The Euromortgage Shop,  Monday, 18 September 2017

 

In France, buying new property under construction – known as Vente en l‟Etat Futur Achèvement (VEFA) in French – is subject to a highly regulated procedure. Buyers consequently enjoy a large number of guarantees.

What kind of property?
A new flat or house can be bought “from plan”.
But the definition of “new property” is quite broad in France and refers to all property completed within less than 5 years.

How do you proceed?
The purchaser buys property that has not yet been built (and, more often than not, only exists on paper) or visits a show-flat if the building is already partly complete.
In exactly the same way as for buying existing property, the purchasing process is divided into two stages, the only difference being that the preliminary contract is known as a contrat de reservation or reservation contract.

Reserve your property!
The reservation contract is a regulated document specific to the “buying from plan” process. It necessarily includes a number of details: a description of the property, the projected purchase price, the date of delivery and the date when the deed of the sale will be signed, etc. the signature of this reservation contract implies the payment of a deposit, which never exceeds 5% of the projected purchase price. No deposit is required if the deadline for completing the sale is more than 2-year after the signature of the reservation contract. Make sure you include the let-out clause concerning your ability (or inability) to arrange a mortgage; this will be included in the final sale agreement signed before the notaire. N.B: You enjoy a 7-day “cooling-off” period after signing this contract. Apart from this retraction period, the document must also include the legal conditions allowing you to withdraw from your agreement and recover your deposit, failing which the contract will be rendered void.

Sign before the notaire!
The building may still only exist on paper! You become the owner of your property gradually as construction work proceeds, and pay the purchase price in stages. You will be sent the final contract before the date for signing it to allow you the necessary time to examine it and check that it corresponds to the preliminary agreement.

Take delivery of the property!
When you take delivery of the new flat or house, you sign a procès-verbale de livraison (acceptance certificate). If the property does not comply with what is specified in the contract, you can place the balance of the purchase price (5%) on a special account until the problems have been put right.
The transfer of funds corresponding to the purchase price is regulated by French law and depends upon progress achieved in building the property.
Payment must not exceed :
- 35% of the total price when the foundations are complete,
- 70% of the total price when the walls and roof are finished,
- 95% of the total price when the building is completed.

The advantages of buying new property
Apart from lower conveyance fees (between 2 and 3% of the price of the new property), modern comforts and no need for renovation work on the building, the buyers of new property in France enjoy a number of further safeguards: a building completion guarantee should the real estate developer go bankrupt, and a damage-to work insurance with, in particular, a ten-year liability clause obliging the builder to repair any defects compromising the strength of the overall structure for a period of ten years.