Buying New Build in France – the Legal Process

The process of buying a property in France is different depending on whether you buy a newly built or an existing property.

This is not surprising, as the product is not the same. Indeed, the differences between an off plan apartment and an existing cottage in the middle of the countryside are obvious. The cottage has been there for numerous years. It has had a long time to accumulate rights and obligations. When you go in, the lights work and water comes out of the taps.

Build or Bust

The off plan property has not yet been built. You do not know what it will look like. You do not know how well it will be built. If the builder goes bust it might even not be built.

As a result the conveyancing process and the protection from the French legal system are also different.

A newly built property is a property which is off plan, or if already existing, is less than five years old and has not been sold. This is called in French vente en l’état futur d’achèvement or VEFA. All other transactions with other properties are resale.

For a new build purchase the buyer will be asked to sign a ’reservation contract’ (contrat de reservation) where he or she commits to buy the property described in the contract, in the event of the developer offering it for sale.

Clause

The developer will offer the property for sale, subject to obtaining the necessary authorisations and to being successful in marketing the properties, i.e., getting enough interest from buyers to make it worthwhile going ahead with the build. There is usually a clause in the contract allowing the developer not to proceed with the sale – with no compensation for the unfortunate buyer – if he does not go ahead with the project because planning permission was not granted or the marketing flopped.

The purchaser of an existing property will be asked, most of the time, especially if it is out of Paris, to sign a compromis de vente which is a binding contract where both parties commit themselves to the sale. There is no uncertainty in such a contract: the vendor commits himself to sell and the buyer commits himself to purchase. The property is there and you can see what it looks like.

Deposit

In practise, purchasers of an off plan property need to make their minds up very quickly as they get sold in a matter of weeks if not days. They can even be asked to pay a 5% deposit before the reservation contract is even handed over to them. There is no danger in doing so, because the purchaser benefits from a 7 days cooling off period of time and will not be committed to the purchase up to the time the cooling off period expires.

Of course, the property will only be reserved to you on the condition that shortly after the deposit is paid, a reservation contract is signed. The contractual description of the property is usually short; this is why the accuracy of the plan annexed to the contract is so important.

Cooling Off

For a resale purchase, the buyer has the time to visit the property before he makes his offer, the offer can be accepted or refused by the vendor. The contract is only prepared after the offer has been accepted. The deposit is paid at a later stage: at the end of the cooling off period.

In both types of purchase, the buyer is committed to the deal only after the contract signed by both parties is notified to him by recorded delivery. The main difference is that for newly built purchase, the deposit is often asked for upfront; whereas for resale purchase it is payable once both parties have signed the contract and the latter is notified to the buyer by recorded delivery.

Regarding the signature of the deed of sale (acte de vente), here again the experience is different. For a resale purchase this is usually signed within three to four months. For a new build it depends on what the contract says. The acte de vente can occur quickly if the developer had already obtained the relevant authorisations (purchase of the plot and planning permission granted) at the time of the reservation contract’s signature. It can take a long time if the project was in its early stages when the reservation contract was signed.

Patience

The distinctive feature of a resale purchase is that legal completion coincides with possession of the property; the same day that you complete (if you are in France) the keys are handed over to you and you walk in your property.

In contrast, the buyer of a new build will need a little more patience. If legal completion takes place a couple of months after the reservation contract is signed, handing over the keys will not take place before the building is finished – and that can take another year or so.

VAT is payable on the price of a newly built property, usually at 19.6%. On the other hand, the property transfer tax is low (frais réduits). A purchase of an existing property (more than five years old or less than five years old but sold for the second time), is not subject to VAT – but you have to pay other property transfer taxes usually totalling 6.89% instead.

Legal Guarantee

Finally the main difference between the two purchases is the legal guarantee of the vendor towards its purchaser.

Basically, there is no guarantee given to the purchaser of a more than ten years old property from the vendor, the buyer takes the property ‘in its present condition’ (prendre l’immeuble vendu dans son état au jour de la prise de possession.)

It is his responsibility to make the necessary checks that the property is structurally sound. It will not be possible to make a claim against the vendor if there is an error in the property’s description, size and even if a fault in its structure appears later on.

There is no room here to go into detail about a case where a vendor deliberately chose not to disclose to the buyer the problem and did so intentionally. This is very difficult to prove. A structural survey of the property is a wise solution to avoid any unpleasant surprises and any legal risk.

Protection

In contrast, when you buy a new build property you benefit from a range of legal guarantees that run from the day you receive the keys. There are various warranties granted to the purchaser that buyers need to be aware of, especially the one that guarantees that the building will be finished in the result that the developer goes bankrupt. The notary details them at length in the deed of sale.

The guarantees are a legal requirement and extremely beneficial – provided the developer has taken the relevant insurance policy to cover his liability.

French law gives a strong protection to off plan buyers and it is important to be aware of them, understand them and – most of all – to know the developer’s insurer, the policy number and the conditions in which a claim can be made.

Knowledge of the system is the key thing to feel comfortable in the process of buying; it is in the interest of the buyer, whatever property he is buying, to understand his rights and his obligation, this understanding will make the experience of buying a more enjoyable experience.

See also:

Why overseas buyers are choosing new build property in France

French law zone

Lead photo credit : New build Editor's pick