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Compensation if buyers decide not to buy your house ...


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Having lived here now for 6 years (and in that time moved once), I'm ashamed to say I did not know the law re selling properties.  I was always under the impression that if the buyer backed out of buying your property (with no reason stated in the Acte - such as mortgage being refused), that the buyer had to forfeit the deposit being held by the Notaire.  It now turns out that most people I know over here thought this was the case too.

So, for those of you who thought the same ... this is not the case at all.

My 'buyers' decided not to buy (various reasons from cooker not being included, economic climate etc etc) which is when I discovered that they have to agree to the deposit being paid to me.  If they don't, it then is transferred to the Caisse des Depot and we have to argue it out in court.   I was also advised at that point that if I won the case, the court would more than likely make the 'buyers' pay a penalty which would probably not be as high as the 10% held by the Notaire - and more likely a sum such as 5,000 euros. 

I originally agreed to a 5 month delay (between the Acte and the Compromis) because the American buyers wanted to transfer the money in two separate years for tax reasons.  I agreed to this as a) I love living in my house and only selling for financial reasons, b) I was happy to have a buyer and c) I thought I was protected in that if they pulled out I would be paid 10% of the purchase price.

They pulled out a month before the Compromis, so the place is now back on the market, and of course the economic climate has worsened.  I now realise that the French Law re selling houses isn't as secure as I'd thought, and perhaps worse thatn that it's shaken my faith spotting honest, trustworthy people !

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The first signing is the Compromis , the second is the Acte.

I thought that if the buyer pulled out after signing the compromis, and paying a deposit, (and after the 7 day period of reflection) the deposit money goes to the notaire and the immobilier to cover the cost of their work up to that point. Not to the seller.

But I might be wrong.

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Our compromis certainly said the 10% penalty was due to the seller (not to the notaire / agent) - as it is the case in most European countries - with the exception of the UK (where gazumping rules!).   However, I wasn't aware of the legal process boxergirl described to secure the settlement of the penalty.  Is this something that (in future) could be avoided by including an additional clause in the compromis?

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[quote user="woolybanana"]I thought the penalty was automatic and sorted by the notaire.[/quote]

It is, as long as the compromis is written to include the penalty. As the purchasers sign the compromis they are agreeing to the penalty.

Judie  (a real estate agent, boo hiss)

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Having recently had a buyer fail to complete after signing the CdV recently,he was made to pay the full 10% deposit,he initially only paid 5%,and was given 6 months to complete. The notaire paid us the majority of the deposit,he only charged a very nominal amount and he informed us that we were entitled to take the chap to court for the full amount. We signed a paper saying we wouldn't do so,. I believe there are several conditions that you can include in the CdV that give you a get out without loss of deposit. I believe that not being able to optain a Mortgage is the basic one but one house we bought we included a condition that the house was given permission for a certain change of use. Although this causes extra delay in completing it is worth protecting yourself,as a buyer, and worth being advised if you are the seller. Unfortunately many people just don't seem able to play it straight,clients and Immo's alike.

Regards.

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Hello,

 

If they pulled out before the compromis, then surely they hadn't even paid a deposit? Normally the deposit is paid at the compromis stage, and should be retained if the buyer backs out for any reason other than those stated on the compromis (unless it's within the 7 days). If no compromis was signed, but they signed a 'promise to buy' at the asking price, then I believe the agent has the right to claim their fee but I don't think you would get anything.

If I have misunderstood, and they did sign a compromis, then read the conditions carefully. Unless they added certain get-out clauses, and provided the deposit was paid, then contact your notaire and ask them why you have not been reimbursed. Did you sell through an agent? Ask them, if so, as they should be able to tell you where you stand too.

Good luck,

Jane

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Sorry, got the Acte and the Compromis the wrong way round !

The contract we signed states that the deposit should be paid to the seller ... but French law states (and I've had this verified by two notaires and two avocats) that the buyer has to agree to this.

I did feel sorry for the Notaire (not something you'll often hear said) as he only got 300 euros for all his work (paid by the buyer).

And as Gastines says, you can actually put anything you like in as a clause at the compromis signing - as long as the buyer signs it, it's legal.  However, I didn't think it necessary to add something about the 10% going to me, as it's already written in - it's just the the law doesn't seem to withhold this.

Another thing worth mentioning (again, checked this with both avocats and another notaire to the one I was using) ... is that even though the buyer pulled out a month before the signing, I still had to fulfil all the clauses in the contract, or he could use that as a way of getting his deposit back.  For example, I had agreed to separate the electrics from the neighbouring house (which I also own) and even though it meant that I'd have to pay for them to be reconnected again for family coming over this month, I still had to do it. 

Plus - probably the most unsettling fact - was that the buyer could change his mind as many times as he liked up to the signing of the Acte.  Therefore, in theory he could turn up for the appointment and sign and I would have to be out of the house immediately.  The idea of hiring a van, packing up all my stuff and having it ready to go on the driveway - even though the Americans had pulled out and had no intention of buying it - seemed ludicrous.  I decided to chance it and do the 'they'll have to remove me by force' bit ... which they may have done ! ... luckily they didn't change their minds !

 

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Hello again,

I'm still confused (sorry!) - if the contract you signed stated the deposit should be paid to the seller, and the buyer signed the contract, then surely they have agreed to it -"as long as the buyer signs it, it's legal", as you say.

"even though the buyer pulled out a month before the signing, I still had to fulfil all the clauses in the contract, or he could use that as a way of getting his deposit back." - now I'm really confused!! I thought the point was that he already had his deposit back, so why did you have to go ahead with all the extra work? If the buyer decides not to go ahead, rightly or wrongly, he should say so in writing to you and the notaire. If the notaire has refunded his deposit already then the sale is null and void - you are not at all compelled to carry out work for a phantom sale.

My apologies - I am in no way an expert and am not at all trying to undermine what the notaire and other officials have told you - I just don't understand why you habe been put in such an unfortunate position, it seems so unfair.

Jane

 

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Confused Jane ... You and me both !!

I thought it was completely unfair which is why I double checked with another notaire plus got the advice of two avocats (one French, one English) and they all agreed that even though the document was signed to say the deposit was to be paid to me, the buyer could contest this by saying that he was not happy with it.

The buyers pulled out but the Notaire said the deposit would not be paid to me until after the date set for the final signing.  Therefore, as they were entitled to change their minds as many times as possible before the final signing (even though they'd sent a recorded delivery letter to the Notaire to say that they would no longer be buying the property), the Notaire advised that I completed the works initially agreed.  This way, they could not use that as grounds for pulling out.  They mentioned in their letter that I had not had the work done yet so wanted their deposit refunded, but as the Notaire pointed out to them, it did not matter at that point as the deadline was another month ahead.

However, as someone else pointed out, the 10% deposit is not a compulsory amount.  For instance I was buying a property at the same time (luckily inserted a clause to say this would only go through if my sale did) and the Notaire only asked for 5% deposit. 

The whole thing seemed biased towards the seller and wasn't a pleasant experience all round.  The whole thing started because I put an ad out asking for someone to help me move my big Godin cooker to my new house.  They suddenly emailed me and asked me to 'reconfirm' that the cooker was not included.  I replied that as it is freestanding, it is not - and they then lied and said that I had agreed to include it.  Apparently three times I said it was included.  Strange that I wouldn't have remembered that, and even stranger as it wasn't even mine to sell (belongs to my ex).

So, if any Americans are looking at your house for sale  (mine was near Boulogne sur Gesse - 31), be careful !!

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Chris / Helen ... got your email but I think it's been censored as I can't reply direct.  My email is on this site if you want to contact me direct  ...just so you don't get caught up with the same people.  Certainly an experience such as this shakes your faith in your judgement of people. 

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[quote user="boxergirl"]Chris / Helen ... got your email but I think it's been censored as I can't reply direct.[/quote]

For info [:)]:

if you have received a PM (rather than an email), headed "(France Forum) Private Message:", you can only reply to it from your own PM box within the forum.

if you have received an email, you should be able to reply to it as normal.

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Usually if the buyer pulls out without having fulfilled any of the 'clauses suspensives' the down paypment of 10% is automatically given to the seller. So unless there was a special non-standard mention in your particular compromis de vente giving the buyers the right to 'disagree' with this logical course of events (thus defeating the unique purpose of the down payment) the notary should just give you the money. The notary has been holding the money in escrow just to prevent the buyer to wriggle out of the deal.

You say you have asked the advice of several other lawmen. I'm very curious as to the exact wording of the CdV making this so disadvantageous for you.

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Krek ... I'll dig out my copy of the Compromis, but

basically I spoke with an English solicitor in Toulouse, a French Notaire in

Toulouse and a French avocat in St Gaudens (31), all of whom didn't even want

to see the Compromis but agreed that the buyers have the right to not agree

that the deposit goes to me.  They cannot get it themselves, it is still

held in Escrow until the whole thing is sorted out.  I even asked if

nothing was done to solve the problem, would the money, after a certain amount

of time, be either refunded to the buyer or given to the seller, and apparently

not.

The whole experience has shaken my faith in the justice system.  The fact

that the buyer pulled out a month before, and sent a recorded delivery to

confirm this - meant nothing as they had the right to change their minds as

many times as they liked before the actual date that the signing was scheduled

for.  So I had to carry on with the agreed works - so that they couldn't use that

as a reason to pull out.  I also had to get the electrics survey done (as the

Acte was delayed until this year and it becomes law now), and  the termites one

re-done as it would have run out (6 months).  Plus, the Notaire said that

it may be a good idea to hire a van, put all my stuff in there ... just in case the Americans turned up on the day and signed for the purchase - as I would have to hand the keys over there and then

!  Needless to say I didn't do that ...

I've since found out that the 10% payable is optional - it is the recommended amount.  I was trying to buy a house at the same time as selling mine (luckily put a clause suspensive in) and they only asked me to pay 5% deposit.  The price of the house wasn't vastly different from the one I was selling so not really sure why I was never even asked for 10%.  Didn't question it at the time, just grateful as I had to borrow the money for it !

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The whole things seems completely illogical to me.  It also seems very strange (unprofessional / dangerous even) that a lawyer would make a statement regarding the enforceability of a contract term when he not seen the actual contract.  I would be interested to know if this opinion was given in writing?  (If so, would hope these lawyers have good professional indemnity insurance!) 

If the buyer can ignore clauses in the contract at will then it would seem that the entire contract is invalid and that the seller should, likewise, have no obligations to the buyer. Regarding the amount of the deposit, that seems entirely consistent; as long as both the buyer and seller agree, the deposit doesn't need to be 10%.

As an aside boxergirl said that:

[the lawyers] all agreed that even though the document was signed to say the

deposit was to be paid to me, the buyer could contest this by saying

that he was not happy with it.

The fact that the buyers signed the compromis is, de facto, the evidence that they (the buyers) are happy with all the terms of the compromis - including the term regarding the payment of damages (i.e. the deposit) on default. 

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My own compromis de vente refers to Article 1590 of the code civil which I suspect is a standard inclusion in sale documents of this kind. 

The article states:

Si la promesse de vendre a été faite avec des arrhes chacun des contractants est maître de s'en départir,

Celui qui les a données, en les perdant,

Et celui qui les a reçues, en restituant le double.

If the giver of a downpayment drops out, then he loses it.  If the receiver of the downpayment drops out, then he refunds the giver double the amount.

As per Scooby, unless your own compromis contained a clause allowing the buyer to drop out and get their deposit back, then I don't understand why these advocats seem to dismiss this fairly clear legal position.

 

 

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I've just looked and my compromis has exactly the same clause in.  

You don't have to tell me that it's illogical - I couldn't believe what I was hearing from the Notaire. 

Which is why I asked another Notaire, and two Avocats here in France (one English, one French).  They did not wish to see the compromis - I guess because they know the law 'overrides' this in practice.

So, if you're selling and you have a couple over from the US looking at your property, take care !!!

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Everyone always told me that buying in France was so simple. Once you have agreed a deal, even before the CdV, it was basically done, or so I heard. As we went through our own house purchase we soon found out that what is written, and what is said, is not actually what happens. If either party wants to be obstructive in any way, the deal basically seems to fail (for one reason or another) without recourse to anyone.

Notaires are generally the best place to resolve any issues because basically what they say, generally goes. The only issue here is that because they act for both buyer and seller, you really have to find a way to ask the right questions to get the answers. They are not free volunteer to offer advice that may compromise the other party, or so it seems.

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Totally right baypond ... from someone else who has found out that French law doesn't hold up after all !

I agree what you say about the Notaire as they act for both buyer and seller - but even if we had used separate Notaires (which you can do), it would not have helped, I guess, as there was no option but to either go to court or agree to an out of court settlement.  When I found out that even if it went to court and the judge found in their favour ... it still didn't mean that I'd automatically be awarded the 10%, just a penalty amount.  Crazy !  Of course the Notaire wasn't happy as he just earned 300 euros from the buyers rather than 8% of the price of the property so he was doing his best to get them to change their minds and buy it ! 

I still believe I was lucky for them to have (finally) offered 9% to settle out of court.  Especially being Americans - they do love a good litigation !!

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