Securing a land acquisition subject to a building permit cleared of appeals

A developer signs a promise to purchase a building plot, obtains its permit, starts work, and then receives, in the thirteenth week, an application for annulment filed by a neighbour before the administrative court (tribunal administratif). The transaction is frozen, the financing suspended, the margin compromised. This scenario, commonplace for anyone acquiring buildable land, illustrates a simple rule: holding a building permit is not enough, it must also be final, that is, cleared of any appeal and of any withdrawal. This guide is addressed to developers, investors and property dealers (marchands de biens) who structure a land acquisition on the buyer's side. It sets out the drafting of the condition precedent of a final permit, the control of time limits, the calibration of the immobilisation indemnity (indemnité d'immobilisation), the management of the risk of abusive appeals and the link between the promise and completion by authentic deed.

What exactly a permit "cleared of appeals" means

The vocabulary deserves to be settled, because a building permit may be "granted" without being "final". Three distinct events condition its legal stability.

First, the time limit for third-party appeals to the courts. Under Article R. 600-2 of the French Town Planning Code, this two-month period runs only from the first day of a continuous two-month period of display on the site. Display on the regulatory sign is therefore the triggering event: as long as it has not been properly carried out and proved, the period does not start, and the permit remains open to challenge without any time limit. Standing to bring proceedings and the absence of suspensive effect of the appeal are set out in our article on third-party appeals against a building permit.

Next, the time limit for administrative withdrawal. Article L. 424-5 of the French Town Planning Code allows the authority that issued the permit to withdraw it, if it considers it unlawful, within three months of the date of the decision. After that period, the administration can no longer go back on its act of its own motion.

Finally, the absence of a prior administrative appeal or of an outstanding prefectoral referral (déféré préfectoral). A third party may apply to the administration before going to the judge, and the prefect has his own power of challenge under the legality review.

A permit cleared of appeals is therefore a permit for which these three time limits have expired without any challenge having been made, or for which the appeals lodged have been definitively dismissed. It is this end point that the well-advised buyer makes a condition of its commitment.

A distinction not to be confused: clearing appeals and clearing mortgages

In real estate law, the term "clearance" (purge) designates two unrelated realities. Clearing appeals concerns administrative planning litigation. Clearing mortgages concerns the real security registered on the property. Article 2462 of the French Civil Code recalls that the seller transfers to the buyer only the ownership and the rights that he himself had in the thing sold: he transfers them subject to the same mortgages with which the thing sold was encumbered. Mere registration of the transfer deed with the land registry (service de la publicité foncière) does not clear those mortgages. A land buyer must therefore deal with both clearances in parallel: the condition precedent of a final permit gives no protection against registrations encumbering the land, the release of which falls under a separate clause and the notary's work.

Why make a final permit a condition precedent

For an investor, land has value only through the buildability it actually allows. Acquiring a plot without any assurance that the scheme can proceed amounts to buying a bare risk. The building permit condition precedent turns this risk into a conditional commitment: the buyer is bound to acquire only if the permit is obtained, and then final.

Two levels of security must be distinguished, and this is where many structures fail. The condition of obtaining the permit protects against a refusal by the administration. The clearance condition protects against subsequent annulment by the judge and against withdrawal by the administration. A developer that is content with a condition of "obtaining" signs to acquire as soon as the order is issued, even though the permit remains fragile for several months. For a building permit for investors, the relevant clause is that of the final permit, expressly including clearance of the time limits for third-party appeals and for administrative withdrawal.

The choice of the contractual instrument governs the mechanics. The unilateral promise to sell gives the beneficiary buyer a purchase option, exercised if it so decides, in return for an immobilisation indemnity. The bilateral promise, or compromis (preliminary sale agreement), binds both parties, the condition precedent then operating as the event on which the final formation of the sale depends. For a property dealer or a developer who itself manages the permit application, the unilateral promise offers more flexibility: the buyer keeps control of the exercise of the option and is not definitively bound until the condition is fulfilled to its satisfaction.

Drafting the condition precedent of a final permit

The quality of the clause determines the solidity of the structure. A poorly drafted condition precedent exposes the buyer either to being bound to acquire a fragile permit, or to seeing the promise lapse before it has been able to secure its project. The particular case of the decision that defers the administration's response is analysed in our article on the stay of decision on a building permit (sursis à statuer).

Defining precisely the object of the expected permit

The clause must describe the permit hoped for with enough precision that the buyer is not forced to accept a substantially degraded permit. A permit subject to heavy conditions, reducing the buildable floor area or imposing costly easements, can ruin the economics of the transaction while formally constituting an "obtaining". It is therefore useful to stipulate minimum characteristics: a minimum floor area, a number of dwellings, a use, an absence of conditions making the transaction economically unviable. Below these thresholds, the buyer must be able to treat the condition as failed or to withdraw without penalty.

Expressly stipulating clearance of appeals and withdrawal

The drafting must cover the three events mentioned above. An effective wording provides that the condition is deemed fulfilled only after:

• expiry of the two-month period for third-party appeals to the courts, running from a proper and continuous display, recorded by a report of a commissaire de justice (bailiff), without any administrative or judicial appeal having been notified to the beneficiary;
• expiry of the three-month withdrawal period open to the administration under Article L. 424-5 of the French Town Planning Code, without withdrawal or stay of execution;
• production of a certificate of no appeal and no withdrawal issued by the town hall and, where applicable, of a certificate of no appeal from the registry of the administrative court.

The burden of proving clearance should contractually rest on the party that has an interest in demonstrating it. The report of display by a commissaire de justice, drawn up at the outset and then renewed during the display period, is the key document: without it, the buyer cannot establish that the appeal period actually ran and has expired.

Allocating responsibility for filing and following up the application

The promise must designate unambiguously who files the application, who bears its cost, and who manages the exchanges with the examining department. Most often, the developer-buyer files the permit in its own name, with the written authorisation of the owner to file on his land. The clause specifies the diligence obligations: filing of a complete file within a set period, mutual information, forwarding of the administration's letters, an obligation to bring about the condition in good faith. This last stipulation prevents manoeuvres: a buyer that, realising the market has turned, refrained from filing or deliberately filed an incomplete file, would see the condition deemed fulfilled on the basis of Article 1304-3 of the French Civil Code, under which a condition precedent is deemed fulfilled if the party with an interest in it has prevented its fulfilment.

Controlling time limits: the chronology of a secured land acquisition

Time management is the nerve of these structures. The timetable must be built from the actual duration of the stages, not from an optimistic estimate.

The ordinary-law examination period for a building permit is set by Articles R. 423-23 et seq. of the French Town Planning Code, in principle three months for a single-family house and its outbuildings, and three months for other constructions, extended in certain cases (establishment open to the public, historic monument perimeter, opinion of the Architecte des Bâtiments de France). A request for additional documents interrupts the period and starts a new one running. One must therefore reason in terms of a potentially extended examination period, not the theoretical one. Where the transaction involves the demolition of all or part of an existing building, see our analysis of the demolition permit and its impact on the timetable of a major restructuring.

Once the order has been obtained, the clearance sequence begins. Proper display triggers the two-month third-party appeal period. The three-month withdrawal period, for its part, runs from the decision. These periods partly overlap, so that the securing window following the obtaining of the permit extends in practice over about three to four months, subject to the regularity of the display.

Consequently, the overall period of the condition precedent must add together the time for filing, the extended examination time, and the clearance time. A period that is too short exposes the buyer to lapse of the promise even though the permit is in the process of being cleared. The clause must therefore provide for a realistic long-stop date, together with a right of extension. Two mechanisms combine usefully:

• an automatic extension in the event of a request for additional documents or an appeal by a third party, until the litigation is concluded;
• a contractual extension that the buyer can activate, where appropriate in return for a financial consideration to the seller to compensate for the prolonged immobilisation.

The link between the term of the promise and the completion date must be locked down: completion can be demanded only once the condition has been definitively fulfilled, clearance included.

Anticipating and neutralising the risk of abusive appeals

Third-party appeal is the main risk of a land acquisition intended for construction. The law has gradually regulated this right in order to stem dilatory or venal challenges, without depriving neighbours of their legitimate right of appeal.

Several procedural levers reduce the risk. Article R. 600-1 of the French Town Planning Code requires the author of an administrative or judicial appeal to notify it, within fifteen days, to the author of the decision and to its beneficiary, on pain of inadmissibility. This formality allows the developer to be informed without delay and defeats appeals that disregard it. Article L. 600-1-1 of the same code restricts the admissibility of appeals brought by associations, by requiring that the articles of association be filed before the display of the permit application. Article R. 600-4 regulates the crystallisation of grounds and the duration of the litigation.

Above all, Article L. 600-7 of the French Town Planning Code allows the beneficiary of the permit to ask for the author of an appeal to be ordered to pay damages where the appeal exceeds the defence of the appellant's legitimate interests and causes excessive harm to the holder of the authorisation. To this action may be added, on the basis of ordinary-law civil liability, the sanction of an appeal brought for a purpose unrelated to the protection of a planning interest, for example to sell a withdrawal.

On the contractual side, several stipulations make it possible to organise the sharing of this risk between seller and buyer. The promise may provide that, in the event of a third-party appeal, the clearance period is automatically suspended until a final decision, the buyer keeping the option of withdrawing or proceeding. It may give the buyer the right to settle with the appellant, while regulating the financial concessions it might make. It may finally organise the allocation of the cost of any withdrawal protocol, a sensitive subject that is better dealt with upstream than when timetable pressure is being applied.

Good practice consists of documenting the display irreproachably: initial record by a commissaire de justice, interim records, dated photographs, exact statement of the characteristics of the project and of the remedies and time limits for appeal. An irregular or incomplete display does not start the appeal period running, which leaves the permit open to challenge and destroys the security sought by the clearance condition.

Calibrating the immobilisation indemnity

In the unilateral promise to sell, the immobilisation indemnity remunerates the exclusivity granted by the promisor, who ties up its property for the duration of the option. Its characterisation and amount must be handled with care in a structure subject to obtaining a final permit.

The principle is as follows: if the beneficiary buyer gives up exercising the option for a reason personal to it, the indemnity remains with the seller. If, on the other hand, the promise lapses owing to failure of a condition precedent that does not depend on the buyer, the indemnity must be returned to it. The clause must therefore state clearly that refusal of the permit, its annulment or its withdrawal, provided they do not result from a culpable failure by the buyer, entail full return of the indemnity.

Holding the indemnity in escrow, generally in the hands of the notary, secures both parties: the funds are blocked, their fate depending on the fulfilment or failure of the condition. The drafting must specify the cases of release to the seller, the cases of return to the buyer, and the body empowered to decide in the event of disagreement.

For a property dealer, the link between the immobilisation indemnity and any paid extension deserves attention. If the promise provides that an extension of the clearance period gives rise to an additional payment to the seller, it must be specified whether or not that payment is credited against the price, and whether it remains with the seller if the condition later fails. In the absence of a stipulation, these sums become a source of dispute at completion.

Linking the promise and completion by authentic deed

The promise is only a stage. The sale is finally completed by completion by authentic deed, once the condition precedent has been fulfilled. The link between the two moments must be conceived as a continuous mechanism.

The completion clause sets the starting point of the period for signing the authentic deed, generally from the recorded fulfilment of the last condition precedent, that is, full clearance of the permit. It must provide for the means of recording this fulfilment: production of the certificates of no appeal and no withdrawal, delivery of the report of display, certificate from the registry. As long as these documents are not gathered, the buyer cannot be called upon to complete.

The question of a party's default at completion must be addressed. If the seller refuses to sign although all the conditions are met, the buyer may seek specific performance of the sale or damages. If the buyer refuses to sign without a reason relating to a failed condition, the immobilisation indemnity or the penalty clause operates in favour of the seller. A specific performance clause, making it possible to have the sale recorded by the court on the basis of the promise, strengthens the position of the developer-buyer that has incurred design and permit filing costs.

Finally, completion is the moment when the outstanding questions are dealt with: release of mortgage registrations, clearance of pre-emption rights, lease or occupation situation, state of easements. The final permit condition does not dispense with any of these checks, which the notary carries out in parallel. A perfectly cleared permit on land encumbered by an unreleased mortgage or subject to an uncleared pre-emption right does not allow a secure acquisition.

Conclusion: the clearance condition is useful only if drafted to withstand challenge

Making a land acquisition subject to obtaining a permit "cleared of appeals" has become a reflex. But the reflex is worth only the rigour of its implementation. A condition precedent that is limited to "obtaining" the permit, without expressly referring to expiry of the third-party appeal period and of the three-month withdrawal period, leaves the buyer exposed to the very risk it thought it had ruled out. The solid structure rests on three inseparable pillars: a clearance clause expressly referring to the three periods and backed by a report of display by a commissaire de justice; a realistic, extendable timetable, based on the actual duration of examination and clearance; and an escrowed immobilisation indemnity whose fate is locked down according to whether or not the failure of the condition is attributable to the buyer.

The position that should guide developers, investors and property dealers is clear: never accept a promise whose condition lapses before full clearance, and never complete before having in hand the certificates of no appeal and no withdrawal. Before any signature, have the condition precedent clause and the clearance timetable reviewed by a real estate lawyer, checking that the burden of proving display and clearance is properly allocated and that return of the indemnity is expressly provided for in the event of non-culpable failure.

Frequently asked questions

What is the difference between a permit "obtained" and a permit "cleared of appeals"?

An obtained permit is a permit issued by the administration, but still open to challenge. A permit cleared of appeals is a permit for which the two-month time limit for third-party appeals to the courts, running from proper display within the meaning of Article R. 600-2 of the French Town Planning Code, and the three-month administrative withdrawal period of Article L. 424-5, have expired without challenge. Only a cleared permit is truly final. For an investor, the relevant condition precedent refers to the cleared permit, not the mere obtained permit.

How much time should be allowed for the condition precedent of a final permit?

The period must add together three sequences: filing and examination, in principle three months but potentially extended by a request for additional documents or an opinion of the Architecte des Bâtiments de France; then clearance of third-party appeals, two months of continuous display; then clearance of the withdrawal period, three months. In practice, the clearance phase following the obtaining of the permit spreads over three to four months. An overall period of several months, together with a right of extension, is essential to avoid the promise lapsing before the condition is fulfilled.

Is display of the permit compulsory in order to clear appeals?

Yes. Under Article R. 600-2 of the French Town Planning Code, the third-party appeal period runs only from the first day of a continuous two-month period of display on the site. Display that is absent, interrupted or incomplete does not start the period running, which leaves the permit open to challenge without any time limit. Proof must be established by a report of a commissaire de justice, drawn up at the outset and then renewed during the display period.

What happens to the immobilisation indemnity if the permit is refused or annulled?

If the promise lapses owing to failure of the permit condition precedent, without fault on the buyer's part, the immobilisation indemnity is returned to it in full. It is retained by the seller only if the buyer gives up exercising the option for a personal reason, when the condition had been fulfilled. Holding the indemnity in escrow in the hands of the notary, with the cases of release and return precisely stated, secures this mechanism.

How can one protect against an abusive appeal against the permit?

Several levers combine. Article R. 600-1 of the French Town Planning Code requires the appeal to be notified to the beneficiary within fifteen days, on pain of inadmissibility. Article L. 600-7 allows damages to be sought where the appeal exceeds the defence of the appellant's legitimate interests and causes excessive harm. On the contractual side, the promise may suspend the clearance period for the duration of the litigation and organise the buyer's right to settle with the appellant.

Is a unilateral promise or a compromis needed for a land acquisition subject to a permit condition?

The unilateral promise to sell gives the buyer a purchase option that it exercises at its own discretion, in return for an immobilisation indemnity, which offers more flexibility to the developer that manages the permit application. The compromis, or bilateral promise, binds both parties from signature, the condition precedent conditioning the final formation of the sale. For a property dealer or a developer, the unilateral promise is often preferred because it preserves control of the exercise of the option until the permit is cleared.

Does the cleared permit condition dispense with the other checks?

No. Clearing appeals concerns only administrative planning litigation. It clears neither the mortgages registered on the land, which survive the sale under Article 2462 of the French Civil Code and require a release, nor pre-emption rights, nor easements, nor the occupation status of the property. These checks are a separate task carried out by the notary, and must be completed before completion by authentic deed.