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“A little knowledge is a dangerous thing”, dixit Mary Hall, chartered surveyor.
This statement applies more than ever when it comes to buying a property.
Below you find a very general syntax of the contract flow in France for purchasing a main or secondary residence.
Note that we recommend other preliminary proceedings in case of
- Buying a property for business use
- Purchasing as partners in joint ownership
- Purchasing as a recomposed family.
- Purchasing a plot of land
PRE - SALES CONTRACT
Nature of the contract
Unlike its name, it concerns a proper contract in its legal sense, which involves important obligations for both parties.
This pre-sales contract is not compulsory, but for practical reasons it is: the buyer in general does not have all the necessary information at this early stage ( like pre-emption rights, right of passage on the property, or mortgage terms of the buyer not finalized, etc.)
The intervention of a French estate agent is neither compulsory, but because of its complexity, we advice strongly to be assisted by a professional, like a FNAIM agent, to establish the terms, because the definitive contract afterwards will in principle copy the terms of this first agreement.
Cool - off period
The non-professional buyer has a reflection period of 7 days to retract after having signed the document in front of the notaire or received the legitimate contract per registered post.(SRU-law of 1/06/2001).
Deposit
In general there is a deposit between 5 and 10 % required from the buyer.
In case of retraction the money needs to be returned within 21 dates from the day following the retraction date.
There are 2 kinds of preliminary contracts:
A. 'Promesse de vente' and 'Compromis de vente' :
A. PROMESSE DE VENTE ( PROMIS TO SELL)
This contract commits mainly the vendor. The owner 'promises' his property to the buyer by giving him a buying option, within the terms of the agreement and within a limit of time.
The candidate buyer is then entitled to buy the property just by lifting the option.
In compensation he pays a deposit of generally 10%.
From that moment onwards several hypotheses can occur:
1.The buying option is taken within the time limit:
The sales is legally concluded and will be 'formalized' by the deed afterwards.
2.The candidate buyer does not lift his option:
Once the time limit is passed, the Vendor can propose his property freely to somebody else and he keeps the deposit.
3. The vendor refuses to sell the property, before the expiry time of the option- to- buy:
The buyer can not force the Vendor to sell to him, but above the reimbursement of the deposit, he is entitled to pursuit the Vendor in court for eventual caused damages.
Same rule applies when the vendor sells the property to somebody else.
4. The vendor refuses to sell the property, after the expiry time of the option- to- buy:
Above compensation for claimed damages, the buyer can force the Vendor to sell him his property, because the simple lifting of the option is sufficient to have a legitimate contract.
In any case, the deposit is reimbursed when the owner does not meet his obligations.
B. COMPROMIS DE VENTE
Most frequently used preliminary contract.
It is a proper sales contract with a 'beginning of execution', because Vendor and Buyer are irrevocable committed: the Vendor promises to sell to the candidate, who promises to buy and in return pays a deposit like in any other contract.
If one or both parties renounces, without valid reason, the other can pursue him, on top, for sustained damages. For that reason the compromis includes certain 'escape' clauses, which both parties decide upon auto ominous, except for one escape clause, the one concerning obtaining a mortgage, see below.
There are two kind of escape clauses: A. Renounce clauses and B. Suspension clauses.
A. The renounce clauses:
Frequently used in compromis, it allows both parties to renounce, just by paying an amount of money, agreed by forehand.
In certain cases it concerns a deposit, that "valids as mean of withdrawal". The Vendor must in that case pay the double amount of the deposit when he changes his mind, where as the candidate buyer only looses the agreed deposit, when he changes his mind.
B . Suspension clauses:
There are 'resolutionary ' clauses and suspension clauses:
The resolutionary clauses do not suspend the beginning of the execution of the contract, but they cancel the contract if the stipulated event occurs.
The proper suspension clauses 'suspend' the execution of the contract until the foreseen event happens.
The only suspension clause which is compulsory in the compromis regards the obtaining of a mortgage.
If the sale is subject to mortgage, the candidate buyer can pull out if he does not obtain his mortgage within the time limit that is set in the contract. He recoups the total sum of the deposit . On the other hand he is liable from the moment his bank has issued a mortgage proposal in line with the terms of the compromis . The compromis therefore indicates the lifetime of the mortgage, the interest rate and the amount borrowed.
It is important to have negotiated the mortgage with the banks prior to signing a preliminary contract.
The candidate buyer who does not apply for a mortgage needs to write explicit in the compromis that he renounces to the benefit given by law.
Candidate buyers can not 'abuse' this suspension clause to voluntary pull out and regain the deposit. There has been several court cases to penalize this practice.
On the other hand certain events ( like redundancy and disability etc,), have been accepted by the tribunals to reimburse the deposit, even after having obtained a mortgage later anyway.
Other pull-out clauses are freely negotiated between parties, such as:
-obtaining a urbanization certificate mentioning the absence of easements
-obtaining planning permission
-clearance of an encumbered - mortgaged estate
-property in process of confiscation
-government's right of pre-emption etc.
-sale subject to prior sale of buyers property (although perfectly legal, it is in French contracts seldom accepted).
FOLLOWING INFORMATION TO COME SOON ON THIS WEBSITE :
ADDITIONAL COSTS OF BUYING
BUYING OFF PLAN
SELLERS OBLIGATIONS
BUYERS OBLIGATIONS
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