Guide to Legal Process of Buying Property in France
4. Contract Conditions
In this section we review the main sale conditions in the contract for the purchase of a French property.
There are seven main issues that we shall examine, as follows:
- Conditional Clauses
- Cooling Off Period
- Options to Buy
- Statutory Disclosures
- Local Rates
4.1. Conditional Clauses
A conditional clause in French is a condition suspensive.
The sale and purchase agreement will always be a 'conditional contract', in the sense that the wishes of both parties are subordinate to certain legal requirements, and the need to establish good title to the property before it can be sold.
The purchaser (and seller) may also add their own conditions.
So if you want confirmation on matters before you are willing to complete you need to include them in the sale and purchase agreement.
The agreement will stipulate the manner in which the buyer will demonstrate fulfilment of the conditions, e.g. offer or refusal of mortgage, copy of planning consent or refusal.
The contract will also state the date by which a condition precedent must be fulfilled. If it is not realised by this date the seller can withdraw from the contract, although it will be subject to the detailed contract conditions.
Perhaps the most common and the most important condition is that relating to a mortgage. Other conditions may relate, for instance, to planning consent, the purchase of adjoining land, or to easements over the property.
If the property is being purchased with a mortgage it is important there is a condition that makes completion subject to a satisfactory mortgage being secured.
The contract will contain in it a clause along the lines of 'condition suspensive d'obtention de crédit/prêt immobilier'.
Even if by some oversight this clause is not included, provided the agreement does not expressly state that the property is being purchased without a mortgage, the law grants a presumption that a mortgage is being obtained.
However, to ensure complete clarity, better to rely on an unambiguous conditional clause in the contract!
It is likely the notaire will insist that any conditions are stated with a degree of precision, in order to reduce the scope for later disagreement and potential litigation.
In relation to a mortgage the information should include the length of time during which the clause should remain valid and the main details of the mortgage - amount, duration, maximum rate of interest.
It is not unusual for the purchaser to be granted 45 days to obtain a mortgage offer, after which the contract can lapse. If you are resident, and with a stable income, this is normally ample time, but it may be all too short for an overseas buyer seeking a French mortgage so if this applies to you try and negotiate a longer period in the contract.
There is frequent litigation in the French courts concerning this condition suspensive, sometimes due to poor drafting or to delays in obtaining a mortgage, or simply because the buyer has had a change of heart and seeks to use it to withdraw from the agreement.
A buyer seeking to rely on a mortgage rate lower than that stated in the sale and purchase contract risks losing their deposit.
In a case before the French Supreme Court, the Cour de Cassation, a buyer signed a contract with a clause suspensive to obtain a mortgage at a maximum rate stated in the agreement.
In seeking to obtain a mortgage at the best rate the purchaser subsequently made application for a mortgage at lower rate, on which he was refused.
As a result, he sought to be relieved of the obligation to purchase the property on the basis of the conditional clause.
The seller refused to accept that the purchaser had acted in good faith and brought an action in the courts, arguing that by seeking to obtain a mortgage at a lower rate it was contrary to the conditions laid down in the sale and purchase agreement, the compromis de vente.
In a hearing at the Court of Appeal the judges found in favour of the purchaser on the basis that the mere fact of seeking a lower rate than that stated in the sale contract did not amount to a breach of contract. As a result, the seller was thereby unable to invoke the penalty clause contained in the contract.
This was not the view taken by the Supreme Court to whom the seller appealed, who considered that the buyer had not fulfilled their obligation to seek funding in line with the conditions stipulated in the sale agreement, and so overruled the lower court.
If you area seeking a mortgage then you may wish to read our guide to French mortgages.
ii. Building Survey
As a general rule, the use of a 'subject to survey' clause is not used in France, primarily because there is no such thing as a sale 'subject to contract' as is the case in the UK.
Accordingly, if there is an issue concerning the condition of the property that you need to verify you may need to be very specific about it, or resolve the issue before you sign the contract.
iii. Planning Consent
Neither is it normal for the sale to be subject to obtaining full planning consent, as a planning application is likely to take some time to prepare and a planning consent, once obtained, can be later quashed if it breaches planning regulations.
Accordingly, where planning is an issue, it is normal for the sale to be conditional on obtaining an 'in principal' planning certificate called a certificat d’urbanisme, which you can read more about in our pages on the Planning System.
A new plot of land for construction of one or more dwellings requires a development permit, either a certificate d'urbanisme or a permis d'aménager. The former is normally sufficient for a plot for an individual house, but it will depend on the circumstances of the development e.g. infrastructure requirements, protected area.
Conditional clauses concerning 'sale subject to planning consent' need careful drafting, not only in relation to the planning conditions that may be imposed, but also to a possible later legal challenge to a planning permission.
You should ensure that the contract contains a relevant clause concerning easements (servitudes), so that completion is subject to no adverse easements on the property, or that, where appropriate, they are included to your favour.
v. Good Faith
The law only offers protection to a buyer who has acted in good faith.
If a buyer withdraws from a contract because one of the conditions has not been fulfilled they can be asked by the seller to demonstrate that they made suitable efforts to get the condition fulfilled. A court of law can also judge all conditions to have been fulfilled if a prospective buyer does not act in good faith.
Thus, where sale completion was subject to planning being obtained a court ordered that the sale was concluded, despite the fact that the prospective buyer had not made a planning application. The court ruled that by virtue of their inaction the prospective buyers had waived the necessity for planning permission to be obtained!
Similarly, where the sale was subject to a mortgage but the purchaser applied for and was refused a larger mortgage than that which was stated in the contract, the court ruled damages were payable to the buyer.
In short, a buyer cannot use conditional clauses as a way of merely giving them more time to decide whether or not they want to proceed with the purchase!
Next: 'Cooling Off' Period
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