Purchasing a property in the process of construction or off plan
Normally developers will market the developments themselves, however agents are often appointed to perform this task, particularly by smaller developers.
French legislation allows property to be sold in the course of construction (vente en l’état futur d’achèvement) off plan on the proviso that a number of strict conditions are met. These involve amongst others planning permission approval, financial guarantees, warranties to be held by the developer, insurance cover and the meeting of the appropriate regulations governing stage payments as made by purchasers.
There are three stages to this process, firstly the reservation contract, secondly the conveyance and finally handover of keys to the completed property. In this type of purchase the land purchase and construction are not separate transactions.
THE RESERVATION CONTRACT is not a contract of sale but a contract whereby the developer grants the prospective purchaser an option to buy an agreed lot/property secured by a deposit of not more than but most commonly 5% of the purchase price. This is deposited into a secure non-interest bearing bank account to which neither party has access until completion. Circumstances exist under which the purchaser can demand return of the deposit however in practice the deposit is usually forfeit should the purchaser withdraw.
ON COMPLETION the notaire invites the purchaser to take up the option to purchase and sends the purchaser a copy of the draft purchase deed together with plans and associated documentation. The purchaser then has one month in which to decide to proceed with the purchase or forfeit the deposit.
On signature of the purchase deed the title passes to the purchaser at which point the purchaser pays a proportion of the purchase price to the notaire, most commonly in the region of 30%, to which are added the notaire fees. This type of transaction usually attracts fees of between 2-4% of the purchase price.
Staged payments are then made in line with the contract schedule in accordance with the progress of work. These are secured against certificates from the developer’s architects that guarantee the appropriate stage has indeed been completed. Experience tells us that these progress stages should be monitored. Purchasers would be advised to visit the development at appropriate intervals.
TAKING POSSESSION: once the building work is complete the purchaser is invited to inspect the property and where possible this should be done personally. Once satisfied the purchaser should then pay the final instalment and having arranged the appropriate insurances take possession.
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