It’s all in the fine print
There’s lots of paperwork to deal with when you buy in France but it need not be a minefield, says Peter-Danton de Rouffignac
As you set off on your search for your ideal French property, along the way you will be asked to sign a number of documents, from the estate agent’s bon de visite to the acte finale at the moment the property becomes your own. In this article I describe the various documents you will be asked to sign and their legal implications.
Most British buyers making their first forays into the French property market will start their property search by visiting a number of estate agents, perhaps after looking at their online catalogue or seen an announcement in their office window. You eventually visit the agent’s office, and hopefully a friendly negotiator will take time to discuss the type of property you are seeking and offer to show you some that come closest to your criteria.
Mandat de vente
French estate agents are highly regulated under the loi Hoguet of 1970 and one of the rules is that they must have a sales mandate (mandat de vente) for every property on their books. The mandat is a written instruction from the owner of the property authorising the agent to try and sell the property in return for a commission, based on a percentage of the selling price. The sales mandate can be exclusive (restricted to one agency) or non-exclusive (allowing several agencies to market the property, and in some cases the owner to seek his own buyer).
Agency commissions can be freely set by the agent, and their commission rates must be clearly displayed at their premises, and visible from the street outside – you can check. The commission is usually included in the price of the property – you will see a note in the property details saying FAI (frais d’agence inclus) confirming that this is the case, so you know exactly what you are being asked to pay. Agency commissions in France range from 3-10% of the property price, the higher figure being justified by the comparative costs of operating in France.
The agent should explain that you will also pay French government taxes and land registration charges, and the notaire’s fee, calculated as a percentage of the sale price. These are generally lumped together under the term frais de notaire, even though the notaire’s fee is only a small part of this overall sum, which will total between 5-10% of the property purchase price.
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The agent’s property details will also include a reference. This can be the same number as the agent’s mandate to sell, as all mandates must be listed sequentially, and logged in a register at the agent’s office. You might note that earlier serial numbers may indicate that the property has been on the market for some time.
Bon de visite
If you decide you wish to visit some of the properties proposed by the agent, you will be asked to sign a bon de visite. This document confirms that the agent introduced you to the property and in the event of a sale justifies the agent’s right to his commission. You may be asked for proof of identity at this stage. This is quite normal for safety and insurance purposes – the agent should have proper all-risks cover to take clients in his car and on property visits.
Software systems, such as a proprietary version called Pericles used by many agencies, automatically log the client’s details and the properties visited, while preparing the bon de visite, providing a further record of which properties were visited and by whom and on what date. This information also helps the agent to give his client (the vendor) a report of the number of visits to his property, and the reasons – if known – why prospective buyers perhaps did not make an offer.
Because of the system of multiple mandates, misunderstandings can arise where a vendor has signed a non-exclusive sales mandate with more than one agency and you find yourself being taken to visit a property you may have already seen. If you realise this, it is polite and correct to inform the agent as soon as possible so as not to waste his time. As a result of the bon de visite it is rare for two agencies to argue as to which one first introduced a client to a particular property.
Occasionally, however, buyers and vendors attempt to bypass the agency, as a way of avoiding paying their commission, and enter into direct negotiation with each other. This is not only dishonest but can result in the vendor being sued for his commission by the agent under the terms of the sales mandate, and in extreme cases the sale being held up by the courts. This could leave a buyer locked into an unfinished transaction, where he has paid a deposit on the property but cannot complete until the situation is resolved.
A study of the jurisprudence indicates that French courts will invariably find in favour of the agent and his entitlement to his commission or damages with interest.
Mandat de recherche
Sometimes an agent may propose to the potential buyer a contract known as a mandat de recherche. This is in some ways similar to the sales mandate signed by a vendor, but in this case instructs the agent to act on behalf of the buyer to find and negotiate the purchase of a property fitting your criteria. In return, the buyer would pay the agent’s commission in the event of a transaction being completed. Such contracts can be restrictive, particularly if a buyer grants the agent exclusive rights of negotiation, effectively preventing the buyer from seeking properties via another agent. Even though it may be time-limited to a period usually of three months, the research mandate may stipulate that the buyer cannot enter into direct negotiations for a further period of 18 or 24 months with a vendor originally introduced by the agent. (Note that a simple bon de visite may contain similar restrictions for a period of up to two years.)
There has been some criticism of the use of search mandates in French consumer and property forums, particularly in instances where an agent has signed both a sales mandate (with the vendor) and a search mandate with a buyer, thus placing himself in a position whereby he could conceivably earn two lots of commission!
Some buyers have also complained that they thought they were signing a bon de visite when in reality they signed a search mandate. This is difficult to understand as the search mandate is a lengthy document containing client particulars, the type of property he wishes to acquire, and the amount of commission he would pay the agency in the event of a purchase. The bon de visite is not a mandate but an acknowledgement that the buyer was first introduced to the property by the agency.
When you eventually find a property you like, the next stage is to make a formal offer. This can be at or below the asking price, but importantly it should be in writing, using either a standard form provided by the agency or a simple handwritten letter. Verbal discussions of price are at best an expression of interest with no legal validity. The status of the written offer is more formal and can be considered as binding, so it should not be entered into lightly. You should certainly not make simultaneous offers on several properties just to test the vendors’ reactions, as you could find yourself committed to buying several properties!
The type of form used by an agency to present your offer will include your personal details, the identity and price of the property, and in some cases details of how you intend to pay – either from your own available funds, or by means of a loan or mortgage. If the vendor is in the fortunate position of receiving several offers, he may prefer to accept one where the buyer is not seeking a mortgage.
The reason for this is that at the next stage – signing the pre-contract or compromis de vente – a buyer seeking a loan or mortgage has additional time to arrange his finances, at the end of which he can still withdraw from the deal if his efforts are unsuccessful.
As a safeguard, a potential buyer could time-limit a written offer, say, for 48 hours after which it will lapse, leaving the buyer free to withdraw. The agent will communicate your (written) offer to the vendor and if it is accepted will secure the deal by getting the vendor’s counter-signature on the document. If your initial offer is rejected, you may respond with a higher offer or withdraw from the deal.
Or you can continue with offers and counter-offers until an agreement is reached, committing both parties to going ahead to the next stage, the preparation of the compromis de vente or pre-contract. Note that no money should ever be handed over to either a vendor or an agency at the stage of the (written) offer.
Compromis de vente
At first sight, a typical compromis de vente can appear daunting, running as it may to 50 or more pages including annexes. It can be drawn up either by the agency or by the notaire appointed to handle the transaction. The compromis essentially sets out the terms under which the final sale contract (the acte authentique) will complete the purchase of the property.
The main difference is that the compromis may contain a number of conditional clauses (clauses suspensives) which must normally be fulfilled in order for the transaction to be completed. Typical conditional clauses can include subject to the buyer securing a loan or mortgage’ or subject to obtaining planning permission’ or subject to a satisfactory survey of the property’. There is no limit to the number and type of conditional clauses that can be inserted into the compromis provided they are accepted by both parties.
The compromis de vente contains certain essential information including the details of both buyer and seller; details of the property and its origin (for example, through inheritance); description of the property, including its surface area if it is located within a co-ownership complex (condominium) such as a block of flats or private estate; the sale price and how it will be paid (out of the buyer’s funds or through a mortgage yet to be secured etc); the amount of any deposit to be paid; the amount and method of payment of the agency’s commission; an agreed date for completion and handover of the property; the list of conditional clauses, if any; and annexes such as the diagnostics immobilier carried out by a certified expert.
It is normal for the buyer to pay a deposit against the purchase price at this stage. This is traditionally 10% but is negotiable between the parties. The deposit is paid to the agency, provided it is licensed and insured to receive client funds, or to the notaire handling the transaction. In both cases, the money is held in a special sequestered account and is refunded to the buyer in the event that the sale does not complete. The deposit is never paid to the vendor, even in the case of a private sale.
The diagnostics or investigations that have to be commissioned and paid for by the vendor have become more complex over the years. They currently include determining the risk of exposure to lead, asbestos and termites, and natural risks or disasters such as flooding or landslides; the state of electrical and gas installations (with recommendations for improvement); and a certificate of energy efficiency for the property, for example whether it is well insulated or not.
In the case of natural risks, every French commune must publish a report known as a PPR (plan de pr�vention des risques naturels pr�visibles) with different zones marked as high risk (for example, risk of flooding) to normal. Various regulations apply according to the rating of a zone, such as a total ban on building or extending a dwelling in a zone rouge (high risk). Part of the notaire’s job in preparing the completion documents is to study the PPR and other expert reports, and a buyer may, of course, privately engage an expert such as a surveyor to give an opinion on the property’s building fabric or the likely cost of any renovations.
The compromis de vente offers the purchaser a high degree of protection, with the use of conditional clauses written into the text. The buyer also benefits from a period of seven days of reflection enabling him to change his mind and not proceed with the purchase. Where a buyer is seeking a loan or mortgage, and this is noted in the compromis, a further period – in practice around 30 days – is allowed to enable him to find and accept a loan, provided he has shown due diligence in trying to seek the appropriate funds. You cannot sit back and do nothing and then attempt to withdraw from the transaction without incurring penalties, such as the loss of any deposit paid.
If all goes smoothly, completion can normally take place within two months, with the drawing-up and signature of the acte authentique, at which point the property becomes yours. If you are unable to attend in person for the signature of the compromis de vente or the final acte authentique, you can authorise a power of attorney for someone (usually a clerk within the notaire’s office) to act on your behalf. This is known as a procuration.
Buying a property privately or through a notaire acting as estate agent involves similar procedures, though buying privately will not give you the protection that the loi Hoguet offers when using a properly licensed estate agent, holding a carte professionnelle issued by the pr�fecture. Private vendors often have an inflated idea of the value of their property and may try to sell it at the market price’, a figure that includes an agency commission that is not payable!
Without an estate agency being involved, the buyer has fewer guarantees that the property is as described, and that the vendor is authorised to sell it. It is also difficult to pursue a private vendor through the courts in the event of problems such as misrepresentation. However, if you are happy you are getting a good deal, both parties can proceed direct to the stage of appointing a notaire to draw up the compromis de vente in the usual way.
Some notaires also act as estate agencies, offering a selection of properties for sale. Their commission rates are fixed at 2.5% before tax on sales over €45,735, making them generally cheaper than estate agents. Their transaction fees (for preparing the sales documentation etc) and the government fees and taxes will be in addition, at the usual fixed scales depending on the value of the property.
At the early stage of your research, you can also call on the services of one of the new breed of property finders (chasseurs de bien), who for a fee (and sometimes a percentage commission on top) undertake to find and shortlist properties for you to view. This can save time and reduce the number of visits you may have to make to France, and gets over the problem of language if you do not speak fluent French. They are widely used in and around Paris and other large cities where the property market remains particularly competitive.
Peter-Danton de Rouffignac MA LLM is a property adviser based near Perpignan. www.francemedproperty.blogspot.com