The initial french property purchase contract (compromis de vente)
The initial contract for the purchase of an existing french property will be a compromis de vente (also known as a promesse synallagmatique de vente or somewhat more unusually a promesse unilatérale de vente). The latter is a unilateral contract whereby the vendor promises to sell and the prospective purchaser has an option to purchase in return for which a holding fee is payable. The compromis de vente is a bilateral contract whereby there exists an undertaking from each party to fulfill their individual agreed tasks, that is to say the vendor agrees to sell and the purchaser to buy. Care should be taken as to which type of contract you sign as each is different in nature and the effects of each are not the same.
The agent or notaire will draft the initial contract usually at the behest of the vendor. The compromis de vente is the most common variant of initial contract. The compromis will contain information, some of which will be standard, such as the price, the description of the property, and the notional completion date. It will also contain conditions that must be fulfilled prior to signature of the purchase deed. It is at this juncture that care must be taken, as detailed attention should be given to the drafting of clauses concerning conditions precedent, which may include for example those concerning finance, the condition of the property, work to be carried out prior to completion, rights of pre-emption, etc. Standard form contracts, even where these are approved by the notaire, will not be suitable in every situation for all purchasers and all properties. One word can make the difference between a purchaser having the right to pull out of a given contract in a particular situation whilst retrieving the deposit, or being faced with losing not only the deposit but also having to pay a hefty penalty as well as the agent’s commission.
It is important to remember that the compromis is a bilateral contract and contains binding commitment on both parties. It is also important to understand that as is the case with any contract often what is not there is as important as what is.
Avoid the offre d'achat (purchase offer) or indeed anything resembling even a simple exchange of letters as depending upon the drafting these can be construed as binding without condition. In the event that you are asked to sign such a document you should ensure that its content is reviewed by a specialist before you sign.
Once the terms of the initial contract have been agreed the compromis is signed by the parties. There then elapses a statutory seven-day period in which the purchaser may withdraw from the contract without penalty.
After the seven-day period has elapsed, the contract is binding upon both parties. The purchaser should pay a deposit, usually 10% of the purchase price, to either the vending agent (on condition that the agent is licensed to hold deposits) or the nominated notaire. Purchasers should resist any request to pay monies directly to a vendor. The notaire will then commence the process of conducting standard searches, confirming the vendors right to title, enquiring with the charges registry as to whether there are any charges registered against the property etc etc. The notaire will satisfy him/herself as to the validity of the vendor’s obligatory certificates such as for example those relating to termites, lead and asbestos where applicable and be made aware of any pre-emptive rights to purchase for example emanating from the local authority or other entity. Local searches will also reveal the existence of easements, rights of way and other encumbrances.
The initial contract will provide for a date by which the final contract should be signed. Purchasers should consider this completion date as notional and not make plans based upon it. There are a number of factors governing the completion date, many out of the direct control of the notaire, the parties, or ourselves. The notaire may be awaiting a response to a particular search or circumstances arise that may cause an unforeseen delay, for example where referral to a court becomes necessary in the event that a vendor becomes incapacitate between signature of the initial contract and that of the final contract.
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