Sale and Purchase Agreement
Once you have agreed the sale price and basic terms with the seller , you are advised to quickly move on to the signing of the preliminary contract, as the property may well be advertised with multiple French Property Agents. The preliminary Contract, usually called the Compromis de Vente, is legally binding. For this reason, you must be certain that you are happy with the conditions of the sale. Most agencies & French Notaires have a standard Compromis de Vente, however it is possible to insert conditional clauses, known as conditions suspensives. For example, a buyer may only wish to proceed with a purchase if certain planing permission is granted and would therefore want this to be added to the Compromis, as a condition suspensive. It is worth noting that the seller does not have to agree to any special conditions, hence why it is essential to discuss “conditions suspensives” with the French selling agent as early as possible, so that all parties are happy with the content of the contract on the day of the signing.In this contract, the purchaser must stipulate whether they are buying with the aid of a French Mortgage. This mortgage can be a conditional clause of the Compromis de Vente.
Whilst it is possible to sign such an agreement through a suitably qualified estate agent, most commonly these formalities take place through the Notaire. The role of the Notaire in French property contracts is more limited than that of a solicitor in the UK. Typically the same Notaire will act for the Vendor and Purchaser. We would recommend that prior to signing the preliminary contract, that you give consideration to appointing an independent legal adviser to assist you through the various stages of the sale. See here for help that is available: French Legal Advice Services
If you are seeking a mortgage to purchase then a suitable conditional clause needs to be entered in the agreement. You may also wish to insert other conditional clauses, notably those in relation to planning.
You will be asked to provide a deposit, normally 10% of the purchase price, although it can be a lesser sum, as the law does not stipulate a minimum percentage deposit. You will pay this directly to the Notaire, or sometimes the agent will accept this into their escrow account but NEVER do you pay the deposit directly to the seller. We recommend that you use a specialist Foreign Exchange provider to send your deposit (and later the balance) this is because typically a FX specialist offers far better rates than a high street bank. It is important to ensure that you use a FX Company that is regulated by The Financial Conduct Authority. See here for our FX Partner
Although the Compromis de vente is signed relatively quickly after an offer has been accepted, there then follows a 10 day cooling off period, in which time the buyer can pull out of the contract without penalty. Following the signing by both seller and buyer, either the French Notaire or the French Estate Agent (depending on who drafted the agreement) will provide the buyer with a copy, which must be signed for. If the buyer is not available to hand this over personally, this will be sent to them by registered post. Once the buyer receives their copy, they have seven days in which to change their mind. In fact the 10 days actually commences the day following receipt of the registered letter. If you do decide to withdraw, you should send a recorded delivery letter to the notaire or agent within the ten-day period, your deposit will then be returned to you by the notaire.
Diagnostiques & Surveys
Property buyers in France benefit from a number of obligatory diagnostiques or reports that vendors in France have to provide. They cover in the main; asbestos, lead, termites, energy efficiency, natural risks, gas installations, waste drainage and electrics. These are presented to the buyer in a Dossier Diagnostique Technique (DDT), so that the buyer knows in advance of any defects.
Surveys are rare in France but there are plenty of Surveyors available should you decide to have one carried out. The agent will usually be able to arrange this on your behalf. It is advisable to get this underway well in advance of the 7 day cooling off period. Alternatively you could check that the vendor is happy for you to add a successful survey result as a conditional clause of the compromis de vente.
If you have any doubts as to the boundaries of the property, or new ownership boundaries are being created, then it may be necessary to appoint a land surveyor to undertake a survey to determine the boundaries.
Once the sale and purchase agreement has been signed, then the notaire is tasked with undertaking the usual searches to ensure you have proper title, and that there are no encumbrances on the property.
They will also need to ‘purge’ the property of any rights of prior acquisition that may be held by the local council or the French national land agency, called SAFER.
These enquiries normally take around two months to complete.
This is something that you need to give your full consideration, as there are different forms of ownership structure through which you can hold your French property, which can have important implications in French inheritance law.
Depending on your circumstances, you can own the property en indivision, en tontine or through a property company called a Société Civile Immobilière (SCI).
A property held en indivision is the most common option of joint ownership and the way in which the notaire will automatically draft the deed of sale, unless you specifically request to buy en indivision. This is essentially equivalent to English ‘tenancy in common’. The property is purchased by two or more persons, each person holding a stake in the property in whatever terms that may be decided between them. If for example a couple owned a property in equal parts, later one of the couple dies, their half share would then be transferred to any children they may have and not to their partner. This can be an issue for some people and they may decide that “en tontine” is a more appropriate way to hold the property.
A property held en tontine is used to avoid the entrenched inheritance rights of children in French law, so that no part of the property passes to them during the lifetime of any of the existing owners. It is similar to an English joint tenancy, so any survivor would then inherit the other share and would gain full control over the property. There are advantages and disadvantages to both options and so it really is best to take advice from a legal expert who can advise you accordingly. French Legal Advice Services
If buying neither indivision nor en tontine suits your needs, then you may wish to consider establishing a company to buy the property. There are various options but the most common type of company purchase is called a Société Civile Immobilière (SCI). An SCI could be described as a property-holding partnership, as it’s a specialist type of company constituted for ownership and the management of property.
Where an SCI is used for the purchase of a private home, the owners effectively become non-paying tenants or occupants of the property. This type of ownership will certainly require full explanation from a specialist.
Once all the local searches are satisfactory and that the balance of funds have been deposited with the notaire, completion of the sale can go ahead. This takes place in the notaires office, by signing the deed of sale, in the form of acte authentique. If it is not possible for the buyer to be present at the completion, a power of attorney may be signed and used. The power of attorney will be in France so it’s advisable to ensure you fully understand the details of the document you are signing.
Fees and Taxes
The total charges payable for an existing older property are between 6% and 8% of the purchase price. Although referred to as ‘notaire fees’ (frais de notaire), these include stamp duties and registration taxes. In fact the actual fee to the notaire is only about 1%!
In the case of a new property, the charges are less, although VAT on the purchase price is also payable.