French Leaseback Annulment on grounds of fraud

Sale of a unit in a holiday residence – Action for annulment on grounds of fraud – Dismissal of the appeal refused on the grounds of the seller’s financial inability

Poitiers Court of Appeal, 1st Civil Chamber, 16 June 2026, No. 25/01302

The facts

By a notarial deed dated 9 November 2022, a couple purchased from the company Alan Alpes Azur a flat situated in a holiday residence governed by co-ownership regulations for a price of €137,000. The entire residence was operated by a company holding a commercial lease.

At the time of the sale, the seller had declared in the notarised deed that there was no dispute with the operator, that he was unaware of any financial difficulties on the operator’s part, and that no request to renegotiate the terms of the lease had been made to him.

However, following their purchase, the new owners discovered that legal proceedings had been pending since 21 October 2020 between the seller and the operator of the holiday residence, concerning the setting of the rent for the renewed commercial lease. These proceedings had therefore been in place well before the sale and had not been disclosed to the purchasers. Taking the view that this concealment had vitiated their consent, they brought proceedings against the seller before the Sables-d’Olonne Civil Court seeking a declaration that the sale was void on the grounds of fraud.

The sale declared void at first instance

By judgment of 31 March 2025, delivered in the absence of legal representation on the part of the selling company, the Civil Court upheld the purchasers’ claims.

It declared the sale void on the grounds of fraud and ordered Alan Alpes Azur to refund the sale price of €137,000.

The company lodged an appeal against this decision.

The purchasers are seeking to have the appeal struck out

In parallel with the appeal proceedings, the purchasers submitted a request to the pre-trial judge to have the appeal struck out.

They relied on Article 524 of the Code of Civil Procedure, according to which an appeal may be struck out where the appellant fails to demonstrate that they have complied with the judgment subject to provisional enforcement.

In their view, Alan Alpes Azur was perfectly capable of repaying the €137,000, given that it still held the sale price in its accounts. They also pointed out that the First President of the Court of Appeal had already refused to suspend the provisional enforcement, finding that the company had not demonstrated the existence of manifestly excessive consequences. They therefore requested that the appeal be struck out until such time as the judgment had been enforced.

The seller claims financial inability

Alan Alpes Azur opposed this request.

It maintained that it did not have the necessary cash flow to repay the sale price immediately and argued that enforcement of the judgment would result in manifestly excessive consequences for it.

It explained that this situation had, moreover, prompted its application to the First President of the Court of Appeal for a stay of provisional enforcement.

A reminder of the powers of the pre-trial judge

The pre-trial judge first of all referred to the provisions of Article 524 of the Code of Civil Procedure.

Where a judgment is subject to provisional enforcement, the pre-trial judge may order the appeal to be struck out if the appellant has not complied with the decision or has not made a deposit, unless enforcement is likely to result in manifestly excessive consequences or if the appellant is unable to comply with the decision.

The court also emphasises that such striking out is merely a discretionary power and not an obligation, even where the decision has in fact not been complied with.

A clear inability to comply

Having examined the accounting documents submitted, the pre-trial judge considers that Alan Alpes Azur does not have the necessary liquid assets to repay the €137,000 immediately.

He notes that the company has a share capital of only €1,000, that virtually all of its assets are tied up (€118,555 out of total assets of €122,754) and that it is operating at a loss.

In these circumstances, immediate payment of the sum awarded could only be made with external assistance or through the disposal of assets. The company is therefore in a situation where it is genuinely financially unable to comply with the judgment.

Rejection of the application for striking out

In view of this financial situation, the pre-trial judge refuses to strike out the appeal.

He considers that the conditions set out in Article 524 of the Code of Civil Procedure do not justify such a measure where the appellant provides concrete evidence of its inability to comply with the decision.

No compensation is awarded in respect of the non-recoverable costs of the interlocutory proceedings; each party shall bear its own costs.

Scope of the decision

This order does not rule on the merits of the case, that is to say, the validity of the sale or the existence of the fraud alleged against the seller. These issues will be examined at a later date by the Court of Appeal.

Its significance lies in the clarification of the conditions for the application of Article 524 of the Code of Civil Procedure. The striking out of an appeal is never automatic in the event of failure to comply with the judgment. The pre-trial judge has a discretionary power and may refuse to impose this sanction where the appellant establishes that it is materially impossible for them to comply with the decision. In practice, the submission of accounting evidence demonstrating a lack of sufficient cash flow, assets that are predominantly fixed assets, and a loss-making position may be sufficient to prevent the appeal from being struck out, even where the order relates to the restitution of the sale price of a holiday home.