The traps to avoid with the preliminary contract
What you must know before the signature of a mutual agreement

According to article 1589 of Civil code: “A promise of sale is equivalent to a sale, when there is mutual consent of both parties on the matter of the thing and the price”. The mutual agreement generates rights and obligations that the purchaser must know before he’s signing this deed, even if the transfer of property of the asset is postponed to the day of the signature of the authentic deed.

Right to retract or cooling-off period

Since 1st June 2001 the non professional purchaser of a dwelling house, benefits of an option of retraction if the preliminary contract is concluded under private signature, or of a cooling-off period if the preliminary contract is concluded by an authentic instrument. During this period, any down payment is forbidden.

Right of retraction

The non professional purchaser can retract within seven days from the following day of the first presentation of the letter signifying the contract. This rule provision applies to the instruments under private signature which the matter is the construction or purchase of a building used for accommodation. The contract is signified by a recorded-delivery letter or by any other kind of method with the same guarantees for the determination of the date of receipt or delivery.

Cooling-off period

A cooling-off period is allowed when the preliminary contract must be established as the authentic deed. The contract must not be immediately signed by the parties. The notary must send the deed to the purchaser which has seven days period to think and indicate if he gives up the purchase.

Remittance of funds to the vendor

In principle, the selling price of an immoveable property should never be paid to the seller before the registration of the deed of sale in the Mortgage Registry and the delivery of a certificate attesting that there is no registration of mortgage superior to the amount of the price. In fact, before this publication, if the purchaser has delivered the price to the vendor, he risks to pay a second time or to abandon the asset if the mortgages exercise their indefeasible right pertaining to the mortgaged estate. In practice, to avoid these risks to the purchaser, he doesn’t pay the selling price directly to the vendor. But he deposits the amount to the notary. Then, the notary can pay the vendor if the certificate doesn’t reveal any registration of mortgage superior to the amount of the price.

SWIFT transfer

Cheques made out in euros and drawn in foreign countries or made out in foreign currency take on important risks: long and uncertain cashing periods, very long refusal periods in some countries, non guarantee of payment (risks of non cashing). In some countries, the legislation in force doesn’t protect very well the payee of a cheque. It’s the address of the cleared bank which determines the legislation applicable for the payment of the cheque. To avoid these risks, French notaries use SWIFT transfers to receive funds from foreign countries. SWIFT system uses a bank telecommunications network on a world scale. To receive a SWIFT transfer, the French notary will beforehand communicate to his correspondent:

his name, capacity, name of his office (and, if it’s necessary, the reference of the operation)
the SWIFT references of the bank in which the funds will be transferred and his IBAN (International Banking Account Number)

With these informations the bank of the purchaser will be able to transfer the funds.

Who pays the costs?

According to article 1593 of Civil code “the costs of instruments and other accessory to a sale shall be charged to the purchaser”. The costs of article 1593 of Civil code are the necessary costs for the deed of sale. Essentially, they include the costs for the drawing up of the deed, the remuneration of the Mortgage Registrar etc. On the other hand, the expenses that the purchaser advances for the redemption of a mortgage are payable by the vendor. If the seller advances the costs, he has a right to ask the reimbursement to the purchaser. According to article 1715 of General Tax Code, the taxpayer of the property tax is the one who is the owner on the 1st January. On January the first, the owner is the debtor of the entire tax. This principle is also applicable to residence tax (“taxe d’habitation”). However, regarding of property tax, the parties can agree on a different dispatching of this tax. But these agreements will just have effect between the purchaser and the seller. These agreements are not opposable to the tax authorities, which, in all cases, will collect the tax from the person who is the owner on January the first.

Easements

An easement is a burden imposed upon a property, build or not (servient tenement), for the benefit of another property belonging to another owner (dominant tenement). In the deed of sale, it’s often stipulated that the purchaser will benefit of the easements if the asset is a dominant tenement and he will bear the open or hidden easements if the asset is a servient tenement. The purchaser will not have action against the vendor. The vendor must declare the easements created by him or the easements that he let create on the assets. The town planning information document will reveal if easements exist which are the result of town planning rules. The preliminary contract is generally concluded subject to a suspensive condition that the town planning information document will not reveal easements which can affect the substance or the value of the asset.

Warranty against obvious defects

When the object of the sale is a building to be erected, the purchaser can be protected by the warranty against obvious (or visible) defects. The concept of visible construction defects applies to any failure in workmanship, whatsoever, discernible by an uninitiated observer. According to article 1642-1 of Civil code “the seller of a building to be erected may not be discharge, either before approval of the works, or before the expiry of a period of one month after the vesting of the purchaser into possession, for defects of construction then patent”. During one month after the purchaser has taken possession, he must use the period made available to draw attention to all visible defects that may have come to his notice, under the terms of contract, and which he may not have been aware of at the time of the handing over of the keys. After the one month period, the vendor is no longer liable for obvious defects. If obvious defects exist, the purchaser has a choice: he can give back the asset and ask the repayment of the price or keep the asset and ask the repayment of a part of the price. If the vendor repairs the defect, there is no need to invalidate the contract or reduce the price.

Warranty against hidden defects

The articles 1641 at 1649 of Civil code prescribe the warranty against hidden defects. The vendor must warrant against hidden defects in the thing sold which makes it unfit for the use of which it is intended, or which so impair this use that the purchaser would not have acquired it, or would only have paid a lower price, if he had known them. This warranty is applicable to all kind of sale and notably to the sale of real estates. If the legal requirements of articles 1641 and following of Civil code are fulfilled, the purchaser has a specific action which object is to warrant him against hidden defects. However, the purchaser must act rapidly and according to a particular proceeding. If all the conditions of the action for hidden defects are fulfilled, the purchaser can obtain, according to his choice, whether the annihilation of the contract or a reduction of the selling price. The vendor is liable to these penalties even if he’s in good faith. The purchaser can also ask the restoration of the building or its replacement.

Regulation relating to health

Lead poisoning preventing measures

According to article L. 1334-5 of Public Health Code (“Code de la santé publique”), a certificate relating to the risks of accessibility to lead is appended to the unilateral undertaking to sell or purchase, to the deed realising the sale of a building used even in part to accommodation, build before 1948 and situated within a zone subject to lead poisoning hazards. This certificate must be established since less than one year before the date of the unilateral undertaking to sell or to purchase or of the deed of sale. If the certificate is not appended to these deeds, no exoneration clause of warranty against hidden defects can be stipulated for defects relating to the accessibility to lead.

Asbestos regulations

According to a decree of 7th February 1996, the owners of buildings (except for the detached houses) build before 1st July 1997 must, subject to penalty in case of default, search the presence of asbestos in products or materials and carry out, possibly, to a periodic control, to a supervision by a registered professional or to appropriate works. The deadline to make these controls expired the 31st December 1999. If, at the time of signature of the preliminary contract, this control hasn’t been made, a suspensive condition specifying that the control doesn’t reveal the presence of asbestos must be inserted. A certificate revealing the presence or, possibly, the absence of asbestos in materials or products in the building must be appended to the unilateral undertaking to sell or to purchase and to any contract concluding the sale of some kinds of buildings. Without this appended certificate, no exoneration clause of warranty against hidden defects can be stipulated for the defects relating to the presence of asbestos in these elements of the building.

Termites

A Law of 8th June 1999 lays down to the owners of buildings located in an area contaminated, or open to be contaminated, particular obligations. The owners must provide a parasitical certificate established before less than three months, or warrant the purchaser for the hidden defects of presence of termites, without possibility for them to insert an exoneration clause. This parasitical certificate, established by an expert, identifies the building and indicates the places checked in the building and the ones not checked, the infested elements by termites or which have been in the past and the ones which are not, the date and the place of its drawing up.

Information about sewerage

A Law of 3rd January 1992 enacts that the cities must create technical control services for the non collective sewer system before the 31st December 2005. According to the Board of Works, it’s in the interest of the vendor to provide the reports delivered by the technical control services for non collective sewer system (“Services Publics d’Assainissement Non Collectif”). The vendor has no obligation to inform the purchaser, but if he does, the non warranty clause will be effective. For the collective sewer systems, no obligation forces the vendor to inform the purchaser. However, the non warranty clause has been turned down without information about the connecting to the sanitary sewer or about the drinking water system. In other respects, the vendor is under a general obligation to inform the purchaser if the latter can’t get information by his own. Finally, it’s in the interest of the vendor of a building located in a city which created a technical control service for the non collective sewer system, to inform the purchaser of the possibly failure of his connecting pipe to the sanitary sewer if the city informed him of the existence of such a problem.

Expenses of condominium (or co-ownership): “charges de copropriété”

Since 1st January 2002, the “charges de copropriété” are based on the obligatory distinction between the current expenses and the expenses for works done. Article 14-1 of Law of 10 July 1965 defines the current expenses: they are expenses “of maintenance, operation and administration of the common parts and of the common equipments of the building”. These expenses are the occasion to establish a provisional budget submitted annually to the vote of the co-owners which the general meeting must take place six months after the last day of the previous accounting period. According to the new article 14-2 of Law of 10 July 1965, work expenses are not included in the provisional budget”. These expenses must be examined on an ad hoc basis. For each expense the general meeting will define and fix the execution and financing methods.

The traps to avoid with the preliminary contractWhat you must know before the signature of a mutual agreement