VEFA and the building permit: what the investor bears when the permit is amended or annulled after signature

The buyer in a VEFA (sale off plan, vente en l'état futur d'achèvement) signs on plan, but in reality is buying a planning authorisation. Between the reservation and delivery, the building permit may be amended by the seller, challenged by a third party, suspended, or even annulled. The investor then discovers that the contract exposes the investor to a shift in the timetable that the investor did not cause, to late-delivery penalties that are often derisory, and to a completion guarantee that does not cover what the investor thought it did. This analysis examines the legal and economic effects of an amending permit or of a court challenge on a sale off plan, and then the contractual and procedural levers available to the buyer-investor.

The building permit, the blind spot of the VEFA contract

A sale off plan is defined in Article 1601-3 of the French Civil Code and, for residential or mixed-use buildings, is governed by the protected sector under Articles L. 261-10 et seq. of the French Construction and Housing Code (CCH). Article L. 261-11 of the CCH requires a minimum content for the contract: description of the building or part of the building sold, price and revision arrangements, delivery period, completion or reimbursement guarantee. The nature of the property is specified by the descriptive notice provided for in Articles R. 261-1 et seq. of the CCH.

This formalism is centred on the property, not on the title that authorises its construction. The contract states the permit reference, sometimes its display date, and rarely the real state of any litigation. Nothing requires the seller, in the protected sector, to guarantee that the permit is final on the day the notarial deed is signed. This is precisely the gap that investors underestimate in the relationship between VEFA and the building permit: sale law protects the nature of the property and the financing, planning law governs feasibility, and the two regimes communicate only through the provisions that the parties have taken the trouble to write down.

A permit free of any challenge: a situation to verify, not to presume

A permit is free of challenge once three periods have elapsed. First, the period for third-party challenge: two months from the first day of a continuous two-month period of display on the site, in accordance with Article R. 600-2 of the French Town Planning Code. Second, the period for administrative withdrawal: Article L. 424-5 of the same Code allows the competent authority to withdraw an unlawful permit within three months of its issue. Finally, the period for the prefect's challenge in the exercise of legality review.

Display is the weak point. It is the responsibility of the permit holder and must be continuous, legible and in accordance with the Order of 21 July 2023 on the content of the display board. Irregular display does not start the period running: a permit that the developer regards as free of challenge may remain open to attack several months after the works start. The only serious evidence is a report by a bailiff (huissier de justice) at the start, middle and end of the display period. A buyer financing an asset yet to be built has a direct interest in requiring these reports to be provided, as with the certificate of the financial completion guarantee.

Two safeguards limit this risk over time. Article R. 600-3 of the Town Planning Code bars any action for annulment of a permit six months after completion of the construction, evidenced by the declaration certifying completion and conformity of the works (DAACT) under Article R. 462-1. Article L. 600-1-2 restricts the standing of third parties to those whose conditions of occupation, use or enjoyment of the property are directly affected by the project.

The amending permit: a change to the project, not an administrative adjustment

What the administrative judge accepts

The amending permit is not defined by any single text. It has long been accepted by administrative case law, provided that the changes envisaged do not upset the overall economy of the authorised project. Beyond that, a new permit is required. The amending permit technique has been considerably widened by the case law on regularisation: Article L. 600-5 of the Town Planning Code allows the judge to order a partial annulment limited to the defect affecting part of the project, and Article L. 600-5-1 allows the judge to stay the proceedings while giving the permit holder a period to produce a regularisation measure. Article L. 600-5-2 then concentrates before the same judge any challenge to the regularisation permit. The choice between an amending permit, an amending decision and a new permit is dealt with separately in our article on regularisation of the permit during proceedings.

From the developer's point of view, the amending permit in a VEFA is therefore a tool for securing the project. From the buyer's point of view, it is a triggering event for three concrete effects: a shift in the programme, a possible change to the nature of the lot sold, and a new display period opening a new period for challenge against the amended provisions alone.

What the buyer can assert against the seller

The answer depends on the stage reached. At the stage of the preliminary reservation contract under Article L. 261-15 of the CCH, Article R. 261-31 of the CCH lists the cases in which the security deposit is returned to the reserving party without deduction or indemnity. Three of them can be invoked directly in the face of an amending permit: the sale price exceeds the forecast price by more than five per cent, one of the fittings provided for in the preliminary contract is not to be built, or the building or part of the building shows a reduction in value of more than ten per cent. An amendment that removes a parking space, reduces an area, turns a balcony into a technical loggia or moves the access to a commercial lot may, with expert support, amount to a reduction in value crossing this threshold.

After the notarial deed is signed, the ground changes. The buyer is the owner of the land and of the constructions as they are carried out. The buyer no longer has a statutory right of withdrawal, but has the general regime for contractual non-performance: specific performance under Article 1221 of the Civil Code where it remains possible, price reduction under Article 1223, termination by court or by notice under Articles 1224 and 1226, damages under Article 1231-1. It must still be shown that the change amounts to non-performance, which the drafting of the contract often neutralises.

Sale deeds do in fact contain clauses authorising the seller to change the characteristics of the property for technical, administrative or architectural reasons. These clauses are lawful in principle but circumscribed. The Unfair Terms Commission has recommended the elimination of provisions allowing the seller unilaterally to change the essential characteristics of the property sold, and the judge reviews, on the basis of Article L. 212-1 of the Consumer Code where the buyer is a non-professional, the significant imbalance created by a change clause with no counterpart or cap. The trade-off is therefore as follows: a bounded change clause (minor changes, affecting neither the area beyond a defined percentage, nor the number of rooms, nor the specification listed in the annex) is negotiable and acceptable; an open clause, covering any change imposed by the authorities or the architect, transfers the whole of the administrative risk to the buyer.

Third-party challenge: effects on the timetable, penalties and financing

Suspension of the delivery period by legitimate causes

VEFA deeds systematically stipulate a list of legitimate causes for suspending the delivery period: bad weather, strikes, contractor failure, administrative injunction, and almost always a court challenge directed against the permit. These clauses are not unlawful, but their operation is reviewed. The courts require that the causes be precisely defined, that the seller establish the reality of the event relied on and its actual effect on the progress of the works, and that the length of the suspension claimed be proportionate to that effect. A challenge to a building permit in a VEFA does not suspend the works by operation of law: unless a suspension is ordered in summary proceedings by the administrative judge, the developer may build at its own risk. Relying on the challenge as a legitimate cause while having continued the works is a contradiction that can be exploited.

The check also covers the counting mechanism. Many contracts provide that each day of bad weather or suspension carries a shift of more than one day, or that the period restarts on a resumption date tied to a project management schedule. These conversion clauses turn a challenge of a few months into a far longer postponement of delivery. They are negotiated before signature, rarely after.

Late-delivery penalties: a penalty clause, and therefore an amount open to challenge

The protected sector does not impose a statutory late-delivery penalty. Compensation for late delivery rests on the contract clause, usually expressed as a fraction of the sale price per day or per month of delay, often capped. This stipulation is a penalty clause within the meaning of Article 1231-5 of the Civil Code. The judge may of the judge's own motion reduce a manifestly excessive penalty, but may also increase it where it is manifestly derisory. It is this second aspect that concerns the investor: a lump-sum indemnity out of all proportion to the loss of rents from an investment building or to the carrying cost of financing drawn down is serious ground for argument, provided that the real loss is documented.

Three drafting points make the difference. The non-exclusive nature of the penalty, which allows compensation to be claimed for loss in excess of the lump sum. The starting point, which must be the contractual delivery date and not a reference date pushed back by the operation of legitimate causes. The cap, which should be removed or raised where the delay exceeds a specified length.

Lost rents, carrying cost and tax

For an investor, late delivery produces a cascade of loss: rents not received, extended interim interest on bank financing, a shift in the letting timetable, sometimes the breach of a commitment given to a tenant. To this is added a tax risk specific to acquisitions made under an incentive regime. The rental investment scheme in Article 199 novovicies of the French General Tax Code, closed for acquisitions after 31 December 2024 but still running for operations already under way, makes the tax reduction in a VEFA conditional on completion of the dwelling within thirty months of the date of the declaration of commencement of works. A court challenge that freezes the site for several quarters may cost the tax advantage, a loss distinct from lost rents and recoverable as such where the cause of the delay is attributable to the seller.

Annulment of the permit after signature: from legal risk to asset risk

Annulment for abuse of power has retroactive effect: the permit is deemed never to have existed. The consequences depend on how far the operation has advanced.

Works not started or under way

The developer must stop the works, failing which it continues in breach of the law. Two routes open up: applying for a regularisation permit on the basis of the provisions permitting regularisation during proceedings, or filing a new compliant permit. In the meantime, the buyer suffers a halt to the works of indeterminate length. If completion becomes impossible, termination of the sale contract may be ordered, with return of the sums paid. It is then the reimbursement guarantee, a variant of the financial guarantee provided for in Article L. 261-10-1 of the CCH, that takes over, where the seller has opted for it rather than the completion guarantee.

Completed construction

Annulment of the permit for a completed construction does not lead to automatic demolition. Article L. 480-13 of the Town Planning Code, as worded following Law No. 2018-1021 of 23 November 2018, known as the ELAN Act, makes an action for demolition subject to two cumulative conditions: prior annulment of the permit by the administrative judge, and location of the construction in one of the zones exhaustively listed in the text (classified sites, surroundings of historic monuments, remarkable coastal areas, natural risk zones in particular). The action must be brought within two years of the annulment decision becoming final.

Outside these zones, the risk is therefore not demolition but depreciation. The building remains standing without a regular title. This compromises the issue of the certificate of non-contestation of conformity, complicates obtaining future authorisations (extension, change of use, division), may feed a challenge by the buyer on a resale and weighs on the bank valuation of the asset. For an investor reasoning in terms of the asset's viability over time, this is a market risk as much as a legal risk.

The liabilities that can be invoked

The buyer has a contractual action against the seller, who undertook to deliver a compliant and lawfully built building, and who knew of the existence of the challenge. Concealing ongoing litigation at the time of signature opens, depending on the circumstances, the ground of breach of the pre-contractual duty of information in Article 1112-1 of the Civil Code, or even fraud (dol) under Article 1137. A liability action may also be brought against the commune where the unlawfulness of the permit stems from a fault of the authority that issued it, before the administrative judge. Finally, Article L. 600-7 of the Town Planning Code allows the permit holder to obtain damages from the claimant where the challenge was brought in conditions exceeding the defence of the claimant's legitimate interests and causes excessive loss. This action belongs to the permit holder, not to the buyer, which suggests stipulating contractually that a fraction of any indemnity obtained be paid over.

The financial completion guarantee: what it really covers

A strictly financial scope

Since Ordinance No. 2013-890 of 3 October 2013, applicable to operations whose permit was filed from 1 January 2015, only the extrinsic guarantee remains in the protected sector. The financial completion guarantee takes the form of a suretyship agreement concluded with a credit institution, a finance company or an insurer, under the conditions of Articles R. 261-21 et seq. of the CCH.

Its call is governed by Article R. 261-24 of the CCH: the seller's default must be established, either by the opening of safeguard, rescue or compulsory liquidation proceedings, or by a persistent failure to complete despite a formal notice that has remained unsuccessful. The guarantor then finances completion. It is released from its commitment on production of a certificate of completion issued by a professional or an independent inspection body. On the distinction between the completion guarantee and the reimbursement guarantee and on calling it where the developer defaults, see our analysis of the financial completion guarantee in a VEFA.

What it does not cover

Three exclusions structure the investor's exposure. The guarantee covers neither late delivery nor contractual penalties: the guarantor owes completion, not the timetable. It covers neither defective workmanship nor non-conformities, which fall under the warranties of completion in the first year (parfait achèvement), the two-year and the ten-year warranties of Articles 1792 et seq. of the Civil Code, the construction damage insurance (dommages-ouvrage) of Article L. 242-1 of the Insurance Code, and the regime for apparent defects in Articles 1642-1 and 1648, paragraph 2, of the Civil Code. Nor does it cover the depreciation of the asset resulting from the irregularity of its planning title.

The notion of completion is also narrower than the one the investor has in mind. Article R. 261-1 of the CCH treats a building as completed when the works have been carried out and the fittings essential for use in accordance with its purpose installed, non-substantial non-conformities and defective workmanship not preventing that characterisation. A building can therefore be completed within the meaning of the text, release the guarantor, and remain commercially unusable as it stands.

Prudence therefore requires three things to be checked before signature: the identity and standing of the guarantor, the amount guaranteed in relation to the residual cost of the operation, and how the guarantee fits with the staging of calls for funds under Article R. 261-14 of the CCH (thirty-five per cent on completion of the foundations, seventy per cent when the building is watertight, ninety-five per cent on completion of the building, the balance of five per cent being capable of being held in escrow in the event of reservations).

Contractual levers to negotiate before signature

Most of the protection of the buyer-investor is decided before the notarial deed, in a balance of power in which the reservation still commits the parties only weakly.

• Condition precedent that the permit be free of challenge: make completion by notarial deed subject to proof that the permit is final, supported by display reports and a certificate of no challenge, with a long-stop date.
• Continuing duty of information: stipulate that the seller informs the buyer, within a set period, of any administrative or court challenge, of any filing of an amending permit and of any regularisation measure ordered by the judge.
• Limits on changes: cap the permissible variations in area, specification and orientation, and provide for a right of termination by operation of law beyond the thresholds.
• Exhaustive legitimate causes: exclude the court challenge from the list or limit its suspensive effect to the length of a suspension actually ordered by the administrative judge.
• Late-delivery penalties that are non-exclusive and not capped beyond a threshold, with a right of termination after a specified length of delay.
• Provision of the certificate of financial completion guarantee and of the information needed to assess its amount.

Procedural chronology: which step, at what time

Discipline over time limits determines the outcome. During the administrative proceedings, the buyer has an interest in intervening voluntarily in support of the challenged permit: the buyer defends the value of its asset, gains access to the file, and follows in real time the crystallisation of grounds provided for by Article R. 600-5 of the Town Planning Code, which bars the raising of new grounds two months after communication of the first statement of defence. Article R. 600-6 requires the judge to rule within ten months on challenges directed against a permit to build a building comprising more than two dwellings, which partly bounds the uncertainty.

In the face of delay, the useful sequence is well known. Formal notice to the seller to deliver, by registered letter, which starts the penalties running and is the prerequisite under Article R. 261-24 of the CCH for calling the guarantee. A report on the state of progress, then summary proceedings for an expert appointment (référé-expertise) under Article 145 of the Code of Civil Procedure to fix on an adversarial basis the state of the works, the deviations from the descriptive notice and the real effect of the challenge on the site. Summary proceedings for an interim payment (référé-provision) under Article 835, paragraph 2, of the Code of Civil Procedure where the claim for penalties is not seriously contestable. Finally, termination by notice under Article 1226 of the Civil Code, to be used with caution since it is exercised at the creditor's risk, or an action on the merits for termination and damages. The legitimate ground required and the framing of the expert's mission are set out in our article on summary proceedings for an expert appointment before a property or construction dispute.

Conclusion

A VEFA transfers to the buyer an administrative risk that the buyer does not control and that the contract makes the buyer bear almost entirely. The amending permit shifts the nature of the property, third-party challenge shifts the timetable, and the financial completion guarantee compensates for neither: it finances a construction, not a return. The most costly analytical mistake is to consider that the existence of an extrinsic guarantee is enough to secure the operation.

The position we hold is simple: on an asset yet to be built, auditing the permit is auditing the property. Before any signature, have an independent adviser check the state of any challenges, the regularity and continuity of the display, the exact date on which the permit became free of challenge, the extent of the change and suspension clauses, and the amount and identity of the guarantor. After signature, do not wait for delivery to act: formal notice and summary proceedings for an expert appointment are the two steps on which most of the later compensation depends.

Frequently asked questions

Does a challenge to the building permit automatically suspend the works in a VEFA? No. Filing an action for annulment before the administrative court has no suspensive effect. The developer may continue the works at its own risk, unless the summary proceedings judge orders suspension of the permit. In practice, the blockage more often comes from bank financing, lenders refusing to release funds on a contested permit. The buyer must therefore check whether the legitimate-cause clause in the contract refers to the challenge itself or only to a suspension ordered by a court.

Does an amending permit allow the buyer to withdraw from the purchase? It all depends on the stage. At the preliminary contract stage, Article R. 261-31 of the Construction and Housing Code requires the return of the security deposit in particular where a fitting provided for is not built or where the property suffers a reduction in value of more than ten per cent. After the notarial deed is signed, there is no statutory right of withdrawal: the buyer must demonstrate contractual non-performance and seek specific performance, price reduction or termination, on the basis of Articles 1221, 1223 and 1224 of the Civil Code.

What exactly does the financial completion guarantee cover? It covers the financing of completion of the building if the seller defaults, under the conditions of Article R. 261-24 of the CCH. It covers neither late delivery, nor contractual penalties, nor defective workmanship, nor non-conformities, nor depreciation linked to the irregularity of the permit. The guarantor is released on production of a certificate of completion, completion being understood in the restrictive sense of Article R. 261-1 of the CCH.

Can the building be demolished if the permit is annulled after delivery? The risk exists but has become residual. Article L. 480-13 of the Town Planning Code, as worded following the ELAN Act of 23 November 2018, reserves the action for demolition for constructions located in exhaustively listed zones (classified sites, surroundings of historic monuments, remarkable coastal areas, risk zones in particular) and requires prior annulment of the permit. The action must be brought within two years of the annulment becoming final. Outside these zones, the loss is essentially one of asset value: difficulty with conformity, blocking of future authorisations, a discount on resale.

Until when can a third party challenge the permit of a building bought off plan? The ordinary-law period is two months from the first day of a continuous two-month period of regular display on the site, under Article R. 600-2 of the Town Planning Code. Article R. 600-3 then bars any action six months after completion of the construction, evidenced by the declaration certifying completion and conformity of the works. Irregular or discontinuous display does not start these periods running, hence the value of successive bailiff reports.

Can the late-delivery penalties provided for in the contract be increased? Yes. The late-delivery penalty clause is a penalty clause under Article 1231-5 of the Civil Code, which the judge may reduce if it is manifestly excessive, but also increase if it is manifestly derisory. For an investor, the argument requires the real loss to be precisely documented: lost rents evidenced by a management mandate or an agreement to lease, interim interest borne, marketing costs. A clause stipulated as not excluding compensation for the excess loss makes this demonstration considerably easier.

Does the buyer have an interest in intervening in the administrative litigation over the permit? Yes, where the economic stakes justify it. Voluntary intervention in support of the permit holder gives access to the pleadings, allows the buyer to follow the timetable for crystallisation of grounds under Article R. 600-5 of the Town Planning Code and not to depend solely on the diligence of the developer, whose interests may diverge from those of the buyer, in particular where it contemplates a withdrawal negotiated against compensation of the claimant.