The fate of the guarantee in the refinancing or extensions of loansRequest the file
It is not uncommon for a loan to be extended into the future under conditions identical to those of the existing loan, for a new term. Alternatively, a mortgage may be modified during a negotiation with the same bank, with new future conditions (loan amount, term, higher or lower interest rate).
As regards the fate of the initially constituted guarantee during the refinancing or extensions of the loan, it is appropriate to consider, on the one hand, the scenario of refinancing by change of creditor, whether novation or subrogation (I) and, on the other, a renegotiation of the future terms of the loan between the same parties (II).
I - The fate of the guarantee in the event of refinancing by change of creditor
In positive law, the change of creditor can be carried out either by novation (A) or by subrogation (B).
A) The fate of the guarantee in the event of novation of the loan
Pursuant to Article 1329 of the French Civil Code, "novation is a contract which aims to substitute an obligation, which it extinguishes, with a new obligation that it creates."
When it aims to change the creditor, the novation is therefore a tripartite contract that unites the borrower, the original lender and the new lender. Indeed, the borrower, because it will enter into a new obligation with a new creditor, must necessarily consent to the transaction (Civ. C., Art. 1333).
The novation has no transfer effect. It will lead to the extinguishment of the original obligation, which united the original creditor and the borrower, and its corresponding replacement by a new obligation, binding the new creditor and the borrower.
The old and new obligations are therefore independent of each other, so that the exceptions that the borrower could have drawn from the original repayment obligation cannot be raised against its new creditor1.
Consequently, the original claim is extinguished with all its ancillary costs (Civ. C., Art. 1334, para. 1) first rank ancillary costs including securities, whether personal or real.
In other words, if the original claim was secured by a guarantee, the guarantor's obligation is extinguished at the same time as the claim. This solution is now set out in full in Article 2313, paragraph 2 of the Civil Code, resulting from the Order of 15 September 2021 reforming securities: the obligation of the guarantor "is also extinguished as a result of the extinguishment of the guaranteed obligation."
However, Article 1334, paragraph 2 of the Civil Code states that, "by way of exception, the original securities may be reserved to guarantee the new obligation with the consent of third-party guarantors."
In other words, the legislator has given the parties the option to transfer the original securities to the new obligation, so that they guarantee it, within the double cap of the limits initially set in the security and the balance of the original claim on the day of its extinguishment.
From a strictly literal point of view, paragraph 2 of Article 1334 of the Civil Code, which does not distinguish between real and personal securities, should be able to be applied to the guarantee. The legislator's use of the term "original securities" does not appear to be by chance: in the working versions of the reform of the law on obligations, and in particular the draft order of 2015, the transfer was expressly limited to real securities only2.
Thus, it would be sufficient for the parties to the novation to request the agreement of the guarantor in order to "transfer" the guarantee, within the limits initially set, to the new obligation, without any other formality.
However, many authors doubt the possibility of dealing with real and personal securities in the same way. The "enhanced" ancillary nature of the guarantee3 should not allow the parties to transfer this security to the guarantee of a new obligation4 : deprived of its support, the guarantee could not survive the extinguishment of the obligation initially guaranteed, which the new Article 2313 of the Civil Code states unambiguously (see above).
1 If we except the exception of the invalidity of the original obligation. With the latter serving as a cause for the new obligation, its invalidity must lead to the extinguishment of the novation and, consequently, the new obligation: Civ. C., Art. 1331.
2 See Article 1346 of the draft order of 2015. See also the proposal of the group led by François Terré: Ph. Simler, "De la novation et de la délégation", in F. Terré (ed.), Pour une réforme du régime général des obligations, Dalloz, 2013, p. 133, esp. p. 135.
3 About which see M. Bourassin, V. Brémond, Droit des sûretés, 7th ed., 2020, Sirey, no. 134 s.
4 J. François, Les obligations. Régime général, Economica, 2000, no. 137, p. 128 ; Ph. Simler, Ph. Delebecque, Les sûretés. La publicité foncière, 7th ed., Dalloz, 2016, no. 245; M. Julienne, Le transport des créances et des dettes par délégation et novation, in L. Andreu, V. Forti (ed.), Le nouveau régime général des obligations, Dalloz, 2016, no. 23