The first loss-making letting year does not, by itself, start the limitation period (prescription) for a liability claim against the adviser. The commercial chamber holds that knowledge of a probably loss-making return from the first year of letting does not establish that the damage has materialised. The five-year period runs from the day the victim knew or ought to have known of the damage, the event giving rise to it, its author and the causal link.
Key points
- The finding of a first loss-making letting year does not, by itself, establish that the damage alleged against an adviser on tax-efficient property investment has materialised.
- The limitation period for a liability claim, whether contractual or tortious, runs from the day the victim knew or ought to have known of four cumulative elements: the damage, the event giving rise to liability, its author and the causal link.
- For obligations between traders and non-traders subject to the former ten-year limitation period, the five-year period runs from the entry into force of the Law of 17 June 2008, without the total duration exceeding ten years.
- The date on which the damage materialised is assessed in the light of the transaction as it was presented, and not of the first letting year's result alone.
Does a first letting deficit start the limitation period?
No: the commercial chamber quashes the decision which set the start of the limitation period at the first loss-making letting year (Com., 10 June 2026, No. 25-14.312). An individual investor and a limited partnership (société en commandite simple), of which they are the manager (gérant) and majority shareholder, acquired several properties giving entitlement to tax reductions between 2006 and 2008. Those properties, intended for letting, were financed by bank loans, following advice given by two companies. In 2020, the investors brought liability claims against those companies for breach of their duty to provide advice (obligation de conseil), relying on insufficient rental return and on an overestimation of the value of the properties.
The decision under appeal (CA Aix en Provence, 30 October 2024, No. 24/01570) had declared the claims inadmissible as time-barred. As soon as the properties were actually placed on the rental market, the investors could compare income and expenses, and therefore question the actual profitability of the transaction. The court of appeal had added that the subsequent worsening of the deficits was irrelevant and that the resale of one building at a loss did not constitute separate damage. The commercial chamber quashes that decision in all its provisions: the deficit of the first letting year is not enough to date the damage (free translation).
the investors' knowledge that the transaction was probably loss-making at the end of the first year of letting did not establish that the damage for which compensation was sought had materialised
The commercial chamber rules on the basis of Articles 2222 and 2224 of the French Civil Code, the latter in its two successive versions, and of Article L. 110-4 of the French Commercial Code. From the combination of those provisions, it derives first the transitional regime arising from the 2008 reform, then the definition of the start of the limitation period for a liability claim:
the limitation period for a liability claim, whether contractual or tortious in nature, runs from the day on which the person claiming to be the victim knew or ought to have known of the damage, the event giving rise to liability and its author, as well as the causal link between the damage and that event
Start of the limitation period: what changes
The period only starts once the damage has materialised, and not at the first warning sign about the profitability of the transaction. A loss-making year says something about one year's result. It does not prove the failure of an investment designed to produce its effects over time, between rent, expenses and the tax advantage. An investor who observes an initial deficit may legitimately expect a recovery in the following years. The commercial chamber refuses to convert that nascent concern into knowledge of the compensable damage.
The starting point requires four cumulative elements: the damage, the event giving rise to liability, the author of that event and the causal link between the two. A single one of those elements, known in isolation, does not start the period. For the investor, the practical difficulty remains intact: it is for them to place in time the moment when the impossibility of achieving the announced return materialised, with dated documents.
The transitional regime deserves attention for older transactions. Obligations between traders and non-traders were subject to a ten-year limitation period before the reform of 17 June 2008. Since the entry into force of that law, they are time-barred after five years running from that entry into force, without the total duration being able to exceed the ten years of the earlier law. Advice given before 2008 therefore follows a combination of two durations, rather than a single period.
What impact for tax-efficient investments?
The decision applies the test of knowledge of the damage and rules out any automatic effect of the first letting deficit. It deprives of effect the argument, frequently raised in defence, that the investor knew everything from the first rent receipt: comparing one year's income and expenses does not amount to the damage having materialised. Before the court of appeal, the investors presented their damage as the loss of chance (perte de chance) of making a more profitable investment, arising and then worsening over successive years.
Several points remain open. The commercial chamber sets no substitute date: it does not say that the starting point lies at the last loss-making year, nor that it coincides with a resale at a loss. The case is remitted to the court of appeal of Aix-en-Provence, differently composed, which will have to date the point at which the damage materialised. The Court did not examine the other ground of appeal, there being no need to do so.
Which elements should be documented to date the damage?
The date on which the damage materialised is proved by documents, not by a presumption drawn from the letting calendar. The limitation debate turns on the comparison between what was announced and what actually happened. A solid file reconstructs both sides of that comparison, year by year, with documents contemporaneous with the transaction.
- Keep the marketing documents: initial financial simulations, rent assumptions, projections of the tax advantage, prior wealth-planning studies.
- Reconstruct the chronology of the letting results, year by year, with the expenses, the loan instalments and the vacancy periods.
- Identify the event which, in the file, reveals the impossibility of achieving the announced return, and link it to a dated document.
- Check, for advice given before June 2008, the interaction between the former ten-year limitation period and the five-year period arising from the reform.
On the advisers' side, the plea of inadmissibility (fin de non-recevoir) based on limitation can no longer be sustained by merely pointing to an old deficit. It requires showing that, on the date relied on, the investor had the information establishing the damage, its author and the causal link.
The checks to make before bringing a claim over advice
An investor considering a claim against their adviser starts by precisely identifying the date on which the damage materialised, supported by documents. They then check which limitation regime applies, depending on whether the disputed advice was given before or after the entry into force of the Law of 17 June 2008. They gather the documents presenting the transaction, the only material making it possible to measure the gap between the announced return and the return obtained. Finally, they distinguish the damage alleged – the loss of chance of investing differently – from the mere loss-making results of a single year, because limitation runs from the former, not from the latter.
Frequently Asked Questions
My tax-efficient rental investment has been loss-making since the first year: has my limitation period already started?
No, not by reason of that deficit alone. On 10 June 2026, the commercial chamber held that knowing that the investment was probably loss-making at the end of the first letting year does not establish that the damage had materialised. The period runs from the day the investor knew or ought to have known of the damage, the event giving rise to liability, its author and the causal link between them.
Does reselling the property at a loss start a fresh limitation period against the adviser?
The question remains open. The court of appeal had considered that the resale at a loss was not separate or new damage, since it merely confirmed the absence of rental profitability. The Cour de cassation quashed that decision on other grounds, without ruling on the point. The case was remitted to the court of appeal, which will have to date the moment when the damage materialised.
Which limitation period applies when the disputed advice was given before the 2008 reform?
Two durations combine. Obligations between traders and non-traders were subject to a ten-year limitation period before the Law of 17 June 2008. Since its entry into force, they are time-barred after five years running from that entry into force, without the total duration exceeding the ten years laid down by the earlier law. The calculation therefore depends on the date of the event giving rise to liability relied on.
What must be established to hold a property investment adviser liable?
Three elements must in principle be established: a breach by the professional of its duties to provide information and advice or to warn, damage, and a causal link between the two. Where the complaint concerns advice, the damage is often presented as the loss of chance of having declined the transaction or invested differently. The gap between the projections provided and the actual results is the central element of the demonstration.
Which documents should be kept after an investment presented as profitable?
Keep everything that records the commercial promise and its comparison with reality: brochures, simulations of rent and expenses, tax projections, letters and emails exchanged with the adviser, notes of meetings. Add the annual monitoring of the operation, with the rent received, the expenses, the loan instalments and the vacancy periods. These dated documents make it possible, later, to place the moment when the damage materialised.