Going back to basics, Indra Balassoupramaniane explains how the pre-contract stage works in France for those who are just beginning their search for a property
Before going into the details of the French conveyancing process, it is worth having a general overview of the system.
As in other countries, there are two stages in a French conveyance: pre-contract and completion. However, in France, the exchange of contracts is signed at an early stage because the general French rule in property transactions is that when the purchaser and vendor are agreed on the price and on the thing to be purchased, this is deemed to be a sale at that point.
Furthermore, the sale becomes binding on third parties when it is registered at the Bureau de Conservation des Hypothèques (Land Charges Registry).
Accordingly, many matters that would be dealt with in many other countries before exchanging contracts (such as local authority and land charges registry searches, establishing title deeds and so forth) are dealt with in France by way of clauses suspensives. This means that a French pre-contract will normally contain one or more conditions which must be fulfilled before the contract is completed.
As such, care is needed before signing such a contract and the purchaser is advised to seek independent legal assistance in order to make sure that this agreement meets their requirements, and contains all of the desired clauses suspensives which will allow them to back out of the deal should a problem subsequently arise.
Otherwise, it will be very difficult and expensive to pull out of the sale as this pre-contact generally includes a clause pénale (penalty clause) to be imposed by either the vendor or purchaser if the sale breaks down. It should also be noted that, in such a case, even if you are prepared to lose your security deposit this does not prevent the vendor from forcing the sale to proceed by taking the matter to the French court.
Promesse de vente
The expression promesse de vente is not actually clear on its own. Technically, it refers to a promesse unilatérale de vente (unilateral promise to sell).
A promesse unitalérale de vente is an option to buy the property granted to the buyer by the owner for a specified price and for a specific duration.
A deposit of up to 10% of the purchase price is made on the signing of the agreement. The purchaser has seven days during which time they may withdraw from the contract without penalty.
If they do not withdraw by this time, within the option period, the buyer has the option not to purchase the property (by giving up their deposit). After the option period, the purchaser is legally bound to purchase the property.
However, as it is a unilateral promise to sell (granted therefore only to the benefit of the buyer), in the event that the seller changes his mind and does not wish to sell, the purchaser can enforce the execution of the contract by forcing the sale in front of a French court.
Compromis de vente
A compromis de vente is what may commonly be understood as a sale and purchase agreement, as there is a clear bilateral obligation. The technical term for this type of contract is called promesse synallagmatique de vente (bilateral promise to sell and purchase). Under this agreement, the owner agrees to sell to the purchaser and the purchaser in turn agrees to buy from the owner, subject to any conditions (clauses suspensives) that may be stipulated in the contract.
A deposit of up to 10% of the purchase price is made on signing of the agreement and the purchaser has seven days during which time they can withdraw from the contract without penalty. Afterward, both parties are bound and the contract can be enforceable in front of a French court, should one party decide not to go ahead with the sale.
As stated above, signing a pre-contract in France takes place much earlier on in the process than in the UK because all relevant enquiries and searches are made after exchange of contracts and before completion.
Because of this, it is common to include some clauses suspensives in the pre-contract to cover special concerns before the parties commit themselves. These clauses are an important element of the contract because until they become unconditional (within a stipulated time limit) the contract is unenforceable.
A clause is a future and uncertain event which has to be performed before the contract can be completed. Any condition can be stipulated as long as it is not potestative (e.g. depending on the will of one party).
The most common clauses are:
• obtaining a loan
• obtaining a building permit
• the absence of mortgages on the property
• that no right of pre-emption is exercised when applicable.
Again, it is advisable to seek assistance from a French lawyer to draft such clauses in order to reduce the scope for later disagreement and potential litigation.
Indra Balassoupramaniane is a bilingual French ‘avocat’ based in Toulouse
Tel: 0033 (0)5 31 54 64 25