Conditional Clauses in Sale Contracts

What are 'conditional clauses' in a property sale contract?

A conditional clause (clause suspensive) in a sale contract is used if you are buying with a mortgage, or completion is subject to planning permission, or some other event.

For those seeking to buy with the assistance of a mortgage, the law offers a high degree of protection for, in the absence of anything to the contrary in the contract, the law assumes that purchase is subject to a mortgage being obtained.

As a result, if you are buying without the assistance of a mortgage, then the notaire will normally insist that a clause to this effect is included in the sale contract. If it is not, the law will presume a mortgage is being sought.

The law also states the duration of such a conditional clause cannot be less than four months, but it can be greater by agreement. Indeed, it is possible to include in the contract a clause that would allow you to increase this period by a maximum duration.

Accordingly you cannot use a conditional clause merely as a pretext for gaining additional time to think about the purchase. Indeed, most sellers and notaires now insist that specific details of the proposed mortgage be inserted in the sale contract, e.g. amount, maximum rate and duration.

If you need more time to decide, then you would be better advised not to sign the contract, or simply rely on the 7-day cooling off period that is automatically now part of any sale contract.

In the event that the mortgage condition is met, then the conditional clause is fulfilled and, other things being equal, completion can take place.

Where the mortgage is either refused, or not obtained in the timescale permitted under the contract, then the contract is terminated. You may, however, be able to get the seller to agree an extension to the contract, either expressly or by default.

Where the contract is terminated the deposit paid by the purchaser is returned to them, although the notaire is entitled to make a small charge (up to circa €150) for the preliminary work they will have carried out on the transaction.

The deposit should be returned to the purchaser within two months of termination of the contract.

In the case of a contract subject to planning permission, then even greater care is required in the drafting of the condition clause, in order to prevent abuse, or later disagreement about its interpretation.

At a minimum, the proposed surface area of the development should be stated, with a description of the proposed works, whether new build, conversion, or change of use. The maximum period for obtaining consent should also be stated.

It is even possible to include in the sale contract, a conditional clause relating to the sale of your existing home, provided of course the seller is willing to accept such a clause!

In such circumstances, it is not enough to simply state, ‘I will buy your house, if I sell mine’. There would need to be a named purchaser already in place, at an agreed price, and a maximum period for completion of the sale.

It is not normal practice to include a subject to survey clause in a sale contract, as occurs in the UK. This is because a contract arises once the sale and purchase agreement is signed, and the lack of precision in a subject to survey clause would not give sufficient certainty to be enforceable.

If there was an element concerning the condition of the property about which you were concerned, then you would be best advised to get a condition report prior to signature.

You can read more about conditional clauses in our comprenhensive Guide to Buying Property in France.

You might also want to read our Guide to French Mortgages.