Real Estate: How Political Outcomes Could Affect Property Sales

A demand that remains rare during election period

Can one back out of a real estate sale in case of a political party's victory? Though surprising, the demand is not exceptional according to Edouard, a Parisian real estate agent: « We see this type of requests resurfacing during elections, but honestly, it remains very rare. » This time, it's the left-wing's program raising fears among real estate investors. « Some of our clients explain they will pass anti-landlord laws. They don't want to take a risk by signing up for a 20-year mortgage."

Martin Bretagne, a notary near Lyon, was recently asked to insert a clause allowing the cancellation of the sale if the New Popular Front wins the legislative elections. In 1981, one of his colleagues had received a similar request before the election of François Mitterrand, he explains. « He had scratched his head and even had to consult the CRIDON to verify its legality. » This Research, Information, and Documentation Centre for Notaries is a structure providing notaries with legal advice, analysis, and information to help them in their professional practice.

Can we include any type of clause in a sales agreement

Suspensive conditions are clauses inserted into purchase agreements, stating that their fulfillment depends on a future event. If this condition is not met, the sale can be canceled without penalty. The most common clause is the securing of a loan: in the event the bank refuses, the buyer can back out without losing their security deposit. Other examples include obtaining a building permit or the absence of pollution.

For a suspensive condition to be legal, it must not be potestative, meaning it must not depend solely on the buyer or seller's will. Otherwise, it is deemed null according to the article 1304-2 of the Civil Code. The suspensive clause of obtaining a loan, commonly used, meets this requirement because it depends on a third party's decision (the bank).

In the case of François Mitterrand's election, CRIDON ruled that even if the contracting parties were voters, their votes were sufficiently diluted for the event not to depend on them. « A response to be nuanced according to the cases, as always in law: the answer would probably be different if we were talking about the vote of a small board of directors of a four-person association, of which one of the two contractors is a member », explains Me Bretagne on her LinkedIn account.

Therefore, the success or failure of a political party is an external event to the contracting parties, which theoretically allows such a clause to be valid. In fact, the most important thing is that both parties accept it. It's then up to the notary's expertise to draft a robust clause, taking into account the various scenarios that could arise if the Nouveau Front Populaire obtains an absolute or relative majority.