In a landmark decision, France’s highest court, the Cour de Cassation, has ruled that notaries must proactively inform clients of potential tax liabilities before they enter into binding property agreements.
The ruling, handed down in May, overturned a lower court’s decision and underscores the notary’s duty to provide complete and detailed financial information, including tax implications, at the earliest stages of a transaction.
The dispute dates back to 2014, when a couple signed a contract giving a buyer an option to buy undeveloped land for €950,000, with the notary overseeing the transaction.
The buyer exercised the purchase option in January 2018, and the sale was completed in February 2018, for €1,025,000.
After the sale, the sellers discovered they were liable for additional taxes, which they claimed they could have negotiated with the buyer had they been informed earlier. They argued that the notary failed to disclose these taxes before the preliminary agreement was signed.
In July 2018, the sellers filed a civil liability lawsuit against the notary, seeking compensation for the unexpected financial burden.
The Toulouse Court of Appeal sided with the notary. The court acknowledged that the preliminary agreements mentioned the “possibility” of additional taxes and that the final deed referenced a 2008 municipal resolution making the land subject to such taxes. However, the court concluded that the notary was not obligated to provide a precise estimate of the taxes before the sale was finalized.
The Cour de Cassation (Supreme Court) sharply criticized this reasoning. In its decision, the the court emphasized that notaries have a legal duty to “inform and advise parties in a complete and detailed manner about the scope and effects of the act, including its tax implications.”
The Supreme Court found that the additional taxes were both foreseeable and calculable as early as the 2014 preliminary agreement, given the 2008 municipal resolution. The notary’s failure to provide this information before the sellers were contractually bound constituted a breach of duty.
“It is the notary’s responsibility to spontaneously inform and advise clients about the fiscal consequences of their transactions before any final commitment,” the court stated. The Toulouse court’s reliance on the final deed—signed when the sellers were already committed—was deemed insufficient and a misapplication of the law.
This decision reinforces the protective role of notaries in real estate transactions. “Buyers and sellers rely on notaries to guide them through complex legal and financial matters,” said a Paris based real estate lawyer. “This ruling ensures that notaries cannot hide behind vague disclaimers; they must actively inform clients of all potential costs upfront.”
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