The Off plan process
Off plan sales are called in France: “vente en l’état futur d’achèvement” (Vefa).
The off plan sale is strictly regulated by the law (articles L. 261-1 and following of the Code of construction and the dwelling).
This technique of selling makes it possible for a purchaser to progressively become owner with the progress of the work, and with a load for him to pay the price step by step.
The sale of off plan is related to apartments and houses.
Financing your purchase
Before getting documentation or visiting anything, we always advice you to prepare your finances. For off-plan properties, our customers usually take a mortgage in France because the rates are better compare to the UK and it will allow them to avoid currency fluctuation. (It is better to send monthly payments from the UK to France on a 10 years basis rather than doing a transfer at a high rate).
Choosing the right property
There are several type of off plan properties in France:
- Classic off plan: you buy a property freehold. It is ideal if you want to use it for your own use.
- Buy to Let : you buy a property freehold and rent it through a management company with secured rental
- Leaseback : you buy a property freehold and sign a 9 or 11.5 years lease with a management company which will guarantee your rental incomes during the lease. Most of the time, you can use the property 1 or 2 weeks per year subject to agreement with the rental company.
To choose the right property you should first think what you are looking to do with it (pure investment, Holiday home and rental, Holiday home).
If you like a development then you will need to check the availability prior to a visit. We always advise our customers to visit a site because it is an important step in their decision. Most of the time the site is just a field but if you buy a property in a large residence then the developer may have done his project in several phases. You can view the properties that have already been sold and build and see where yours will be located among the others.
Taking an option
If you take an option, the developer holds a property for you without any commitment to buy. He will keep it for a few days (1 to 2 days) until your visit or until your finalise your decision if you do not intend to visit.
The preliminary contract (reserving a property)
The first stage consists of signing with the promoter a preliminary contract (contrat preliminaire), also called contract of reservation (contrat de reservation).
By this contract, the agent commits himself to reserving a property for you. On the other hand, you pay a deposit. In addition, and to enable you to appreciate the extent of your commitment at the time of the signing of this contract of reservation, it must be established in writing and to comprise certain obligatory details: a detailed description of the future property (approximate livable surface, a number of rooms, dependences, etc.); the quality of constructions (materials employed, provided elements of equipment), with a technical note annexed to the contract; the estimated sale price and, if necessary, methods of its review; the date the final sale contract will be signed.
At the time of the signing of this preliminary contract, the purchaser pays a deposit which cannot be higher than 5 % of the estimated price if the completion date of the sale does not exceed a year.
This amount is brought back to 2 % when this time does not exceed two years. Beyond, no sum can be claimed as yours. The deposit, which does not bear interest, is deposited on a separate account, generally opened by a notary.
You will then be notified of the signed preliminary contract. As from its reception, you have a 7 days cooling off period to retract.
The final deed of sale (contrat definitif de vente)
The agent must notify to you in regards to a selling at least 1 month before the final signature. This one month time limit will enable you to check that the project conforms to what has been promised. The contract of reservation must have more details than is contained in the preliminary contract, and in particular: a detailed description of the property, price and modes of payment, delivery period, guarantee of completion or refunding, suspensive (determining) condition of obtaining a loan.
Moreover, the agent must give you a plan with housing dimensions and a duplicate of the joint ownership rules. Note that if the final sale contract reveals an abnormal difference compared to the preliminary contract, you can give up the operation and your deposit will be refunded to you within three months. The final sale contract must be signed in front of a notary.
The price and its methods
The payment is progressive according to the building work ahead. The payments requested from the promoter will not exceed the following cumulated amounts:
- 5% Initial deposit
- 35% of the total price at the time of the completion of the foundations
- 70% of the total price when the property is weatherproof
- 95% of the total price at the time of the completion of construction
- 100% of the total price the day the property is available to the purchaser (the day you receive the keys).
The delivery
The contract can comprise either a date specified or a certain period (ex: last quarter 2008 or in 12 months as from such event).
The contract can comprise penalties in the event of delay of the delivery for the benefit of the purchaser.
GUARANTEES
When you buy off plan or that you build a house, you benefit from specific guarantees on the builder responsibilities.
Once the building is delivered, legal guarantees ensure your protection. In other words, you have the power to appeal if you note defects after having taken ownership of your new property.
The guarantee of completion
The guarantee of completion is one of the measures which protects the purchaser. Obligatory, it ensures the purchaser that the promoter will be able to continue the construction until the completion of the building. It can take two forms:
The “intrinsic” guarantee
The intrinsic guarantee exists without the salesman being required to hold a guarantee from an external organization, since the operation respects one of the following conditions:
– The building is weatherproof (roof posed but windows not installed) and has no mortgage or privilege on it;
The foundations are finished and the promoter has indeed the financing necessary to cover the major part of the expected selling price (60 or 75%).
The “extrinsic” guarantee
This one is given by a banking or financial house, a company of guarantees, or an insurance company.
It takes the form: either of an opening of credit given by a guarantee organization which then commits to advance the money to the promoter or to pay the amount necessary to complete the work.
A clause must specify in the sale contract the right for the purchaser to require guarantee and the payment of the sums necessary for the completion of work;
A convention of guarantee by which the guarantor jointly commits himself with the promoter paying the necessary sums to the completion of work.
The guarantor is held to provide the necessary sums to the completion of the building in the event of failure of the promoter, but will not be constrained to ensure himself the work management and to complete it himself.
Responsibility and defect of conformity
From the signature of the contract of reservation to the delivery, the promoter assumes a responsibility: to ensure to the purchaser the conformity of the property. The promoter must deliver the property in accordance with the characteristics stated in the contract and the purchaser cannot be constrained to accept a different one.
In the event of non-conformity, the purchaser can:
Require the setting in conformity of the property, if this one is still possible;
Or ask to cancel the contract, with possible damages refunded.
Apparent and hidden defects
The purchaser of an off plan property is protected, in terms of a guarantee, from defects of construction and defects of soundproofing.
The apparent defects
The promoter is held to guarantee the apparent defects of construction to the reception of work during a time limit of 1 month, as from the reception of the work by the purchaser. This guarantee covers all the defects of realization. The defect must be apparent, i.e. detectable by a nonprofessional builder.
The purchaser has a time limit of 1 month after the delivery to announce the apparent defects of construction, by recorded letter with acknowledgement of delivery. If the promoter does not carry out the necessary work, the purchaser can obtain a reduction in the price or a judgment of the promoter, under obligation, to carry out repairs necessary.
In the event of huge defects, the cancellation of the contract could possibly be obtained, with a damages refund. The purchaser has a 13 month time limit from the delivery date, to go to the Court.
Hidden defects
The 10 years guarantee which relates to all the hidden defects, even those resulting from ground defects, which compromise soley of the work, or which make it uninhabitable. The promoter and the professional having carried out work are fully responsible during 10 years for these damages, the starting point of this decennial guarantee being the acceptance of work done by the purchaser.
The 2 years guarantee which relates to the equipment of the building is subject to a guarantee of correct operation during 2 years as from the acceptance of work done. This guarantee covers the elements which can be removed or replaced without deteriorating the structure of the building (ex: shutters, interior doors).
The soundproofing defects:
If the minimal standards of soundproofing are not respected, work necessary to reach the lawful minimum are the responsibility of the contractor during 1 year after the acceptance of work done. The promoter is responsible during 1 year, from the first acceptance of work done, of the conformity to the minimal standards of soundproofing.
Guarantee of refunding
The guarantee of refunding is one of the provisions which protects the purchaser from real off plan properties.
Optional, it takes the form of a joint guarantee by which:
A banking or financial house, a company of mutual guarantee or an insurance company begins to refund the payments carried out by the purchaser in the event of a friendly or legal resolution of the sale due to a defect of completion.
The guarantee of refunding ends to the completion of the building and can be called upon by the purchaser only if it is clearly stated in the sale contract.
The labels
The labels are certificates of technical quality. The principal labels are Qualitel and Promotélec.
The Promotélec label relates to the electric installation, its quality, its performance and its safety. This label guarantees that the installation is carried out according to the code of practice. Are taken into account: the electric component, the heating and the production of domestic hot water by electricity, the heat insulation and the ventilation of housing.
The Qualitel label is allotted to the whole of construction. It certifies the performances of seven criteria: protection counters the noise (interior and external), the estimated cost of the loads of heating and domestic hot water, the heat insulation of summer, the quality of plumbing, the installation and the electric equipment, and the durability of the roofs and frontages.
Notary expenses
Among the advantages of the off plan purchase, the expenses of acquisition, also called expenses of notary, are relatively low and thus constitute a decisive economic asset.
Purchase of a housing: the acquisition of a new housing is carried out in reduced expenses of notary. Count approximately from 2% to 4 % of the selling price (compare to 6 to 8% for resale properties).
We do not charge you any commission for our service as we are paid by the property developers.