Article 45, third paragraph, provides that all the claims referred to in Article 39 arising from a payment or handover made before the date on which the guarantee ceases remain covered by the guarantor if they are filed by the creditor within three months of receipt of the registered letter with acknowledgement of receipt sent by the guarantor, where the creditor is among the persons who must be informed individually, or, in other cases, of publication of the notice of cessation.

The distinction is operational. As long as the guarantee is in force, the landlord is not bound by any filing period under Article 45; it must, however, contend with the three-month waiting period of Article 42. As soon as the guarantee ceases, the countdown under Article 45 begins and becomes the main risk.

The countermeasure for a landlord that filed late

Article 45 contains a decisive point for the defence: this period runs only if it is stated, together with its starting point, in the letter or in the notice, as the case may be. Symmetrically, Article 44 requires that the notice of cessation published in a daily newspaper state the period for filing claims provided for in the third paragraph of Article 45 and its starting point. A landlord against whom the guarantor raises late filing must therefore systematically demand production of the registered letter received, or of the published notice, and check that both statements are present. Their absence leaves the period without a starting point.

Article 45 also specifies who must be informed individually: persons who have made payments and handovers to the licence holder within the past ten years and whose names and addresses appear in the register-directory provided for in Article 51, as well as persons who have given a mandate to manage their buildings and whose names and addresses appear in the register of mandates provided for in Article 65. Where the licence holder is a co-ownership managing agent (syndic) or a company manager, the guarantor also informs the chair or, failing that, the members of the co-ownership council or of the supervisory board. A principal duly entered in the register of mandates is therefore entitled to receive individual notification, and is not expected to monitor the local press.

The grounds for cessation and the three clear days' stay

Article 44 lists the cases of cessation: resignation of a member of a mutual guarantee company, termination of the guarantee contract, expiry of that contract, closure of an establishment, death, cessation of activity of the guaranteed person, and placing of the business in lease-management (location-gérance). Cessation is the subject of a notice in a daily newspaper published or, failing that, distributed in the département of the head office or main establishment, and, where applicable, in the départements of the establishments, branches, agencies or offices that depend on it. The text adds that the guarantee may not cease before the expiry of a period of three clear days following publication. In the event of death, an exceptional and provisional extension, of a duration not exceeding one year, is possible if the running of the business is assumed, by express agreement, by another person holding the professional licence for the same category of activities and guaranteed by the same guarantor.

Where cessation is accompanied by a change of guarantor and the new guarantor shows the former one that it has stipulated the clause provided for in the last paragraph of Article 22-1, the published notice takes the place of individual notification. Checking which of these two cases applies determines the starting point of the filing period.

Manager in collective proceedings: do not wait

The opening of safeguard, reorganisation or liquidation proceedings against the property manager does not suspend the principal's right to approach the guarantor. Article 39 excludes any obligation to take prior action, and Article 42 does not make payment conditional on the outcome of the proceedings. The text allows only a postponement: if the guaranteed person is the subject of collective proceedings during the three-month period, settlement of the claims may be deferred until the statement of claims is filed with the court registry under the conditions of Articles R. 624-8 to R. 624-11 of the French Commercial Code.

The tactical consequence is twofold. First, the landlord must approach the guarantor without delay, observing the formalities of Article 39, and at the same time file its claim in the insolvency under the conditions laid down in Book VI of the French Commercial Code. Second, since the postponement is only a regulated option, a guarantor that simply refuses to examine the claim on the ground of the collective proceedings goes beyond what the text allows it. The time limits and pitfalls specific to that filing are dealt with in our article on filing a claim in collective proceedings.

Article 41 offers a complementary lever for structuring a collective loss: the guarantor or, where the guarantee takes the form of a deposit, the most diligent of the creditors may apply by petition to the president of the judicial court (tribunal judiciaire) for the appointment of a court-appointed administrator or an expert responsible for drawing up the statement of claims, having regard to the periods set out in Articles 42, 44 and 45. In a case with multiple principals, this appointment fixes the scope of the pool to be distributed and secures the pro rata calculation.

Coordinating the claim on the guarantor and the action against the manager

The action against the guarantor and the action against the manager are neither alternative nor successive: they are conducted in parallel, with a coordination rule laid down by Article 39.

First rule, mandatory: in the event of court proceedings, the claimant must notify the depositary or the guarantor of the summons by registered letter with request for acknowledgement of receipt. A landlord that sues the manager for return of funds and for liability without notifying the guarantor exposes itself to a discussion about whether the resulting decision can be relied on against the guarantor. This notice must be sent as soon as the summons is served, with a copy of the document.

Second rule, offensive: if the guarantor disputes that the conditions for the right to payment are met or the amount of the claim, the creditor may sue the guarantor directly before the competent court. A landlord faced with a refusal to examine the claim, a challenge to the statement of account or a prolonged silence therefore has a direct action, without having to obtain a prior judgment against the professional. In practice, the guarantor is often sued after the three-month period of Article 42 has expired and, where applicable, after the filing made within the period of Article 45.

For its part, the action against the manager retains two distinct uses. It first allows the landlord to recover the balance of the loss not covered by the guarantee, either because the guaranteed amount is insufficient after pro rata distribution, or because the damage exceeds the return of funds, for example the cost of reconstructing the letting accounts, losses linked to leases not renewed or arrears left unrecovered. It then rests on the obligations of the agent, who is bound to account for its management and to answer for faults committed in carrying it out. It also allows, where the facts justify it, a criminal limb to be pursued, since misappropriation of funds received on condition of returning them or putting them to a specified use may be criminally characterised; the complaint and, where relevant, joining the proceedings as a civil party give access to evidence that the civil route does not always reach, in particular on bank flows.

Where the management reports are incomplete or the rent receipts are unavailable, a pre-trial investigative measure, sought in summary proceedings (référé) on the basis of Article 145 of the French Code of Civil Procedure, makes it possible to have an expert appointed to reconstruct the flows between the principal's account and the landlord. This measure has a double effect: it quantifies the claim, a condition of Article 39, and it dates the loss, which is useful if the guarantee ceases while the case is under way. The admissibility conditions and the conduct of this measure are dealt with separately in our article on the expert-appointment référé under Article 145 of the Code of Civil Procedure.

What the institutional landlord should put in place beforehand

Calling on the guarantee is prepared before the loss, when the mandate is drafted and the relationship is managed. Three requirements deserve to be set out in the contract: a short payment-over frequency with express dates, which determines when sums fall due; an obligation to provide management reports detailed by unit, together with the statements of the principal's account; and annual transmission of the financial guarantee certificate in force, stating the guarantor and the guaranteed amount. To these is added, since 2022, an express request for the summary of the points of non-compliance given by the guarantor under Article 38-1.

The operational warning signal is not the failure to pay over, which comes late, but irregularity in reporting: delayed reports, discrepancies between rent receipts and announced collections, charge adjustments carried over from one financial year to the next, unusual requests for provisions for works. From these signals, the useful reaction time is counted in weeks, because a termination of the guarantee contract by the guarantor, often coinciding with the deterioration, starts the filing period of Article 45.

Conclusion

The financial guarantee of the property manager is not a last-resort remedy after enforcement routes against the professional have been exhausted: it is a first-resort route, which the Decree of 20 July 1972 deliberately freed from any obligation of prior proceedings. The real risk for an institutional landlord is therefore not legal, it is operational. It lies in three recurring defects: a claim insufficiently quantified, a default not established for want of a served formal demand, and filing out of time after the guarantee has ceased. To these is added the risk of competing claims, pro rata distribution rewarding the quick creditor and penalising the approximate one.

The recommendation is simple to state and demanding to carry out. From the first missed payment over, have a statement of claim drawn up unit by unit and due date by due date, have a formal demand for payment served by a commissaire de justice referring to the mandate and the period, send the guarantor a complete written claim that starts the three-month period of Article 42, and immediately request a copy of the guarantee certificate and, where relevant, of the published notice of cessation, to check that it does state the filing period and its starting point. A badly dated file is lost; a well-chained file is paid.

Frequently asked questions

Must a judgment be obtained against the property manager before approaching the financial guarantor? No. Article 39 of Decree No. 72-678 of 20 July 1972 provides that the guarantee takes effect on the sole evidence that the claim is certain, liquidated and due and that the guaranteed person is in default, without the guarantor being able to require the creditor to take prior action against the debtor professional with a view to recovery. The guarantor therefore cannot rely on either the benefit of discussion or a requirement for an enforceable title. If the guarantor disputes the conditions for the right to payment or the amount, the creditor may sue it directly before the competent court.

How can the manager's default be proved under the Hoguet Law? Article 39 indicates that, for the guarantor, default may result from a formal demand for payment followed by refusal or left without effect for a period of one month from service of the demand. A demand served by a commissaire de justice is therefore the safest route, because it gives a certain date to the starting point of the period. It must refer to the management mandate, the periods concerned and the amount claimed, with a statement of account annexed.

Is the amount of the guarantee limited to €110,000? No, it is a floor. Article 30 of the Decree provides that the amount of the financial guarantee must be at least equal to the sum of €110,000. Article 29 further requires that the amount set by the agreement not be lower than the maximum amount of the sums for which the holder remains accountable, nor, save for duly justified special circumstances, lower than the maximum amount of the sums held during the previous guarantee period. The guarantee certificate must therefore be obtained in order to know the amount that can actually be claimed.

Within what period must the guarantor pay after the claim? Article 42 provides that payment is made on expiry of a period of three months from presentation of a written claim accompanied by supporting documents. This period allows all competing claims to be identified, a pro rata distribution (marc le franc) taking place if the total of the claims exceeds the amount of the guarantee. Where the guarantee ceases before this period expires, its starting point is postponed to the date of publication of the notice provided for in Article 45.

What happens if the financial guarantee ceased before the misappropriation was discovered? Claims arising from a payment or handover made before the date of cessation remain covered if they are filed within three months, running from receipt of the registered letter sent by the guarantor to the principals entered in the register of mandates or, failing that, from publication of the notice of cessation. Article 45 specifies that this period runs only if it is stated, together with its starting point, in the letter or in the notice. A landlord against whom late filing is raised must therefore demand production of the letter or the notice and check what they state.

Does the manager's judicial liquidation block calling on the guarantee? No. Article 42 allows the guarantor only to defer settlement until the statement of claims is filed with the court registry, under the conditions of Articles R. 624-8 to R. 624-11 of the French Commercial Code, where the guaranteed person is the subject of collective proceedings during the three-month period. The claim must therefore be sent to the guarantor without delay, in parallel with the filing of the claim in the insolvency. Article 41 also allows a court-appointed administrator or an expert to be appointed, on petition to the president of the judicial court, to draw up the statement of claims.

Financial guarantee or professional civil liability insurance: which should be called on? The financial guarantee covers the return of funds received in connection with a transaction referred to in the Hoguet Law, so typically rents collected and not paid over. The professional civil liability insurance covers the consequences of management faults without misappropriation of funds, for example failure to recover an arrear or failure to notify an insurer of a claim. A single case frequently justifies both steps, taken simultaneously and quantified separately to avoid any double recovery in the claims.