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French property law - does France offer property buyers the right level of protection?
Buying and selling real estate in France is well supported by consumer protection laws: It is structured and defined by French law, with a series of checks designed to ensure a fair and legal transaction takes place.
The regulations governing the sale and purchase of property in France are long established and strictly governed and enforced by the Notaire assigned to the project. A notaire is a government official, responsible for receiving the deeds. The notaire is under the authority of the French Department of Justice and is appointed by Decree. The profession has a monopoly in matters relating to purchases, sales, exchanges, co-ownerships of real estate, leases, mortgages, etc. Thus, transfer deeds must be prepared by a notaire, whose role consists in authenticating the parties’ signatures. Notaires do not represent the interest of either party in the transaction, however, many people consider having their independent legal advisor is a necessity rather than an option.
Specifically in France, there are mandatory precedent conditions for the sale contract, which make completion subject to the buyer’s ability to obtain the financing of the property in question. The seller is legally bound to assume a guarantee to the property’s precise surface and is under a legal obligation to disclose certain defects (specifically termites, asbestos and lead). Buyers benefit from a seven day 'cooling off' period, during which time they can withdraw from the contract and receive a full refund of their initial deposit.
An initial agreement sets the sale's terms and conditions. It is a provisional contract while the notaire prepares the Title Deeds. The preliminary contract is legally binding upon both the buyer and the vendor: the two parts agree one to sell, the other to buy subject to specific conditions (called ‘conditions suspensives’)
Prospective buyers should carefully review the contract’s terms into detail and ask questions to their own advisor. In the same way, do not hesitate to negotiate the clauses of the contract. Do not pay any money before signing. Buyers are expected to pay the notary or the estate agent a deposit, but never pay anything to the vendor or the developer directly.
One of the main advantage of the French two-stage conveyance process lies with the fact that, once the initial contract has been signed, sellers cannot pull out and sell the property to someone else. Gazumping, the practice of seller’s pulling out of a sale at the last minute without penalty, is non-existent in France. Where a seller decides to pull out, a Court can order him to sell or pay the buyer high damages in compensation. At French law, there are limited situations where gazumping can take place. A pre-emption (preference)
Once the initial agreement or ‘Compromis’
Property transfer only takes place only at the time of the signature of the Title Deeds (Acte Authentique)
Pre-sale surveys also bring purchasers a fair degree of protection.
The price stipulated in the contract is deemed to take account of any financial consequences arising from the condition of the property e.g. with regard to termites, asbestos, lead poisoning, energy performance and major natural and technological risks.
French off-plan real-estate purchase offers investors the ability to acquire high-end property at the lowest possible price and achieve maximum potential return on investment. Some investors are concerned about buying off-plan as they have heard scaring stories from other markets where developers have disappeared with their money, properties not completed. Buying off-plan in France is however very formalised compared to other markets. The new-build buyer is much protected. The French construction industry is highly regulated and developers by law have to meet rigorous government standard. All new properties must meet the new building regulations and energy efficiency measures. Contracts for the sale of new off plan properties provide for payment of a deposit (up to 5%) and subsequent stage payments and precedent conditions. The initial security deposit gets paid on a client/escrow account and is fully refundable should the transaction fall through.
Another example of consumer protection laws in France offering security lies with the fact that buyers are entitled to pull out and get a full refund of their investment if the property at completion differs from what is set out in the reservation contract and these differences lower the value of the property by at least 10%.
These laws are strictly enforced but given the differences in language, culture, law and ethics, it is remains advisable to instruct your own qualified French lawyer to guide you through the purchase or sale process and protect your interests.
Investors should exercise due diligence and choose wisely, making sure that the builder and developer have a track record of successfully building high-quality real-estate and, as always, that their property will be situated in right location.