Buying property off plan

Off plan sales of property make it possible for a developer-builder to sell housing whose building has not yet begun. This transaction, known as off plan, should be distinguished from sales of existing property. To ensure that the purchaser runs as few risks as possible, off plan sales of housing (vente en l’état future d’achévement or VEFA in French) are strictly regulated by law (articles L.261-1 of the Building and Housing Code).
This form of sale enables the buyer to purchase the property as the work progresses through a process of stage payments. In practice, the sale of off-plan housing can be for apartments and individual houses. However, the starting point is the signature of an initial contract, also referred to as the “reservation contract” (contrat de reservation) with the developer.

The initial contract

According to the terms of this contract, the vendor undertakes to reserve the property for you. In exchange, you pay a deposit (dépôt de garantie). In addition, so that you know exactly what you are getting when you sign the reservation contract, you must receive a written statement which will contain a certain amount of compulsory information, without which the contract would be void: a detailed description of the future accommodation (approximate size, number of main rooms, outhouses, etc.); the quality of building (materials used, fittings and fixtures supplied) which is included in an annex to the contract; the provisional sales price, and when and how this sales price might be amended; the date at which the final contract will be signed; and possibly, the amount and terms of any loan that the vendor undertakes to obtain for you.
Advice : If you decide to seek your own financing, we recommend adding a conditional close in the contract subject to your obtaining the loan. In this way, if you do not obtain your loan, you will be able to recover your deposit. When you sign the initial contract, you will be asked to pay a deposit which cannot exceed 5% of the provisional price if the date of completion ot construction is under one year. This amount is reduced to 2% if the completion is scheduled within two years. Beyond that, you cannot be asked to pay a deposit. The deposit, which does not gain interest, is deposited on a special account, generally by a notary. You will then receive formal notification of the signature of this initial contract, upon reception of which you have seven days to change your mind.

Final contract of sale

The vendor must inform you of the final sale at least one month before the date you are required to sign. This one-month-period, which cannot in theory be reduced, is designed to enable you to check that the project conforms with that which was promised. To this end, the final sale of contract must reiterate in more detail the terms of the initial reservation contract, in particular: detailed description of the property for sale, price and terms of payment, delivery date, guarantee of completion or reimbursement, conditional loan clause. In addition, the vendor must provide you with a detailed plan to scale of the property, and multi-occupancy regulations. Should the final contract comprise any significant difference with the initial contract, you have the right to interrupt the transaction and obtain reimbursement of your deposit within a maximum of three months.
The final contract of sale must pass through a notary’s hands to be legal.

Payment

Payments are staggered according to the construction progress, and cannot exceed:
. 35% when the foundations are finished
. 70% when the roof is completed
. 95% on completion of the building.
The remainder is payable when the keys are handed over. Should the accommodation be unfit for habitation on completion, the remaining 5% will be deposited on a special account until repairs have been carried out.
If the sale is carried out with conditional clauses, no payment can be asked until these clauses are satisfied. I should be noted that the vendor who does not respect staggered payments can be subject to penalties.

Handhover

When the building is finished, the vendor and the different builders take formal reception of the work. This consists in checking the work and can give rise to notification of any flaws or defects. As you are not present at this point, we recommend stipulating in the sales contract that you will be given a copy of this report on completion. This is essential as it is from this date that the guarantees and insurance clauses are calculated.

Insurance guarantees

So that the buyer runs as few risks as possible, the vendor is obliged, by law, to take out specific insurance of two sorts: either a completion guarantee (garantie d’achèvement) or a reimbursement guarantee (garantie de remboursement). These insurances are generally underwritten by a bank or mortgage company.
The vendor does not have to resort to the services of an outside company if he fulfils a certain number of conditions relating to the progress of work and if he can justify sufficient capital to carry out the operation. The completion insurance guarantees that whatever happens, the work will be completed. The reimbursement guarantee enables you to obtain the reimbursement of amounts already paid should the sale be cancelled. It should be noted that either insurance can be substituted for the others, thus, a reimbursement insurance can be effective at the commencement of building and can then be superseded by a completion guarantee when the work has reached a specific stage. In addition, there is a visible defect insurance relating to defects notified on handover of the property or within the following month. Should you fail to reach an agreement with the vendor, you can take your case to court within a year in order to obtain the cancellation of the sale or a reduction in price.