You have now found the French property that you want to buy; you have been able to check all the pros and cons, to discuss with the estate agent or the vendor the conditions of the purchase and your only concern now is to make sure that the vendor cannot sell the property to another purchaser.
To cover this potential problem you and the vendor must sign a contract which binds at least the vendor to sell and allows time for the Notaire to check the fulfillment of the "let out" clauses - clauses suspensives - and to collect the documents needed for the final deed and for you to finance the purchase.
On the other side the vendor or his interested representative is as eager as you to sign any paper which would bind you to the purchase.
Any agreement on the details of the purchase and its price is able to bind both parties. Consequently anybody has got authority to draw up such a contract. Having regard to the importance of this contract it is sensible to ask for a professional to draft it and what better professional for French conveyancing than a French Notaire.
His professional experience and responsibility is most of the time the best guarantee against any loophole. Just let him know what you want to achieve.
Where there are no particular worries about the property the contract will usually include the following "let out" clauses:
We have already stressed in previous articles the importance of these "let out" clauses - conditions supensives. Everyone tells you "there is no problem".
Make certain that there is no doubt about anything and make sure it is written down as a condition suspensive! The next step is to know what sort of contract you are being asked to sign.
You may be surprised to learn that there are two sorts of contract called Promesse de Vente (promise to sell) and Compromis de Vente (contract of sale) whose effects and consequences are different. You will be even more surprised to know that you are more likely to sign a Promesse de Vente if you are north of the Loire river and a Compromis de Vente if you are south!
After this short explanation regarding "let out" clauses, we have set out below an explanation of what exactly is a Promesse de Vente and a Compromis de Vente.
You must bear in mind that the most important difference between the two contracts is that with the Promesse de vente the purchaser is not committed whereas he is with the Compromis.
With the French Promesse de Vente the vendor is obliged to sell the property to the purchaser at the agreed price. The purchaser benefits from a delay in making up his mind before informing the vendor of his final decision. It is the vendor who is committed not the purchaser. The purchaser in signing the promesse de vente accepts the seller's commitment to sell the property to him.
But at the same time that the purchaser signs the Promesse de vente he pays to the stakeholder a reservation fee (usually 10% of the purchase price). This payment has no other meaning than to prove the commitment of the beneficiary of the promise to the purchase. If he doesn't want to purchase and if he can't justify that one of his let out clauses has not been met this sum will be transferred to the seller. This is what could be called the price of the option.
To give a full garantee to the vendor and to prevent any possibility of the seizure of the reservation fee by the holder's creditor: the reservation is "pledged". If the promesse is not drafted by a Notaire to prevent any unfortunate surprises make sure that this sum is paid to the estate agent's special stakeholder account and that he has got a mandatory licence called Carte Professionnelle.
Both the Notaire and the Estate Agent provide a life assurance guarantee, in case the purchaser dies before completion. This guarantee is free for the client. One of the conditions is that the deposit is lodged with the Agent or Notaire's Stakeholder account. If you do not fulfill the Insurance Company requirement make sure that you have lodged a clause suspensive for you surviving to the date of completion.
The beneficiariy of the promise will only be committed to the purchase when he has agreed on the purchase. It is said that the beneficiary of the promesse lève l'option. By taking up the option, both parties can be compelled to purchase because the contract binds them. In practice it is quite usual that there is no levé d'option and that the Notaire calls both parties to sign the final deed before him and the purchaser's acceptance is then implied.
Behind the difference of geography there is a difference of commitment. Both parties to a compromis agree to sell and purchase upon the fulfillment of the last condition suspensive. Then the contract is binding.
The compromis de vente also provides for the deposit to be paid to a stakeholder. It can be considered as part of the price paid in advance, what is called an acompte. But be careful it has not be named "arrhes" because provisions of article 1590 of the Civil Code allow either party to be released from the contract at any time subject to the loss of the arrhes in the case of the purchaser's withdrawal or to refunding twice this amount in the case of the seller's withdrawal.
You can moreover find other terms such as dédit (release fee) for any sum that the purchaser commits himself to pay to the vendor to be released from an obligation to buy. If it is named clause pénale (liquidated damages) its amount could always be subject to judicial review as regards quantum.
The significance of this sum in both contracts is such that where a reservation fee is large (e.g : 20%), it could be considered that the actual agreement is not a promesse de vente; the beneficiary's commitment to purchase being implied.
The signing of both types of contract is achieved at a much earlier stage than it is the case in an English transaction. The French contract framework will structure all matters and usually the general let out clauses provide for the main reasons which could prevent the signing of the conveyance.
So take care in checking that your personal requests have been registered under conditions suspensives.