Preliminary binding agreement (“Compromis de vente” in French)
This is probably the most important document to be executed by all the parties.This contract is usually prepared by a French Notaire or an estate agent.
As soon as executed and generally speaking:
– This contract would bind the vendor
– The purchaser would have a 10 day cooling-off period during which it would be possible to withdraw
This preliminary binding agreement would contain many information relating to
- The vendor and the purchaser (please note that it is possible to include a special paragraph relating to a substitution clause if for example it is needed to set up a company)
- The property to be sold
- The price and its future payment (cash or loan/mortgage ; in case of loan or mortgage, it would be necessary to draft a condition precedent in this respect)
- Potential encumbrance or servitudes
- Date of the transfer of the property and transfer of enjoyment
- Information relating to potential pre-emption right(s)
- Information relating to planning permission and legal guarantee if the property is less than 10 years old
- Information relating to all the mandatory reports to be provided by the vendor (asbestos, lead, termites, gas, electricity, energy performance, Natural and Technological Risks
- Information relating to the main drainage system or septic tank
- Deadline to execute the final deed of conveyance
If the purchase relates to an off-plan property, the preliminary agreement is named “contrat de réservation”.
It is also possible to buy a French property at a property auction.
Final deed of conveyance (“Acte authentique” in French)
The final deed of conveyance is more or less a reflection of the preliminary binding agreement.There is usually some 10 to 12 weeks between the execution of the preliminary binding agreement and the execution of the final deed of conveyance
The sale is subject to undertaking the usual and requisite searches and to obtaining the appropriate papers and certificates under French Law, hence this 10/12 weeks period (local authority and zoning constraints, potential right of existing pre-emption right of the Town hall, lifting of previous mortgage and charges etc.)
The price is paid that day and the keys are handed over at the same time.
It is, under certain circumstances, a statutory requirement that in the event of the sale of real property, non-French and non EU residents must appoint a duly authorised and bonded Tax representative in France.The ostensible role of such a Tax Representative is to guarantee full payment of whatever amount of CGT or any other taxes which might be due to the French Tax authorities.
In other words, if there were to be a subsequent reassessment (redressement) with penalties, then the idea is that the French Tax authorities would have a solvent guarantor on French territory without having to undertake research to find a foreign resident.
The number of such duly authorised Tax representatives is very limited in France.
The tax people would also accept, at least in theory, a personal guarantee from a French tax resident, of whatever nationality, known to the vendor and who is willing to stand as guarantor at first demand for the vendor for at least four years.
However, the person in question would be taking on almost unlimited personal liability for any possible future tax debts relating to the vendor and this is perceived by most people to be an unreasonable commitment which would relate to their real property as well as their personal goods and chattels.
For further information on buying and selling a French property please click here.