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This post explains some essential facts about the “compromis de vente” or “promesse de vente” when buying – selling – property in France. Once you have made all your check list (see our previous post “check list before buying property”) and feel that you are ready to buy, the owner or the estate agent may ask you to sign a “promesse d’achat” (this is absolutely not compulsory) which is your price offer on the property.  You should be very careful in the wording, terms and conditions. Nothing has to be paid at the stage of the “promesse d’achat”. We will write a separate post on this document. Once the buyer and the seller both agree on the price and the property, then you sign a preliminary acquisition contract. Everything is settled in this contract except for the “conditions suspensives”, you therefore have to pay great attention in its wording. If the “conditions suspensives” are fulfilled within an agreed time limit, you will then sign the final acquisition contract (“acte de vente”).

Two types of preliminary acquisition contracts:

« Promesse  unilatérale de vente » and « compromis de vente » (or “promesse synallagmatique de vente”) are two very different legal types of preliminary acquisition contracts. However they both have in common:

  • The buyer may withdraw his consent within 7 days following the signature
  • In both cases, the preliminary contract includes one or several “conditions suspensives” (see paragraph below)
  • The buyer pays a deposit (“dépôt de garantie”, see paragraph below) at the signature of the preliminary contract (generally 5 to 10%)

The choice between the 2 types of preliminary contract is free, and depends purely upon the negotiation between the buyer and the seller. When you buy through an estate agent, it is very likely that you will sign a “compromis de vente” as it is safer for the seller.

1/ The “promesse unilatérale de vente”

«Unilatérale » means that the commitment affects only one side, in this case only the seller is committed to sell to the buyer, while the buyer is not committed to buy.

  • However, if a buyer sign a “promesse unilaterale” and the “conditions suspensives” (see paragraph below) have been fulfilled on time, the buyer will lose its deposit in case he does not buy the property (i.e. he does not sign the final contract or “acte de vente”).
  • If the buyer decide to buy, the deposit will be deducted to the final payment at the “acte de vente”
  • In case the “conditions suspensives” are not fulfilled on time, the transaction cannot happen and the buyer does recover his deposit. However the buyer may choose to sign the final contract even if the “conditions suspensives” have not been fullfilled. This is only the case for “conditions suspensives” in favour of the buyer.

The “promesse unilatérale de vente” is similar to an option.  The seller of the “option to buy the property” is the property owner, his remuneration is the deposit. The buyer pays a deposit to “acquire the option of buying or not” the property and the deposit represents the cost of the option.

The “promesse unilatérale de vente” has to be registered at the tax authorities’ office (« recette des impôts”)

  • within 10 days following the signature, if the contract is  not signed at the “notaire” office
  • within one month if it is signed off at the “notaire” office

2/ The “compromis de vente” or “promesse synallagmatique de vente”

« Synallagmatique », means mutual agreement on both sides (buyer and seller), i.e. both the buyers and the sellers agree respectively to buy and to sell the property at a specific price. They are both committed to the transaction, contrary to the “promesse unilaterale” where only the seller is committed. Therefore the “compromis de vente” is a legally binding contract on both sides. (“la promesse de vente vaut vente” article 1589 of the French “code civil”). However, the signature of the final acquisition act (“acte de vente”) depends on the fullfilment of the “conditions suspensives” within the time limit written in the “compromis de vente”.

If the “conditions suspensives” are fulfilled within the time limit, it is compulsory for both sides to sign the final contract (“acte de vente”). If at this stage one side does not agree to commit to the transaction, the other side may legally sue and enforce the signature of the transaction.  Additionally he may also obtain financial compensations and interests.

It is not necessary to register the “compromis de vente”.

 

 What is a « Condition suspensive »?

« Conditions suspensives » are clauses in the preliminary contract which suspend the effect of the contract as long as these clauses have not been fully satisfied or fulfilled. If one of the “conditions suspensives” is not fully satisfied within a specific time limit, the final contract (“acte de vente”) cannot be signed and the transaction cannot be finalized. However, a “condition suspensive” should always depend from an external factor independent to the buyer or the seller. If the “condition suspensive” depends on the, power, control or goodwill of the buyer/seller it is void and labeled as “potestative” (in English and French).

The most common “condition suspensive” is related to the mortgage approval by a bank or financial institution. This clause specifies the amount of mortgage that the buyer has to get approval for and the specific approval time limit. The buyer has to do all necessary work to get the mortgage approval.  French law requires that a “condition suspensive” for mortgage approval should always be included in a preliminary contract when a private individual buy a flat or a house. However, if you buy a property without a mortgage, you should specify in handwriting that you forfeit the benefit of this “condition suspensive” for mortgage approval.

Other very common “conditions suspensives”:

  • No easement of urban planning (“absence de servitude d’urbanisme”)
  • No public utility easement (“absence de servitude d’utilité publique”)
  • No preemption from public authorities, alternatively waiver of public authorities preemption rights (“renonciation au droit de préemption)
  • Clearance of all third party guarantees on the property (“apurement des hypothèques”)

If you buy a building plot of land, it is highly advisable to include a “condition suspensive” for approval of all planning permissions (e.g. “permis de construire”) including taking into account the time limit for third party claims against the planning permission once it has been delivered by the local town hall…

You may also add a “condition suspensive” for selling of your current property. The proceeds will therefore finance the new property.  However, this clause may not be accepted by the seller, although it should be easier if you already signed a “compromis de vente” on your existing property.

You may add other “conditions suspensives” as long as they are not “potestatives”, e.g., you are a British architect and you are interested in buying a flat in France to set up an architect office. You may add a “condition suspensive” to obtain the right to change the flat assignment from habitation to office…

Other clauses in a preliminary contract: “clause pénale”, “clause particulière”…

The “clause pénale”     is quite common in a “compromis de vente”. It generally states the amount that the buyer has to pay to the seller (up to 10% of the price) if the buyer does not fulfill his commitment to buy the property once all “conditions suspensives” have been met. It avoids the seller to sue the buyer in order to obtain financial compensation. However a “clause pénale” may also exists to compensate the buyer when the seller does not finalise the transaction. The “notaire” will recover the amount and then transfer the amount to the beneficiary.

A “clause particulière” is generally related to a specific item of the property. E.g. the buyer has asked the seller to repair the tiled floor in the kitchen before the signature final transaction act, this can be stated in a “clause particulière”. If the clause has not been fulfilled at the final transaction act, a correlated sum of the selling proceed can be kept in an escrow account by the “notaire”.

Buying a property: 7 days to change you mind!

Whether you sign a “compromis de vente” or a “promesse de vente”, you may change your mind within 7 days following the date of the signature. In order to withdraw from the preliminary sales contract, the buyer has to send a letter with acknowledgment of receipt to the seller within the 7 days period. However, the 7 days time limit should abide by very specific rules and it only applies for the buyer:

If the preliminary sales contract is signed off privately, without the “notaire” (in French “acte sous seing privé”)

Once the preliminary contract has been signed the seller has to mail one original copy to the buyer by letter with acknowledgement of receipt. The seller should forward the original copy with an attached letter specifying the `possibility for the buyer to withdraw.

The 7 days period starts from the day after the first presentation of the letter with acknowledgement of receipt (whether the buyer is at home or not) notifying the buyer of the preliminary contract.

If the preliminary contract is signed at the “notaire” office:

The 7 days period starts the day after the preliminary contract was signed off by both parties.

In both case, if the 7th day is a bank holiday then the end of the 7 days period is postponed to the following day. However if the 7 days period includes a bank holiday (excluding the 7th day) the ending day is not postponed to the following day.

What should be in the preliminary contract?

  • Details of buyer and sellers (address, name, profession…)
  • Origin, history of the property (previous transaction date and transaction act, name of previous landlord…)
  • Address of the property
  • Detailed description of the property, equipments, dependency. The area in square meter is compulsory for flats in estates as long as the area is at least 8m2
  • If there is any guarantee (“hypothèque” on the property or any easement (“servitude”))
  • Fees due to the professional in charge of selling the property and which party has to pay the professional fees
  • Selling price and payment proceed (with or without a mortgage)
  • Time limit for the validity of the preliminary contract
  • Conditions suspensives
  • When the property is to be handed over to the buyer
  • The technical diagnostics have to be attached to the preliminary contract (please refer to the post “check list before buying property” for the list of technical diagnostics, “buying French property: energetic performance becoming more important?” for the energetic performance diagnoses, “the hidden lead assessment” for the lead diagnoses)

Is it better to sign the “compromis” or “promesse” at the notaire office or not?

The preliminary contract can be:

  • “un acte sous seing privé »: when the preliminary contract is not signed at the « notaire » office. E.g. either signed privately between the buyer and the seller, or signed with the help of the estate agent.
  • « un acte authentique » : when the preliminary contract is signed at the « notaire » office

Although signing the preliminary contract at the “notaire” office is not compulsory*, it should be the preferred option. The “notaire” will draw and write the “compromis de vente” or “promesse unilatérale de vente”. The “notaire” will also collect all the necessary documents. Additionally, each party, buyer and seller, may choose a separate “notaire” and it is generally better to do so. In this case there are no additional fees as they will be shared between both “notaires”. Choosing one or two “notaire” does not encompass additional fees for the preliminary contract as such, as the fees are the same whether the “notaires” deal with the final act only, or the preliminary and the final act. If you buy or sell your property through an estate agent, he might write the preliminary contract (the cost should be included in the estate agent fees). On the positive side, an “acte sous seing privé” may quicken the acquisition process. But unless you know everything about the wording of a preliminary contract, it is still advisable to sign at the “notaire” office.

The final acquisition contract is always signed at the “notaire” office. Again the buyer and the seller may both choose their own “notaire” and it will not cost a penny more than having only one “notaire” as both notaires will share the fees which are state regulated.

What about the deposit or “dépôt de garantie”?

The deposit is the financial compensation paid by the buyer in exchange for the commitment of the seller to sell his property to the buyer only and within the time limit of the “compromis de vente”. Although there is no minimum for the deposit amount, in most case it stands between 5 and 10% of the property selling price.

If the preliminary contract is signed at the “notaire” office or with the support of an estate agent, the deposit should always be paid to the “notaire” or the estate agent (who should have a financial guarantee). The deposit is paid at the signature of the preliminary contract; it will be kept by the “notaire” or estate agent on an escrow account. If the preliminary contract is signed privately, the deposit cannot be paid by the buyer before the 7 days withdrawal period. In this case to, the deposit has to be paid to a “notaire”. Never pay the deposit to the buyer.

What will happen to the deposit?

  • If the buyer withdraws within the 7 days period, the buyer recovers his deposit within 21 days following his withdrawal.
  • Also, if one of the “conditions suspensives” is not fulfilled within the time limit, the buyer recovers his deposit
  • If all the conditions suspensives are fulfilled within the time limit:
    • “compromis de vente”: the deposit will be deducted to the final payment at the signature of the final act (“acte de vente”)
    • “Promesse unilatérale de vente”: if the buyer decides to buy the deposit will be deducted to the final payment at the signature of the final act (“acte de vente”). In case the buyer does not buy the deposit will be kept by the seller.

 

*Except for preliminary contract with a time limit longer than 18 month (including after prorogation), signed between a private seller and a professional buyer, also a 5% deposit is compulsory