Property Resold Without Authorisation: No Unfair Term Defence for the Disloyal Borrower (CA Nancy, 2 April 2026, No. RG 25/01275)

CA Nancy, 2nd Civil Chamber, 2 April 2026, No. RG 25/01275

What happened in this case?

What was the loan at issue and which clauses were in play?

By a private deed (acte sous seing privé) of 10 November 2010, Caisse d’Epargne et de Prévoyance Grand Est Europe (hereinafter “the bank”) granted an individual a “Primo Optionnel” mortgage loan of €253,000, repayable over fifteen years after a 36-month grace period, at an interest rate of 4% per year, to finance the purchase of a home with renovation works. The loan was not secured by a mortgage but by a guarantee from Compagnie Européenne de Garanties et Cautions (CEGC) covering 100%, a very common arrangement whose counterpart lies in two clauses of the general terms and conditions.

Article 14 of the general terms and conditions provides, as quoted in the judgment, that “the borrower undertakes to notify the lender and the guarantor in the event of sale of the financed property and to repay this loan”. Article 18 lists the cases of early repayment becoming due, including, “In general, failure to comply with the obligations set out in the loan offer”, and adds that the borrowers undertake, throughout the term of the loan, “Not to sell or mortgage this property or to pledge the shares conferring the right to enjoy and own this property, without the express authorisation of the lender”. Breach of this prohibition entails, under the terms of the clause, that the loan becomes due.

What happened after the property was sold?

On 17 December 2013, the borrower resold the financed home. The judgment notes that he did so “without informing CEPGEE and CEGC, and the borrower continued the repayments”. According to the bank, the sale price (€243,495.61) was received on 30 December 2013 in an account held with it, then distributed from 8 January 2014 by three transfers; the borrower is said to have thus “fraudulently transform[ed] a mortgage loan into a cash loan”. The repayments continued for six years; from 15 January 2020, the instalments were no longer paid.

How was the loan accelerated?

It must be stressed at the outset: the acceleration of 2 December 2020 was declared for non-payment of instalments, not because of the sale, of which the bank says it was unaware. It is because the guarantor subsequently refused its guarantee that the bank, deprived of its guarantor, sued the borrower.

What had the Court of First Instance of Nancy decided?

What argument had the borrower first raised?

Before the court, the borrower argued, according to the judgment, that “the acceleration declared by CEPGEE was void, insofar as the sums lent had become due by reason of the sale of the financed property, under Article 14 of the general terms and conditions”. The loan would therefore have become due as early as 2013, so that the 2020 acceleration would no longer have any purpose; one can guess the aim of a limitation defence. This choice would prove very costly on appeal.

What did the court decide?

By a judgment of 7 March 2025, the court ordered the borrower to pay €172,408.62, plus interest at the contractual rate of 4% from 20 April 2021. It held that the borrower “had failed in his obligation to perform the contract in good faith” by selling without informing the lender and the guarantor, and that the acceleration “had been regularly declared” on the basis of Article 18, for lack of regularisation of the unpaid instalments. Acceleration for non-payment was therefore held to be regular; the breach of the duty to inform comes in only as reinforcement.

What did the Court of Appeal of Nancy decide on 2 April 2026?

What new ground did the borrower raise on appeal?

On appeal, the borrower changed strategy and invoked, for the first time, the unfair nature of the acceleration clause, which allows the bank to demand, “with fifteen days’ notice running from a formal notice by simple registered letter, payment of all sums due under the loan”, in the event of default on a single instalment of €1,791.30. It “is presumed unfair under Article R. 132-2 of the Consumer Code (code de la consommation)” (now R. 212-2), because “the fifteen-day notice period given to the borrower to regularise all or part of an unpaid instalment is not of a reasonable duration in view of the sudden worsening of the repayment conditions”.

The bank does not contest this ground on the merits. It argues that it “is not raised in good faith”, the borrower having “deliberately concealed the resale of the financed property”; in the alternative, that two months elapsed between the formal notice and the acceleration, a reasonable period having regard to Articles L. 312-39 of the Consumer Code and 1226 of the Civil Code.

What are the court’s reasons?

The court does not answer the unfair term argument: it says neither that the clause is unfair, nor that it is not. It reasons exclusively on the basis of former Article 1134 of the Civil Code (now 1104) and the performance of agreements in good faith. It infers from Articles 14 and 18 that the borrower had to inform the lender and the guarantor and “seek the express authorisation of the lender before selling the financed property”, then notes that he sold without authorisation and “continued, with knowledge of the accepted contractual clause, to pay the loan instalments until 15 January 2020”. It draws from this the core of the judgment:

“It follows that Mr [Y] [K] voluntarily evaded the prohibition on selling the financed property without the lender’s authorisation, and thereby deprived it of the expected benefit of the contract, characterising his intention to avoid payment of the sums due by means of the proceeds of the sale.”

Noting that the borrower had himself argued at first instance that the sale had made the loan due, the court holds: “Accordingly, Mr [Y] [K] cannot rely on that same contract, and more specifically on the unfair nature of the clause providing for acceleration for non-payment of instalments due on their due date, to escape his deliberate breach of the prohibition on seeking the express authorisation of CEPGEE before selling the financed property.” And it adds: “Indeed, the rule that agreements must be performed in good faith makes it possible to penalise the disloyal use by Mr [Y] [K] of a contractual prerogative in order to oppose termination of the contract.”

Finally, “without prejudice to the very substance of the rights and obligations lawfully agreed between the parties”, the court “finds that the sums remaining due under the loan became due as a result of the sale of the financed property”. The judgment is upheld, with a further €3,500 under Article 700 of the Code of Civil Procedure (code de procédure civile).

Why is this reasoning open to criticism?

Let us be frank: the borrower’s conduct, as described in the judgment, does not inspire sympathy. But unfair terms law is not handed out on merit: it protects the consumer as the weaker party, and it is precisely when the consumer is in the wrong that one can tell whether the protection is real or merely decorative. The judgment calls, in our view, for several reservations.

Can good faith neutralise the public policy nature of unfair terms rules?

Protection against unfair terms is not a contractual favour. Article L. 212-1 of the Consumer Code deems unwritten any clause creating a significant imbalance to the detriment of the consumer. This protection is a matter of public policy and derives from Directive 93/13/EEC, under which the Court of Justice of the European Union consistently holds that the national court must examine of its own motion whether a clause is unfair as soon as it has the necessary elements.

The court holds that the disloyal borrower “cannot rely on that same contract” to invoke the unfair nature of the clause. But a consumer who invokes an unfair term is not invoking the contract: he is invoking the law against the contract. The good faith of Article 1104 governs the exercise of prerogatives arising from the contract; it is not meant to paralyse a rule of public policy that the judge must raise of his own motion. Review of unfair terms is objective: it concerns the clause, not the person. The phrase “without prejudice to the very substance of the rights and obligations lawfully agreed” is here turned on its head: it is used to justify the judge not examining whether those rights are themselves lawful.

Is the clause prohibiting sale itself unfair?

Second weakness, a deeper one: to set aside the acceleration clause for non-payment, the court relies on another clause, the one prohibiting sale without the lender’s express authorisation on pain of the loan becoming due. Yet that clause was not reviewed at all.

A clause that allows the professional to terminate as of right, by simple notification, where the property is sold by a borrower who continues to repay, naturally falls within the presumption of unfairness of Article R. 212-2, 4°, of the Consumer Code (formerly R. 132-2): termination without notice of a reasonable duration. It is also questionable under Article L. 212-1: no mortgage was granted, a guarantee company secures the loan at 100%, and the bank suffers, as long as the instalments are paid, no loss arising from the sale. Does prohibiting an owner from selling his property for fifteen years, on pain of immediately repaying €250,000, create a significant imbalance? The question deserved to be raised of the court’s own motion. If this clause is deemed unwritten, the whole edifice collapses: all that remains is a breach of a duty to inform, penalised by contractual liability, subject to proven loss, and not by the loan becoming due.

Acceleration was declared for non-payment, not for the sale: is there a substitution of grounds?

Third reservation. Acceleration was notified on 2 December 2020, after a formal notice referring exclusively to the unpaid instalments; the bank never declared acceleration on account of the sale. It does argue on appeal that the borrower “is contractually deprived of the benefit of the term by the sole effect of the resale of the financed property”, but this due date was never put into effect, whereas Article 18 requires “a simple notification made to the borrowers by registered letter with acknowledgement of receipt”. By “finding” that the due date “results from the sale of the financed property”, the court substitutes for the cause relied on in 2020 (the unpaid instalments) a cause (the 2013 sale) that no notification had activated: a retroactive due date in fact, without formal notice or notice period, which is exactly the mechanism that the case law on acceleration clauses seeks to regulate. And if the due date goes back to 2013, a limitation issue arises for an action brought in 2021; the judgment does not address it, the borrower apparently not having raised it. A line of argument for fellow practitioners to bear in mind.

One last reservation: if the bank sued the borrower, it is because CEGC refused its guarantee. That loss, if it exists, falls under contractual liability; it does not justify depriving the borrower of the statutory protection against an unfair term. The court made the borrower pay for the guarantor’s default by a detour that circumvents consumer law.

How does this judgment fit with recent case law?

Where do disputes over the acceleration clause currently stand?

Acceleration clauses in mortgage loans are more and more often declared unfair: clause without prior formal notice (CA Metz, 26 February 2026, No. 24/02013), clause without reasonable notice period (CA Saint-Denis de La Réunion, 27 February 2026, No. 23/00989). Above all, the Court of Appeal of Paris held, in a mortgage loan, that fifteen days’ notice is not enough (CA Paris, Pôle 5 ch. 6, 18 February 2026, No. 24/13463): this is exactly the clause at issue in Nancy. The French Supreme Court (Cour de cassation) has moreover been asked for an opinion on its consequences in mortgage enforcement proceedings: see what the opinion of 21 May 2026 changes.

How are banks trying to get around this case law?

Faced with this trend, banks are looking for ways round it. The Court of Appeal of Agen accepted that the bank may obtain judicial termination of the loan despite an unfair acceleration clause (CA Agen, 13 May 2026, No. 25/00210). The Nancy judgment is in the same vein with a different technique: rather than substituting judicial termination for contractual acceleration, it neutralises the argument through good faith and shifts the cause of the due date to another clause. In both cases, the judge spares himself from drawing the concrete consequences of an unfair term; but in Agen, he at least examines the seriousness of the non-performance, whereas in Nancy a finding of disloyalty is enough to close the door.

Nothing indicates that the Court of Cassation would endorse such a neutralisation of a rule of public policy; but banks will use it every time a borrower has breached an ancillary contractual obligation.

What can a borrower do in a similar situation?

How can your situation be distinguished from the one decided in Nancy?

The judgment rests on a combination of cumulative circumstances: an express prohibition on selling without authorisation, an undeclared sale, no early repayment despite receipt of the price, concealment lasting six years and, above all, the borrower’s contradiction, having himself argued that the sale made the loan due. It is by showing that one or more of these circumstances are missing that the judgment can be set aside.

The most frequent case is that of the borrower who sold while informing the bank, often through the notary, and applied all or part of the price to early repayment: no “intention to avoid payment” can be found, and the acceleration clause for non-payment must be examined in the normal way. If the contract contains only a duty to inform, without any prohibition on selling, the breach can be penalised only by damages, and the judgment, which rests on the “deliberate breach of the prohibition on seeking the express authorisation”, is inapplicable. Finally, if the bank learned of the sale by other means (receipt of the price, letter from the notary) and went on collecting the instalments for years, it is the bank that fails in good faith by belatedly invoking the clause.

What arguments should be raised in defence?

Faced with a bank relying on the Nancy judgment, three lines of defence should be raised together, from the first instance. First, ask the judge to review of his own motion the unfair nature of the acceleration clause for non-payment and of the clause prohibiting sale (Arts. L. 212-1 and R. 212-2, 4°, Consumer Code). Second, challenge the substitution of the cause of the due date: a bank that declared acceleration for non-payment cannot rely during the proceedings on a cause never notified, and if it does, all the consequences must be drawn, limitation included. Finally, avoid the mistake made in Nancy: arguing oneself that the loan was due from the sale, then invoking the unfair nature of the clause. Before any written exchange with the bank, bear in mind that every written acknowledgement can be turned against you.

Should you give up challenging an acceleration of the loan when you have sold your property?

Certainly not. The judgment of the Court of Appeal of Nancy of 2 April 2026 is a decision on its own facts, rendered in a context of prolonged concealment and procedural contradiction. Its reasoning, which neutralises through good faith a protection of public policy that the judge must raise of his own motion, and which bases the due date on a clause whose unfair nature was not examined, seems to us fragile; it does not prejudge the position of the Court of Cassation.

The lesson is twofold. Challenging an unfair acceleration remains an effective weapon, provided it is wielded consistently from the first instance and accompanied by a request to review all early repayment clauses. And the sale of a financed property must never remain in the shadows: informing the bank and the guarantor in writing, keeping proof of it and, where appropriate, repaying early are the best safeguards against an accusation of disloyalty. If your bank claims the whole of a loan after the sale of a financed property, or invokes a contractual breach to set aside your arguments, have your contract reviewed by a banking law lawyer before replying.

FAQ: Sale of the Financed Property, Acceleration and Unfair Terms