Four steps to buying a property in Paris
Step 1: The Sale agreement
After several months searching for an apartment, Mr and Mrs Smith have found an apartment they like in an 18th century building, located in the 9th arrondissement of Paris. The price of the apartment is €430,000 and they wish to get a loan of €300,000; they have sufficient funds to cover the estate agent fee, the deposit and the fees for the deed. The estate agent asks them to make an offer to the vendor. They wish to know whether this is binding.
Yes, it is binding by the signatory. This is standard practice but not compulsory.
In the offer Mr & Mrs Smith make to the vendor (price equal to or inferior to the asking price) they request a specific condition is applied. As they wish to avoid any delays, they set a time limit on the offer. They will therefore not be able to withdraw from the purchase at any time during that period. If the vendor does not accept the offer within the timescale requested by the Smiths, they will be released from their obligations. If, on the contrary, the offer is accepted with the given terms and conditions, they are liable to sign a “Compromis de Vente” (Sale agreement).
Step 2: The choice of Notaire
Once the offer has been accepted, the vendor can recommend they contact his Notaire and fix an appointment for the signature of the “Compromis de Vente”. Mr & Mrs Smith ask whether they can appoint their own Notaire.
Yes, the vendor and purchaser can have different notaires; this will not incur any extra charges.
Step 3: The Sale agreement
(Compromis/promesse de vente)
The Notaire in charge of the sale sets up a date for the meeting with the vendor and the Smiths for what is known as the “signature meeting”. At the meeting he will need to be given a cheque by the buyer corresponding to 10% of the purchase price plus the fees for drafting the “Compromis de Vente”. At the time of this meeting the vendor will all the various surveys, known as “diagnostics”, carried out on the property. The vendor and the Smiths ask whether this is normal practice?
With regards the buyers:
In return for the agreement from the vendor, it is normal practice for the buyer to pay a deposit. It is normally 10%. The cheque is immediately banked in the account of the Notarial Office. This amount corresponds to either an “on account” payment of the price of purchase or as a penalty fee for the vendor if the buyer pulls out of the purchase. In any case, the Smiths have the right to pull out during a period of 7 days starting from the day after the receipt (by hand, bailiff or by registered post) of the notification of the pre-contract. If they wish to pull out, no reason need be given and they are able to recover the full amount of their deposit within 21 days, starting from the day after their retraction.
With regards the vendor
Yes, he must carry out the following surveys:
The measurement of the property sold (Loi Carrez – Carrez Law) Risk of exposure to lead Risk of asbestos exposure within the property Termite search Energy performance survey Natural and technological risk assessment Gas and electric installations if these are more than 15 years old.
The vendor must give this dossier to the Notaire before the date of the signature of the Compromis or Sale Agreement so that the Smiths can be informed, prior to the date of the signature, of the current state of the property. At the time of the sale of an apartment in a block of flats, other information will also be required from the vendor: such as the rules and regulations of the building, a copy of the maintenance records, the amount of service charges, etc…
Step 4 : The bank loan
The Notaire has informed Mr & Mrs Smith that it will take approximately 3 months before they can sign the final deed. He has explained to them that during that time they must contact their bank in order to obtain a loan. At this point, Mr & Mrs Smith are worried that they are now locked into an agreement and that they are not certain of getting a loan.
If Mr & Mrs Smith do not obtain their loan, they have the choice of either carrying on with the purchase (if they find a different source of finance) or pulling out. In the latter case, they would recover their deposit unless they have acted in bad faith (for example, if they requested an amount that exceeds their financial capability or if they do not agree to adhere to what is stipulated in the pre-contract).
Note: If the buyer states that he will not be asking for a loan, he will need to confirm this with a handwritten statement on the Compromis de Vente. If the Compromis or the sale agreement has been signed by acte Authentique, the handwritten statement will not be necessary.
Acceptance of the loan
The buyer has a minimum of 30 to 45 days to obtain a loan in accordance with the conditions specified in the Compromis (amount, delay, taxes….). Once the loan has been issued by the FRENCH bank, there is a compulsory law whereby the borrower cannot accept the loan for a period of ten days. The sale cannot, therefore, go through before the end of this period. The Notaire must verify certain information; if the vendor is the owner of the property, the root title of the property, the location of the property with regards to urban rules and regulations, the easements, situation of the mortgage, etc… Sometimes the property is located in an area where the Town Hall has pre-emption rights. This means that they have priority over the purchase of the property during a period of two months. The purchase would be understood to be for the good of the community. The final deed cannot be signed before the end of this period.
All these steps justify the time lapse between the signature of the Compromis de Vente and the signature of the final deed.
Step 5 : Title Deed
Mr & Mrs Smith have obtained the loan. The Notaire informs them that the file is complete and proposes a date for the signature. He asks them to bring a bank cheque for the outstanding amount of the purchase price and a provision of funds for the purchase fees (please see purchase fees below). How does the sale take place? On the day of the signature, Mr & Mrs Smith will go to the Notaire’s office. The vendor will also be present along with his Notaire and the estate agent. The Notaire reads through the Title Deed. Mr & Mrs Smith listen carefully and ask questions to be sure that they understand the contents of the document they are signing. The vendor hands over the keys to the Notaire at the same time as he receives the cheque or confirmation of bank transfer from the purchaser.
Step 6 : The remittance of the purchase price
The vendor is surprised that the full amount of the sale price is not handed over to him. The remittance of the purchase price is the payment by the purchaser. The Notaire explains that he must reimburse the outstanding mortgage on the property, keep a provision to settle the lifting of the charge, etc… Once all the above has been settled, the remaining amount will be handed over to the vendor. The Notaire hands over an attestation of the sale to the purchaser and the vendor. He indicates to Mr & Mrs Smith that they will receive a true copy of their Title Deed along with the final breakdown of the fees related to the sale after the registration at the Land Charge Registry.