How to Buy Property in France
1. Purchase of an existing property
French mortgage advice - "Compromis de vente" or "promesse synallagmatique" (Bilateral agreement to sell/buy) This constitutes the most common type of preliminary contract for the purchase of existing property with both seller and buyer committed, having mutually agreed on the property and the price. Transfer of property will take place subject to signature of a deed before the notary and/or obtaining a loan or mortgage.
Upon signature of this agreement, the purchaser has to deposit a sum which is normally 10% of the purchase price with the notary or the estate agent. This deposit is usually described either as a payment on account or a penalty for breaking the contract and will be deducted from the sale price. The way the system of payment on account and penalty works is as follows: if the purchaser indicates that he does not wish to proceed, he forfeits his deposit; if any conditions included in the agreement have not been fulfilled for reasons beyond the purchaser's control, the deposit will then be refunded; if the seller decides not to proceed, he may have to pay a charge to the buyer. The sales agreement must indicate the method of payment. When using a mortgage to assist with the purchase, the sales agreement should contain a "condition suspensive" (opt-out clause) , so that if the loan application is not successful, the deposit will be refunded.
The agreement must describe the property, and should contain other conditions relating to town planning, rights of way, etc.
The purchaser and the vendor must subsequently within a period of time stated in the preliminary contract, enter into a formal deed, drawn up and executed by a notary, to complete the purchase of the property.
2. Purchase of a new construction property
1)
Vente en l'Etat Futur d'Achèvement "VEFA" (Sale of property for future
completion). This is the most common type of contract for the purchase of
a property which is not yet completed. Payments are made by installments
as the construction progresses. The parties must also sign a "contrat
de réservation" (reservation contract) which states, among other
things, the price of the completed property, the technical
specification, the methods and dates of payment, etc. The purchaser
must pay a deposit of up to 5% of the estimated price, which is
deducted from the purchase price. If the purchaser decides not to
proceed with the contract, the deposit will be forfeited. Providing the
contract includes a "condition suspensive" if the purchaser cannot
proceed because a mortgage application has been unsuccessful, or
because provisions of the contract have not been observed, the deposit
will be refunded. The parties then sign a deed of sale containing the
binding agreement of the parties on the various terms of the
preliminary contract before the notary. It is at this stage that the
vendor transfers ownership of the property to the purchaser.
2)
"Le contrat de construction de maison individuelle" (Contract for the
construction of a house) It is possible to buy a plot of land and have
a house built on it as in the UK. In this case, it is advisable to make
enquiries with the French local authorities about obtaining planning
permission and to exercise care in the choice of builder.
You have to enter into a preliminary sales contract for the purchase of
the land (see page 8) and a separate contract with the builder. Once
you have signed these two contracts, you can proceed with your mortgage
application.
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