The Initial Sale Contract in France
The information contained below has been largely superseded and substantially enlarged in our Guides section at Buying a property in France.
The Compromis de vente
Please consult our new Guides section on Buying a property in France: Promesse de Vente / Compromis de Vente
In this article, we explain the Compromis or Promesse synallagmatique de Vente which is essentially adapted for a vendor who wants the purchaser to be committed to buy and does not want just a sum of money as damages if the sale does not proceed.
From our experience it seems that the Compromis de vente is more appropriate for individuals and the Promesse de Vente is better for developers.
In most cases both the vendor and the purchaser have agreed about the property and the price. In addition, article 1589 of the Civil Code states that a promise to sell (a Compromis) is a sale when all the parties have agreed both the subject matter and the price.
In fact one must bear in mind that in France it is almost impossible, in most cases, to sign the final deed immediately before the French Notaire because of the "let out" clauses which were explained in Part I. Also time is needed for the Notaire to collect all the necessary documents from different administrative departments.
As with the Promesse de Vente, a deposit which is usually 10% of the purchase price, will be kept by a stakeholder, who is usually the Notaire, until completion. This sum will be deducted from the purchase price if the sale is completed.
If the sale is not completed because the purchaser does not want to buy the property despite the fact that all "let out" clauses have been complied with then in this case the vendor can compel the purchaser to buy.
As explained below it is also usually stipulated that if a vendor does not want to go before the Court he can also receive the deposit as damages for the salewhich has not been completed.
The time delay between the signature of the Compromis and the Final Deed (Acte Authentique) is generally as for the Promesse de Vente - two or three months.
Bearing in mind that the main aspect of the Compromis de vente is the possibility for both parties to compel the other, in default, to respect the obligations stipulated in the contract, it is important to know the procedure when a party wants to issue proceedings.
The party who wants to complete the sale and sign the Final Deed must issue a writ against the party in default in order that the Court can order the latter to sign the Final Deed.
The Court can also grant a Judgment which will be in fact the title deed and in this case the Judgment is registered at the Land Registry. In addition damages can be granted to the party who has issued the proceedings.
But before that, it is wise to register at the Land Registry the "claim" before the Court or a deed called "Proces verbal de defaut" drawn up by the Notaire which basically states that one party is in default in not completing the sale.
The advantage of this registration is that a third party cannot say that the initial contract was unknown. But you have to bear in mind that despite this registration the party must obtain a Judgment from the Court or a notarial deed within three years.
There is also an unpleasant tax implication when you issue proceedings to complete a sale. The transfer duties are payable immediately. So in the case that it is the vendor who compels the purchaser, he is obliged to pay the transfer duties in advance and even if it has been stipulated in the initial contract that they would be payable by the purchaser.
In résumé it seems that the Compromis is more appropriate for an individual than for a developer who prefers to lose a deposit than to be forced to buy a property where he may have made an error of commercial judgment in the first place.
For the sake of completeness there is a third kind of initial contract, very frequent in commercial transfers but not in domestic transfers is called "la Promesse d'achat". The definition can be "one person commits himself to buy a property in the case where the owner wants to sell it".
It is in fact the contrary of a Promesse de Vente because as a matter of factonly the purchaser is committed. The same rules explained in Part I about the Promesse de Vente apply. In the case where the vendor accepts the promesse d'achat both parties are committed.
The initial contract whatever it is (Promesse de Vente, Compromis, Promesse d'achat) is the most important deed. The final deed usually is only a deed drawn up according to the requirements of the Land Registry but the term of the initial contract are checked to see that there are no outstanding points. It is so important therefore before signing this initial contract to seek legal advice.
The information contained below has been expanded in our new Guides section on Buying a property in France: Buying a property in France