A little knowledge is a dangerous thing
Mary Hall, Chartered Surveyor.
This statement applies more than ever when it comes to buying a property.
Below you will find only a brief summary of the process in France for purchasing a main or second home.
Note that we recommend other preliminary investigations when:-
- Buying a property for business use
- Purchasing as partners in joint ownership
- Inheritance issues if remarried etc
- Purchasing a plot of land
Pre-sales contract (preliminary contact)
Nature of the contract
Unlike its name implies, it is actually a proper contract in the legal sense, which involves important obligations for both parties.
This pre-sales contract is not compulsory, but for practical reasons it is advisable. The buyer in general does not have all the necessary information at this early stage (right of way on the property, or mortgage terms of the buyer not finalized, etc).
The use of a French estate agent is also not compulsory, but because of its complexity, we strongly recommend you seek professional advice from a French qualified agent (FNAIM).
It is important to establish the terms because the definitive contract afterwards will in principle copy the terms of this first agreement.
Cooling off period
The non-professional buyer has a reflection period of 7 days to pull out after having signed the document in front of the notaire (preferable) or received the finalised contract per registered post. (SRU-law of 01/06/2001).
In general, the buyer has to lodge a deposit of between 5 and 10 % of the purchase price.
In case of cancellation by either party, the money needs to be returned within 21 days.
There are 2 kinds of preliminary contracts:
This contract mainly commits the vendor. The owner ‘promises’ his property to the buyer by giving him an option to buy within the terms of the agreement including a time limit.
The buyer is then entitled to buy the property just by taking up the option.
In exchange he pays a deposit of generally 10 %.
From that moment onwards several things can happen:
- The buying option is taken within the time limit:
The sale is legally concluded and will be ‘formalized’ by the deed afterwards.
- The buyer does not take up his option:
Once the time limit is passed, the Vendor can offer his property freely to somebody else and you must be aware he keeps the deposit.
- 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 in addition to the return of the deposit, he is entitled to pursue the Vendor in court for damages.
The same rule applies when the vendor sells the property to somebody else.
- The vendor refuses to sell the property, after the buying option has been taken up:
As above damages can be claimed and also, the buyer can force the Vendor to sell him his property. Taking up the option is sufficient to have an enforceable contract.
In any case, where the owner does not meet his obligations the deposit is reimbursed.
This is the most frequently used preliminary contract.
It is a proper sales contract because Vendor and Buyer are irrevocably committed: the Vendor promises to sell to the buyer, who in turn promises to buy and pays a deposit.
If either party renounces, without valid reason, the other can sue for damages. For that reason the compromis includes certain ‘escape’ clauses, which both parties decide upon after negotiations, except for one escape clause, the one concerning obtaining a mortgage, see below.
There are two kind of escape clauses: A. Renunciation clauses and B. Suspension clauses.
The renunciation clauses:
Frequently used in compromis, it allows either party to renounce, just by paying an amount of money, agreed beforehand.
In certain cases it is a deposit that is the agreed means of withdrawal. The Vendor must in that case pay double the amount of the deposit if he changes his mind, whereas the buyer only loses the agreed deposit, if he changes his mind.
There are ‘resolutionary‘ clauses and suspension clauses:
A resolutionary clause cancels 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 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 requested the mortgage with the banks prior to signing a preliminary contract.
The buyer who does not apply for a mortgage needs to explicitly state in the compromis that he renounces the benefit given by law.
The buyers can not abuse this suspension clause to voluntarily pull out and regain the deposit. There have 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.
Other pull out clauses are freely negotiated between parties like:-
- obtaining an urbanization certificate confirming 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 seldom accepted in French contracts).
A notaire is a publicly appointed French lawyer who specializes in property law. His main role is to formalise and record property transactions. He can also act on behalf of the buyer and the vendor in the same transaction. Although notaires are renowned for being impartial, you may wish to consider taking other professional advice to protect your own position (eg: estate agent, surveyor or lawyer). This is because he may not have detailed knowledge of all the circumstances surrounding the sale or the property itself. They are unlikely to have visited the site.