Property dealer — French Tax Code art. 1115

Extension of the commitment to resell:
a narrow option

Unlike the commitment to build (French Tax Code art. 1594-0 G, A), article 1115 of the French Tax Code provides no extension mechanism as of right for the property dealer. Outside ZACs, the tax authorities have no power to extend this period. Three ways out exist where the resale cannot take place within the statutory period of 5 years (or 2 years for unit-by-unit resales): the substitution, before the deadline, of a commitment to build for the commitment to resell (French Tax Code, art. 1594-0 G, A, II), which counts as performance of the latter; the renewable annual extension reserved for properties located in a concerted development zone (ZAC) and acquired by the developer (French Tax Code, art. 1594-0 G, A, IV bis); and, by way of exception, force majeure, which the administrative doctrine itself accepts (BOI-ENR-DMTOI-10-50, § 70).

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— In brief
Applicable provision
French Tax Code art. 1115: 5-year commitment (2 years for unit-by-unit resales)
Extension as of right
None, except for properties in a ZAC acquired by the developer (French Tax Code art. 1594-0 G, A, IV bis)
ZAC case
Annual extension granted by the DDFIP (French Tax Code, art. 1594-0 G, A, IV bis; procedure: Annex III, art. 266 bis)
Third avenue
Substitution of a commitment to build before the deadline (French Tax Code, art. 1594-0 G, A, II)
Force majeure
Accepted by the administrative doctrine (BOI-ENR-DMTOI-10-50, § 70): externality, unforeseeability, irresistibility
Forfeiture sanction
Duties plus interest at 2.40% per year (French Tax Code art. 1727 via art. 1840 G ter, I)
— 01

A legislative asymmetry: reselling vs building

The legislation creates an asymmetry between the two commitments under article 1115 and article 1594-0 G, A. The commitment to build benefits from a renewable annual extension open to all (French Tax Code, art. 1594-0 G, A, IV), upon reasoned request to the DDFIP, and the absence of a reasoned refusal within two months counts as acceptance. Article 1115 itself contains no extension rule: the legislature has provided for an extension of the resale period only in IV bis of A of article 1594-0 G of the French Tax Code, solely for properties located in a concerted development zone and acquired by the person responsible for developing or equipping it, with no tacit acceptance.

In practice, where the property dealer is unable to resell within the allotted period, three ways out exist: substituting, before the deadline, a commitment to build for the commitment to resell where the transaction involves works resulting in a new building (French Tax Code, art. 1594-0 G, A, II), which counts as performance of the commitment to resell; benefiting from the renewable annual extension reserved for properties located in a ZAC (French Tax Code, art. 1594-0 G, A, IV bis, under the procedure laid down in article 266 bis of Annex III to the French Tax Code); or, by way of exception, invoking force majeure, which the administrative doctrine itself accepts (BOI-ENR-DMTOI-10-50, § 70). Outside these cases, there is no statutory basis on which the tax authorities may grant additional time to an ordinary property dealer.

This asymmetry requires operational control of the timetable from the moment of acquisition. The firm secures transactions upstream (structuring, timetable, documentation of contingencies) to avoid having to rely on these narrow avenues downstream.

— 02

The three ways out when the deadline cannot be met

Only the substitution of commitments applies as of right where its conditions are met; the other two remain exceptions. Their proper combination makes it possible to defend a transaction that could not be completed within the initial period.

1. Force majeure (doctrine and case law)

Force majeure is accepted by the administrative doctrine (BOI-ENR-DMTOI-10-50, § 70), which may be relied upon under article L. 80 A of the Tax Procedure Code. Three cumulative conditions: externality (a cause external to the property dealer and its organisation); unforeseeability (at the time the commitment was given); irresistibility (an insurmountable impossibility of selling throughout the entire period). A fall in the market, the absence of a buyer at the hoped-for price or the prospect of a loss do not amount to irresistibility: they make the sale less advantageous, not impossible (Cass. com., 14 sept. 2010, n° 09-15.495; CA Versailles, 24 janv. 2002, n° 1999-2214). The real-estate professional is moreover presumed to have been able to check the planning constraints, which rules out unforeseeability.

2. ZAC extension (French Tax Code, art. 1594-0 G, A, IV bis)

For properties located in a concerted development zone and acquired by the person responsible for developing or equipping the zone, a renewable annual extension may be granted by the DDFIP or the DRFIP (French Tax Code, art. 1594-0 G, A, IV bis; procedure laid down in article 266 bis of Annex III to the French Tax Code). The reasoned request is sent by registered letter with acknowledgement of receipt no later than one month after the expiry of the period; it specifies the properties concerned and the amount of duties at stake. Unlike the commitment to build, the silence of the tax authorities does not count as acceptance. Accepted grounds: marketing delays caused by administrative or technical difficulties, as well as the time needed to acquire all the land in the zone (BOI-ENR-DMTOI-10-50, § 60).

3. Substitution of a commitment to build

Where the transaction involves works resulting in a new building, the purchaser may, before the deadline of its commitment to resell, substitute a commitment to build for it (French Tax Code, art. 1594-0 G, A, II; Annex III to the French Tax Code, art. 266 bis, V; BOI-ENR-DMTOI-10-50, § 100). This substitution counts as performance of the commitment to resell; the new commitment, for four years from the date it is given, then benefits from the renewable annual extension under IV, with tacit acceptance after two months. Once the resale period has expired, substitution is no longer possible (Cass. com., 13 déc. 2011, n° 11-11.951).

— 03

Our approach at the firm

When a client is approaching the deadline, the firm acts in two stages. First, strategy: analysis of the factual situation, identification of the avenue most likely to succeed (substitution of a commitment to build before the deadline, ZAC extension, force majeure), and assembly of the evidentiary file (correspondence, certificates, timeline of the steps taken). Then, representation: drafting the reasoned request where a provision allows it (ZAC extension, substitution of commitments), filing it with the tax authorities, monitoring the exchanges and, where necessary, litigation.

The firm's cumulative experience in these matters makes it possible to anticipate the lines of attack of the tax authorities and to build arguments that withstand judicial scrutiny.

— Frequently asked questions

Everything you need to know before requesting an extension

Can the commitment to resell be extended like the commitment to build?

No, not on the same terms. IV of A of article 1594-0 G of the French Tax Code expressly provides for a renewable annual extension of the commitment to build (upon reasoned request to the DDFIP, by registered letter with acknowledgement of receipt, within one month of the expiry of the period; the absence of a reasoned refusal within two months counts as acceptance). Article 1115 of the French Tax Code, which governs the commitment to resell, provides no equivalent mechanism. Three ways out exist where the resale cannot take place within the period: the substitution, before the deadline, of a commitment to build for the commitment to resell (French Tax Code, art. 1594-0 G, A, II), which counts as performance of the latter; the renewable annual extension reserved for properties in a ZAC acquired by the developer (French Tax Code, art. 1594-0 G, A, IV bis); and, by way of exception, force majeure.

What are the criteria for force majeure?

Force majeure is accepted by the administrative doctrine (BOI-ENR-DMTOI-10-50, § 70): the purchaser must establish an external and unforeseeable circumstance that placed it in an insurmountable impossibility of selling throughout the entire period. Three cumulative conditions: (1) externality: the cause of the impossibility of reselling must be external to the property dealer and its organisation; (2) unforeseeability: the cause could not have been anticipated when the commitment was given; (3) irresistibility: an insurmountable impossibility of selling throughout the entire period. A fall in the market, the absence of a buyer at the hoped-for price or the prospect of a loss do not amount to irresistibility (Cass. com., 14 sept. 2010, n° 09-15.495; CA Versailles, 24 janv. 2002, n° 1999-2214).

How does the extension work for properties located in a ZAC?

IV bis of A of article 1594-0 G of the French Tax Code provides for a renewable annual extension of the resale period for properties located in a concerted development zone and acquired by the entity responsible for developing or equipping the zone; the procedure is laid down in article 266 bis of Annex III to the French Tax Code. The extension is granted by the departmental or regional director of public finances (DDFIP/DRFIP). The request must be sent to that director by registered letter with acknowledgement of receipt, no later than one month after the expiry of the period; it must state the reasons and specify the properties concerned and the amount of duties at stake. Unlike the commitment to build, the silence of the tax authorities does not count as acceptance. Accepted grounds include marketing delays linked to administrative or technical difficulties, as well as the time needed to acquire all the land in the zone (BOI-ENR-DMTOI-10-50, § 60).

What are the sanctions if the deadline is missed without an extension?

Forfeiture triggers the recovery of the duties not previously collected, payable within one month of the breach of the commitment, plus late-payment interest under article 1727 of the French Tax Code (0.20% per month, i.e. 2.40% per year), in accordance with I of article 1840 G ter of the French Tax Code. Interest runs from the first day of the month following the expiry of the statutory period for presenting the deed of acquisition for registration (BOI-ENR-DMTOI-10-50, § 110; Cass. com., 6 nov. 2024, n° 23-11.616). If the tax authorities further rely on abuse of law under article L. 64 of the Tax Procedure Code, an 80% surcharge (reduced to 40% where the taxpayer is neither the main instigator nor the main beneficiary) is added under b of article 1729 of the French Tax Code. Under article L. 64 A, this specific surcharge does not apply (BOI-CF-IOR-30-20, § 130); only the ordinary surcharges may be applied where justified (40% for deliberate non-compliance, 80% for fraudulent manoeuvres).

What should you do if the deadline is approaching with no prospect of resale?

Act early. Three lines of action: (1) document from now on the steps taken (active sale mandates, marketing efforts, correspondence with potential buyers), which is useful for invoking force majeure; (2) analyse the alternative avenues: substituting, before the expiry of the resale period, a commitment to build if the planned works result in a new building (French Tax Code, art. 1594-0 G, A, II), partial sale, restructuring of the transaction; (3) provision for the cost of a possible forfeiture: duties assessed at the rate in force on the date of acquisition, plus late-payment interest of 0.20% per month running from the first day of the month following the expiry of the period for presenting the deed for registration, i.e. in practice from the acquisition (Cass. com., 6 nov. 2024, n° 23-11.616); over a five-year period, interest thus reaches approximately 12% of the duties. An early audit considerably reduces the risk of a heavy sanction.

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