the contract process involved in buying a property « off-plan » in France
1st Step :
Le contrat de réservation :
If you buy a property off-plan it is normally a two-stage contract process.
In the first stage you will sign a preliminary contract, before you enter into the final VEFA contract itself.
The preliminary contract is called a contrat de réservation.
Before you sign the initial contract, you would be wise to establish how far the developer has reached with the development so that you can be more or less certain that it will proceed, and that it will do so on the basis as set out in the plans.
While the larger developers may well be able to offer you a well-delineated product with a high degree of certainty, this is not universally the case with all developers.
Thus, it may well be that detailed plans of the proposed development are not available. The developer may not even yet own the land, and full planning permission may yet not have been granted.
The developer may still be seeking funding and may simply want to get as many buyers as possible in place, in order that the banks will release the funds.
2nd Step :
Financing plan :
The off-plan purchase process can be broken down into several stages:
After you sign the preliminary contract, you will pay the developer a deposit of around 5%, known as the “dépôt de garantie”.
You will then enter into a ten-day cooling off period. During this time, you can change your mind and cancel the contract without losing your deposit.
Once the cooling-off period is over, it’s time for the VEFA contract. This will be drawn up and signed in the presence of your Notaire.
VEFA contract signed, you will start to make stage payments as construction progresses. A typical time frame for the payments is as follows:
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5% at the signing of the contact
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15% when building work starts
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15% when the foundations are laid
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20% when the floors are laid
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10% when the upper flooring is laid
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5% once the building is watertight
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15% when the partition walls are completed
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5% when the tiling/carpeting is finished
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5% upon completion of work
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5% at the key handover
3rd Step :
L’acte authentique :
The name of the contract you will need to enter into for such a purchase is called a Vente en l’état futur d’achèvement (VEFA).
When you have obtained your financing, the deed of sale is notified to you. An appointment at the notaire is offered. However, you can have your personal notary carry out a participation to represent you and accompany you in your acquisition.
The authentic act includes all the conditions and guarantees of the sale: the sums to be paid during the calls for funds, the detailed description of the accommodation (surface, floor, rooms …) …
The signing of the authentic deed allows you to become the owner.
Fees for “off-plan” French property
When you buy, you will have to pay a number of taxes and fees, most often grouped under the name of “notary fees”. These acquisition costs are broken down as follows:
- the notary’s fees,
- disbursements (expenses advanced by the notary such as cadastre, surveyor, etc.),
- taxes collected by the state.
If the fees collected by the notary are fixed by decree, calculated on the selling price all taxes and identical, whether it is new or old real estate, it is not the same for the taxes perceived by the state. These vary according to the nature of the acquisition and are lower for a new home.
The notaire and legal fees for a VEFA are lower than those for an existing property. Whilst the latter come out at circa 8% the fees for a VEFA are around 3%.
Nevertheless, as it is a new property you will be paying VAT at the rate of 20%. In some cases, this VAT may later be reimbursable on the sale of the property, provided you have owned it for a minimum period, eg 9 years.
RT2012 label
Buying an “off-plan French property is the assurance of a number of labels and certifications, which guarantee quality, safety and performance.
1 –Certifications and labels on the quality of the building and on equipment
First, in terms of buildings and equipment, developers must comply with extremely stringent regulations. By buying in the off-plan property, you have therefore guarantees on the quality, comfort and security of your home. Some certifications and / or labels come in addition, supplement the provisions provided by the legislator.
2 – Energy labels and thermal regulation
The so-called energy labels make it possible to justify a level of energy consumption.
They complement the 2012 thermal regulations for new buildings. (This regulation sets an upper limit for primary energy consumption for dwellings). To benefit from these labels, the building must be efficient from a thermal point of view. The certification also covers safety and heating, domestic hot water, air conditioning and lighting installations.
RT2012: As a result of the Grenelle environment, the 2012 Thermal Regulation requires all new buildings whose building permits have been filed since 1 January 2013, a primary energy consumption of less than 50 kWh / m2 / year. A figure that varies slightly by region.
To achieve this result, a requirement is placed on insulation techniques, energy materials and equipment as well as bioclimatic design. In addition, the RT 2012 involves the installation in smart meter dwellings, which will make it possible to monitor usage consumption by use: hot water, heating, lighting or domestic electrical equipment.
3 – Environmental certification
It helps to justify the environmental quality of your home and your building, it is part of a sustainable economy approach.
The certification “Habitat et Environnement”: To obtain it, the developers must respect at least six of the following seven points: show an environmental will, keep the site clean, choose renewable energies and reinforced insulation, select materials that respect the environment, reduce water consumption, ensure the comfort of residents such as selective sorting of waste, and inform residents about green gestures.
Differents guarantees on “off-plan” french property
If the developer cannot complete the transaction, you are assured of recovering the amounts paid. When the work is started, the completion guarantee ensures that the construction will be completed.
When the building is completed, the seller of the building, along with the various parties, proceeds to the reception of the work. Then he proceeds to delivery. During this formality, you will go around the owner and verify that everything has been achieved as agreed in the contract.
Developers Building Guarantee :
The ten-year building guarantee from the developer/builder operates through an insurance policy they are required by law to take out.
This insurance policy is called the assurance décennale.
There are severe penalties for a developer/builder who does not carry this insurance cover.
Our own strong recommendation would be that you should always ask to see the insurance certificate of the developer before you sign the contract.
You should check that it is an up-to-date certificate, failing which the insurance company may be unwilling to pay out in the event of a claim. Normally, the Notaire should verify that it is satisfactory.
The ten-year guarantee operates on a tiered basis as follows:
I. During first year from completion the developer is obligated to guarantee complete performance of the work – La garantie de parfait achèvement.
II. During second year to guarantee that fittings are in good working order, e.g. electrics, sanitary goods, heating, windows, shutters, and doors – la garantie de bon fonctionnement.
III. During the ten years from completion to guarantee all those works concerned with the stability and integrity of the building including those elements which ensure the building is wind and watertight, e.g. foundations, floors, walls, staircase, ceilings, door and window frames, major electrical and plumbing defects, roof, framework – l’assurance décennale.
Where a defect arises, the client is not obliged to prove the fault and the developer/builder is presumed to be responsible.
The developer/builder can, however, escape liability on grounds of force majeur (event not foreseeable, irresistible and external).
Most importantly, beyond the first two years, the ten-year guarantee does not cover defects in building products or equipment installed in the property. It only covers the workmanship of the contractor.
Accordingly, if, for instance, your boiler ceases to function after five years, you cannot go back on the builder, unless the cause of the failure was their installation work. If the builder was not at fault, you would need to examine the manufacturers’ guarantee.
There is also a guarantee that the property complies with current noise insulation standards – la garantie de l’isolation phonique. This guarantee operates separately from the assurance décennale for the first year following handover, to the benefit of the first occupant of the property.
Moreover, in a recent judgement, the French Court of Appeal took the view that, even should a property comply with current noise insulation standards, if there remains a noise problem that can be objectively identified, then it is still possible to draw upon the ten-year guarantee to seek redress. It will, as always, depend on the circumstances.