The French Property Purchase Cooling Off Period
The French property purchase cooling off period is a great benefit to French property buyers. It should expire before the purchase deposit is paid.
In England it is the practice not to enter into a binding contract until you or your solicitor is satisfied with searches and enquiries, any survey and any necessary mortgage offer.
In France, where practice is closer to Scottish law, it is usual to enter into the compromise de vente, which will immediately bind the parties to the transaction, at a much earlier stage. However, due to high-pressure estate agent sales tactics a cooling off period was introduced for buyers. This allows them change their minds within a fixed short period and to withdraw from the contract. The legislation was introduced in June 2001 as a result of the Loi SRU dated 13 December 2000.
The law allows a non-professional purchaser to withdraw from the contract even though both parties have signed it. This cooling off period will last for a fixed period of ten days which will start the day after the formal signed compromis de vente has been received by the purchaser.
Since the law came into force, Article L271-1 of the Code of Construction and Housing has provided that a copy of the initial contract must be delivered to the purchaser by registered letter with acknowledgement of receipt or any other equivalent means for the determination of the date of receipt of delivery. In practice there are two ways to notify the contract: either by registered post or by hand delivery.
It is common practice for the estate agent who prepares the initial contract to send a copy of it to the purchaser by registered post (lettre recommandeé avec accuse de réception). The purchaser will then benefit from the cooling-off period of ten days which starts the day after receiving the notification. However, we have seen notifications sent to the purchaser before both sides have signed the contract and agents asking the purchaser to sign the receipt confirming the start of the cooling-off period. This procedure does not comply with the law and is illegal as it is clearly stated that the cooling-off can only start the day after the purchaser receives the contract signed by both parties.
It is very important for a Notaire in charge of a file to ensure that the notification was properly sent to the purchaser in order to avoid any argument regarding the start of the cooling-off period and when it expires. The risk for a vendor would be that he would find himself in a position where the cooling-off notice was incorrectly sent to his purchasers and that they request a new notification is sent in order to have the possibility of withdrawing before completion.
The second way of notifying a contract is to deliver a copy of it by hand. Giving a copy of the contract to clients and asking them to sign the certificate confirming receipt was more the practice followed by Notaires, as public officers.
This practice gives the authenticity that the client received a copy of the contract and the start date for the cooling-off period. The recent decree dated 19 December 2008 has amended the conditions for a Notaire or even an estate agent to give the notification by hand. The first requirement is likely to bring to an end the practice developed by the Notaire of the certificate of hand delivery which is signed by the purchaser and then attached to the Deed of Sale to certify that the procedure for the cooling-off period was followed.
Now it is a copy of the Sale Agreement, whether it is notarial form or a private agreement, which will be delivered to the purchaser.
The contract must set out the provision of Article L271-2 of the Code of Construction and Housing. This is not new and practitioners were already putting a copy of this text on the certificate delivered by hand to the purchaser. However, the innovation is that the beneficiary of the cooling-off period must write a sentence on the contract confirming the receipt of a copy of the contract.
The contents of the handwriting is strictly defined by the text. It requires further that the buyers specify the name of the professional who assisted him with the signing of the contract. This applies whether it is the estate agent or the Notaire. Also noted is the place and date where the contract was signed.
As far as the deposit is concerned, the initial contract that they signed stipulates that the deposit of 10% will have to be paid to the Notaire. In practice an estate agent or Notaire would like the purchasers to pay the deposit when they sign the contract to give the security to the vendor that they are serious clients. However, it is not unusual to have a clause in the contract stipulating that the deposit will have to be paid within two to three days after the expiry of the cooling off period. It could be a condition of the contract that will enable the vendor to withdraw if the deposit was not paid.
The deposit is a sum that will be lodged with the estate agent or Notaire in the client account. It will not generate any interest for the purchasers should they decide or be obliged to withdraw before completing.
The deposit will represent a proportion of the price if completion takes place. However, should the buyer decide to withdraw for any reason it is likely that this sum will be allocated to the seller’s estate agent to cover their lost commission as part of the sum due under the penalty clause. The deposit cannot be transferred immediately to the seller and in practice the seller will have to follow a procedure to establish the buyer’s failure to complete and the right to claim the deposit as compensation.
Best French Mortgage have noticed a small but increasing number of instances per year where estate agents have been very reluctant to return purchase deposits when the buyer has withdrawn at the end of the cooling off period or under a French mortgage clause suspensive. We recommend that buyers insist that the deposit is lodged with and held by the Notaire not the estate agent.
