A few things to know when purchasing a new build property in France
A new build off plan property is known as a “Vente en l’Etat de Futur d’Achèvement “ or VEFA in French.
This transaction is regulated by law to protect the committed buyer before, during and after the delivery of the property.
To move forward with your VEFA project, you will sign a preliminary contract (known as the reservation contract). It is a specific pre-sales contract (Any other pre-contract form is forbidden) where the developer promises to reserve a property for the client if the program is carried out. This contract is signed privately, between the developer and the buyer (sales brochures made by promoters don’t have any contractual value).
The preliminary contract must be drawn up in writing. It must indicate at least and under penalty of nullity:
- The location of the premises
- The number of main rooms and the list of service parts
- The situation of the building
- A technical note summary to indicate the nature of the construction materials, the different elements of equipment and accommodation provided (elevator, cellar, collective heating, etc..)
- The estimated price and terms for its revision within the limits that are authorized by law
- The estimated delivery date
- A complete reproduction of legal articles and amendments related to the escrow deposit
How is the purchase price set and revised?
The price is set by the developer. At the stage of the preliminary contract, the law authorizes the promoter to give an estimated price (which can only vary based on a legal building variation index known as BT01). It is in the buyer’s interest to negotiate a firm price to rule out any increase at the time of signature of the final sales contract.
Can a developer demand an escrow deposit?
An escrow deposit is often expected. The funds are transferred into a special account in the name of the buyer. No other amount can be demanded from the buyer or even accepted before the signature of the finalized sales contract.
The escrow deposit is limited at:
- 5 % of the sale price if the sales contract is signed within 1 year
- 2% of the sale price if the contract is signed from 1 to 2 years
- No escrow deposit can be claimed beyond two years
How and when to sign the finalized sales contract?
Within a few months after signing the reservation contract, the buyer will receive the finalized sales contract and the annexes. These documents must be received at least one month before the signature date.
- The law requires the presence of certain clauses in the contract:
- The detailed description of the property and its location in the building
- The price, terms of payment and any conditions for reviewing the price
- The delivery date
- The mortgage terms and conditions
The contract must also include annexes relating to the layout of the property (plans, sections, indication of the surfaces of each of the rooms, etc.) and the materials used.
The co-ownership rules are also given to the purchaser before the sales contract is signed.
How do you schedule the purchase of the property ?
The buyer will purchase the property through several installments as the works move forward. This schedule is strictly regulated by law.
- 35% of the price on completion of the foundations
- 70 % once the structural works are finished (exterior walls, laid roof, finished terraces)
- 95% with the completion of the build
- The remaining 5% is payable when the property is delivered to the buyer
Our dedicated team of brokers can help you to negotiate and implement better terms and conditions for your purchase in France.