French property sales contract
Key stage in the legal process when buying a property in France, the signing of the sales contract (or purchase contract) allows sellers and buyers to demonstrate their respective commitments. Although legally this step is not compulsory, it is in practice implemented nearly automatically. There are few sellers who will be willing to continue to deal with you without this contract. Indeed, a preliminary sales contract clearly secures the transaction. This key document summaries everything previously agreed. Signed by both parties, this contract must forecast, in as much detail as possible, what will be the final deed of sale.
Two types of property purchase contract can be put in place in France. You can set up a unilateral promise to sell or a preliminary sales agreement. Both commit you and the seller in different ways. The signature of the sales contract is actually part of the list of pitfalls to be avoided by foreigners. Indeed, many sellers attempt to put in place a contract that better protects their interests than yours.
The role of the sales contract
When buying a property in France, the seller and you must progress through multiple agreements and acts. After negotiating the terms of the sale, the agreement must be set in a preliminary contract. The role of this document is to establish a genuine legal link between the two parties. Therefore, it must contain all the necessary information which will be included in the final act.
The aim of a preliminary sales contract is to conclusively link the two parties. It also allows the three parties involved (the seller, the Notaire and you) to take the time to perform the respective tasks they must fulfil to permanently seal the transfer of ownership. The Notaire must collect the many documents and information necessary for the transaction. On his side, the seller will organise his move from the property sold. For you, this period allows you to take the time to research and find a mortgage to buy the property.
The unilateral promise to sell
The seller commits to sell you his property at the price indicated at the time of the acceptance of your offer to buy. He also undertakes to reserve the property for you for a set period called the “option period”. The contract must mention the length of this period. It usually varies between two and four months. During this period, the seller cannot sell his property to another person, even if he receives a more advantageous offer. As a buyer, you also sign this contract. However, your signature does not yet commit you. Indeed, you simply acknowledge the promise to sell.
Deposit to be paid by the buyer
In return for reserving the property for this option period, you must pay a deposit, called “holding fee”. This amount generally equals 10% of the amount of the total transaction. However, it is possible to plan for a lower amount, especially when the price of the property is high. It is preferable to negotiate and lower this amount as you never know what may happen later.
This payment must be made upon the signing of this promise to sell. You will have to transfer the total amount of this fee to an account belonging to the Notaire. At this stage, the seller does not receive any money. If you decide to exercise the option, you are committing to the purchase. Otherwise, if you decide not to continue with the transaction, three options are available.
– You decide to give up for personal reasons within the legal withdrawal time-frame given to the buyer. This time-frame is 10 days. This delay starts from the day following the receipt of the registered letter notifying you of the signature of the contract. In this case, you get back the whole of your holding fee. You do not owe the seller anything.
– For personal reasons, you decide to give up after the legal withdrawal time-frame of 10 days. The holding fee remains with the seller. The French Law considers it as damages for the seller for reserving his property in France for you for a period of time.
– You give up on the purchase after the legal withdrawal period of 10 days. This cancellation results of the non-completion of one of the suspensive conditions. For example, you did not get the funding needed for the purchase. In this case, you recover the full holding fee. You are acting legally; the seller has no claim against you.
Commitments of both parties
You are slightly committed because of the mandatory payment of the holding fee. Nevertheless, you may withdraw within 10 days of receiving the registered letter notifying you of the signature. This withdrawal must be notified to the seller by signed-for registered letter. After the 10 days, only the non-completion of a suspensive clause will allow you to withdraw without facing financial penalties.
The seller, meanwhile, is fully committed. He cannot cancel the sale and he gives you an option on his property. It means that he is no longer allowed to offer his property to another buyer during the period mentioned in the contract.
The preliminary sales agreement
The preliminary sales agreement is a different contract from the unilateral promise to sell. Indeed, it commits the two parties. The seller agrees to sell his property in France at a set price. As the buyer, you commit to buy it. This compromise is a sale, but a clause in this contract delays the effects of the sale to the signature of the deed of sale.
Deposit to be paid by the buyer
Like for the unilateral promise to sell, the seller will ask you to pay a deposit to confirm your commitment. This deposit is generally between 5 and 10% of the value of the property. You will need to pay this amount after the signature of the contract. This signature will take place at the expiry of your legal withdrawal deadline of 10 days. As the buyer, you will have to transfer this sum directly to the Notaire and not to the seller.
You can also complete the preliminary sales agreement by private deed with the seller. In this case, choosing a Notaire to entrust him with the money is a wise decision. Indeed, it is better to transfer the money to the Notary rather than directly pay to the seller. This solution provides a guarantee for the seller and you. The seller is reassured that you are serious. On your side, you know that your deposit will be retained by the Notaire until the conclusion of the sale. At the time of the signature of the deed of sale, the seller will collect the deposit. It will, of course, be deducted from the remaining amount you must pay.
Commitments of both parties
You have a legal period of 10 days after signing the preliminary sales agreement to decide to cancel your purchase. Just notify the seller by signed-for registered letter. You do not have to justify your decision. The seller cannot claim any payment of compensation against you. Potentially, the deposit will not have been paid before the expiry of that time limit. But if it was the case, you recover your down-payment in full.
Your situation is different if you decide to cancel the transaction after the expiry of your legal withdrawal period. You will be, in this case, contractually committed to the seller. A penal clause in the contract mentions that the seller has the right to keep your deposit.
The preliminary sales agreement often links the conclusion of the sale to certain conditions, called “suspensive conditions”. For example, obtaining a mortgage or the authorisation from the local Council to perform specific work. When the sales agreement mentions such conditions, their non-completion automatically renders the contract null and void. Both parties are therefore free of any commitment. The seller cannot claim against you. You retrieve your deposit in full.
On his side, the seller can no longer withdraw. He must sell you his property if you do not retract. The Cour de Cassation (Supreme Court) considers that by signing this contract, the seller consents to the sale. So, a withdrawal by the seller from his commitment results in the payment of damages and interest for you.
Elements to be included in the contract
The preliminary contract must include several elements to be legally valid. Regardless of the type of contract in place, the list of elements remains the same.
– The identity of the two parties, their details and their marital status
– The complete address of the property in France and its type
– The origin of the property (date of the previous deed of sale and name of the previous owner)
– The detailed description of the property, its equipment and its potential outbuildings
– The existence (or not) of a mortgage
– The complete file containing the property surveys
– The documents and information specific to the condominium (only for the apartments concerned)
– If the file related to the property surveys has not been provided, add a clause indicating that you will benefit from a new withdrawal period on receipt of these surveys
– You can also add a suspensive clause in the case of detection of a defect in the surveys
– The amount of the fees due to professional(s) in France linked with the sale (estate agent, Notaire)
– The selling price and the payment terms (with or without a mortgage)
– If applicable, the characteristics of the mortgage that you plan to put in place (duration, rate)
– The validity date of the preliminary contract and deadline for the signing of the final deed of sale
– The date of availability of the property
– The suspensive clauses
In fact, we previously mentioned suspensive clauses, but what are they? A suspensive clause suspends the execution of a contract until the completion of the event. If the expected event does not occur, you are legally free to cancel the contract. If the event occurs, nothing can stop the contract from going ahead. Among these conditions, the most important one relates to you obtaining a mortgage. If you buy with the help of a mortgage, you automatically benefit from this condition. It allows you to only buy if you find your mortgage within a certain period. Generally, a period of 60 days is granted to you to get a mortgage offer from a bank in France. In other words, you will have about two months to obtain your finance and inform the seller.
Property surveys related to the contract
A few years ago, to improve the transparency of the real estate transaction, the Government decided to modify the Law. Now, the seller is under obligation to provide you with various property surveys grouped together in a single file. You can then, before you fully commit to buy, be more informed on some aspects of the property. The preliminary contract must now include this file.
To provide these property surveys does not force the seller to carry out any work. If one of the documents reveals a problem, it is better to confirm in writing in the preliminary contract which one of the parties will assume the consequences.
Be aware that, in the event of a problem with one of these property survey, you will always have the option to withdraw without being accountable to the seller. The list of documents to be provided to a buyer by the seller gets longer every year. In 2019, there is a total of nine property surveys, ten if purchasing a condominium apartment!
– Report on the risk of lead exposure
– Status relating to the presence of asbestos
– Status relating to the presence of termites
– The condition regarding natural and technological risks
– The property survey relating to the energy performance of the French property
– The property survey relating to the presence or not of dry rot
– The condition of the interior gas installation
– The condition of the interior electricity installation
– A document relating to the private sanitisation
– The “Métrage Loi Carrez” property survey relating to the surface of a condominium apartment in France
A professional must carry out these property surveys. The seller risks a fine of €1,500 if he cannot provide you with these surveys. As said previously, the results of these property surveys do not force the seller to carry out any work. They are only there to provide you with better information, even if one of the property surveys indicates the gas or electric installation seems dangerous. Nevertheless, the Mayor or the local Prefect can force the seller to perform the necessary work in the case of lead or termites. This is the list and the validity of the property surveys that the seller will provide you. Do not forget to study each property survey passed on to you. Also, insert additional withdrawal clauses in the preliminary contract if you have any doubts.