2. Preliminary Contract

If you buy a property off-plan, it is normally a two stage contract process.

In the first stage you will sign a preliminary contract, before you enter into the final VEFA contract itself.

1. 2.1 Purpose of Contract
2. 2.2 Deposit
3. 2.3 Cooling Off Period

2.1. Purpose of Contract

Before you sign the initial contract, you would be wise to establish how far the developer has reached with the development, so that you can be more or less certain that it will proceed, and that it will do so on the basis as set out in the plans.

Whilst the larger developers may well be able to offer you a well-delineated product with a high degree of certainty, this is not universally the case with all developers.

Thus, it may well be that detailed plans of the proposed development are not available. The developer may not even yet own the land, and full planning permission may yet not have been granted.

The developer may still be seeking funding, and may simply want to get as many buyers as possible in place, in order that the banks will release the funds.

The developer is under no obligation to sell the property to you, even though you may have signed a preliminary contract.

Of course, if they did not do so, you are entitled to a full refund of your deposit, and instances of developments not proceeding do sometimes occur. More usually, the timescale for start and completion may drift.

If so then, depending on the precise circumstances, you may be entitled to withdraw from the contract and/or seek damages. The detailed grounds for withdrawal are set out in the next section, when we review the VEFA contract itself.

The law prescribes only a minium level of information need be provided in the preliminary contract although, to assist with marketing of the properties, most developers will generally offer a contract that provides an appreciable level of detail on the specification.

If the developer has received full planning consent, ask to see the plans, or visit the local Mairie to see them. They may tell you more about the development than is contained in the preliminary contract, e.g. scale of proposed development.

Strictly speaking, there is no legal obligation to sign a preliminary contract before you sign the final VEFA contract. In theory, if you have any concerns about signing a document that lacks precision, you can choose to proceed directly to the final contract.

However, as the detailed final contract is not normally available at the time the development goes on the market, this may, of course, mean that you risk losing the possibility of buying into the development (or at least the particular property you wish to purchase), as others who are prepared to reserve a property step in before you. It is a choice you have to make.

The developer may take unkindly to you doing so, and find a pretext not to proceed with the contract. You then need to make up your mind if you wish to proceed on any other basis.

2.2. Deposit

The law strictly forbids the payment of any deposit before the signature of the intial contrat de réservation.

Accordingly, if you are asked for a deposit by a developer before you sign the contract, you should refuse.

At the time you do sign you will be asked for a dépôt de garantie.

The maximum deposit that can be requested depends on the planned delivery date of the property, as follows:

• Within one year - 5%
• Between one and two years - 2%
• More than two years – 0%

The deposit cannot be used by the developer to fund the development. It must be placed in a client account, either with a bank, or through the Notaire, and cannot be withdrawn until the sale is completed.

If this date passes, without the VEFA contract having being signed, then you have the right to withdraw and obtain reimbursement of your deposit.

2.3. Cooling Off Period

Once the contrat de reservation is signed you have a seven day 'cooling off' period, during which time you can withdraw from the contract and receive a full refund of your deposit.

The seven day cooling off period does not start until you have received a copy of the contract documentation, which should be sent to you by recorded delivery. It does not matter that you may have been handed a copy by the developer at the time you signed the contract. There must be formal, certified confirmation you have received the contract, which can normally only be achieved by a recorded delivery receipt.

If you withdraw from the contract beyond this date then you will lose your deposit, unless you are able to invoke one of the permitted reasons allowed by law, e.g. failure by developer to proceed in accordance with preliminary contract.

If you are seeking a mortgage to fund the acquisition, then it would be best that this was in place (at least 'in principle') before you signed the preliminary contract. If not, then you must ensure that a conditional clause is inserted in the preliminary contract, making signing of the final VEFA contract subject to you obtaining a mortgage.

If the developer is agreeable to this clause a time limit will be imposed. In some cases a developer will have access to a mortgage lender for their clients, but whether on terms more or less favourable than you could obtain elsewhere, only you can judge.

If you are happy to proceed with the preliminary contract, then the final VEFA contract will be signed when full details of the proposed development are known, and the contract documents have been prepared by the Notaire.