Deposit on French House?

[[email protected]]

We are looking at what looks like the perfect property in Finistaire on

Friday and have a question about the deposit required. I know that in

France a deposit of 10% is required but is there a time limit on it.

There seems to be a time of three months to complete on property

purchase in France, does this mean that if we haven't sold our UK house

and completed the French purchase do we lose the deposit?

Thanks

Jon

[Will]

The deposit becomes payable at the end of the seven day so-called 'cooling off' period following your receipt of the copy of the compromis de vente signed by all relevant parties. 10% is customary, as this corresponds to the amount you would forfeit under French law if you pull out of the sale, but smaller amounts can sometimes be negotiated with the notaire.

The 12 week period to signing the final acte de vente is an average, the date is merely an aticipated signature date, and is definitely not set in stone. The signing date is frequently moved by the notaire at the request of seller, or buyer, or both, or to accommodate the notaire's own requirements, though it should normally only be done with the agreement of all concerned. There are many reasons why it may be necessary to change the date. However, undue delays and procrastination by the buyer could well result in the notaire either insisting that the sale is completed or cancelled, and if the latter happens the buyer is liable to forfeit the 10%, possibly plus costs.

It is not a good idea to embark on a French purchase without the finance in place, and many notaires and agents will not allow it to proceed without either a definite sale of an existing house, or cash available, or a loan arranged. Unlike in England, once the sale is agreed you are committed and you cannot just change your mind.

[Llwyncelyn]

As a lawyer my advice would always be and as Will suggests that unless you have the funding in do not go down the road of paying a deposit be it 10% of 10000 euros or 10% of 100000 euros.

If you have rock solid funding in place (and in writing) then go ahead but  please bear in mind a promise is just that a promise and is not legally binding then stay well clear for its basically burning hard earned money.

I was in the UK for the last few days and my friends of long-standing in the property business say (in Wales that is) that the school holidays are upon us people have had their holidays credit cards need paying and Xmas is around the corner.  They say (again in Wales) that the market is cooling down and they are basically restricting their costs until once more the spring comes around.  To take a chance on your house selling and without an exchange is dangerous and heady stuff as would the case of using ones credit card etc.

I am sorry to be doom and gloom but to sign a French document without the balance of the purchase in your back pocket is the stuff of science fiction.  Please do not do it.

Try to think UK your UK Solicitor would advise you not to exchange on a purchase unless you were going to exchange on your current purchase almost at the same time.  If you declined to take his advice he could and should just walk away for as I say its madness.

[Nick Trollope]

Sorry, but I think that you (Will & Welsh-bloke) are rather over-dramatising the situation.

It is perfectly normal to include a clause in the CdV that covers the non-sale of a property abroad - I had one, despite not having a house on the market!

It is also normal for the French to buy with a bridging loan - this option is also available to foreign buyers - bridging loans have no monthly repayments and the rates are pretty good, typically.

I have only once paid a deposit - the other times I told the purchaser that I wasn't going to pay one - take it or leave it! Not paying a deposit does not remove your liability to pay penalties if you break a contract....

 

[Will]

Hello Nick - I agree that deposits of less than 10% can be paid, in fact I said so. I also agree about bridging loans (pret relais) being common. We have ourselves used pret relais and bought without paying a deposit though I quite agree that doesn't remove any legal obligations.

You can put any clause suspensive you want in the compromis. Trouble is, the clauses have to be agreed by all parties and many of those parties (especially sellers, agents and notaires) are somewhat less happy than they used to be about clauses making the sale conditional on finding finance or selling another property, particularly abroad. Whether this unwillingness, and the unwillingness to take smaller deposits, are or are not due to a significant number of defaulting Brits using the finance trap as an excuse for changing their minds and pulling out of sales I leave up to your imagination.

Rather than thinking bridging loans are not normal or not recommended, I could not be more in favour of them - used with care they are an excellent way of ensuring finance is in place to allow a sale to go through, and they remove the ridiculous scramble customary in the English system to all complete together. Instead, you have a decent relaxed period during which to move in to your new house.

[Gardian]

[quote user="Will "]

Unlike in England, once the sale is agreed you are committed and you cannot just change your mind.

[/quote]

This sums it all up very concisely.

This thread (and another a week or so ago, where some of us were bickering over the detail of what you can and can't do) gives the clear answer.  You may well be able to add clauses to the Compromis over timing, funding, sale in the UK, but it has to be by agreement up front.  You may well be able to agree to sign a Compromis without providing a deposit, but you risk a financial penalty if you default. You may well be able to extend the date for completion, but it has to be by agreement.  The Notaire may well opt to extend the date, but you may not have a say in it.

However ................ at the end of the proverbial day, Will's quote above is fact. (unless the vendor agrees to let you off the hook).

Conclusion ................ No, it's blindingly obvious.   

[Nick Trollope]

Yes, we know that, but that is not applicable to the OP.

I don't think that the OP wanted to get out of a compromis (unlike the other you refer to) more to the point, he wanted into one, with the minimum of risk. True, the Vendor may not like the clause, but we can't know that, can we? An one certainly doesn't get if one doesn't ask!

In a buyers market (it certainly is at the moment) they buyer calls the tune - if Vendors don't like it there are always plenty of alternatives. None of this, BTW has anything to do with the Notaire - at the compromis stage, a notaire is rarely involved. Notaires are tax collectors & will (usually) do what their clients ask & their masters tell them.

And noone was bickering.

 

[cooperlola]

Do take care Jon.  I have friends here whose UK buyers dropped out and they are still paying the mortgage on two houses after nearly 2 years because they have yet to find another buyer. They had signed the compromis so eventually had to complete on the French house, no matter how patient the sellers were!

[allanb]

[quote user="Will "]

It is not a good idea to embark on a French

purchase without the finance in place, and many notaires and agents

will not allow it to proceed without either a definite sale of an

existing house, or cash available, or a loan arranged. Unlike in

England, once the sale is agreed you are committed and you cannot just

change your mind.

[/quote]

I don't think this is quite correct.

Under a law of 13 July 1979, if the purchase depends on obtaining a

loan, the sale must be made conditional on the loan actually

being obtained.  I'm taking this from the printed form of compromis de vente which I signed when I bought my house three

years ago.  The French is: ...en cas de financement par un

prêt, la vente doit être conclue sous condition suspensive de

l'obtention du prêt.

If you don't need a loan and you are willing to remove this protection,

you need to hand-write and sign a paragraph in the agreement to that

effect.

I can well imagine that an agent would prefer the buyer to have "a

definite sale of an existing house, or cash available, or a loan

arranged".  It reduces the risk that he will do a lot of work with

no result.  But it seems to me that he can't insist on it, if the

seller is willing to sign without it.

[BJSLIV]

 without the finance in place

In the context this was written Will meant, I am sure, finance in the sense of the proceeds of the house sale being available , ie cash in hand.

Absence of a sale would not be good enough reason to cancel a purchase by relying on this clause.

You would need to demonstrate your inability to obtain a loan.

[Will]

That's right - cash in the bank, mortgage or bridging loan agreed, signed compromis (or contracts exchanged on a house outside France) - all should be acceptable. There is a standard condition about failure to obtain a mortgage cancelling the sale, but because this is often included and is on some pre-printed forms doesn't necessarily mean it has any legal standing - its actual inclusion is still subject to the agreement of all parties. As I said, some agents etc do not use this clause. And, as bjsliv indicates, you would need to demonstrate that you could not obtain the finance anywhere for the clause to be invoked.

I for one would not be at all happy about accepting an offer to buy from a person who did not have the wherewithal to even get a loan, or one who made the purchase conditional on selling his/her own house, and would not (indeed have not) agreed to such a condition.

[allanb]

[quote user="Will "]

I for one would not be at all happy about

accepting an offer to buy from a person who did not have the

wherewithal to even get a loan, or one who made the purchase

conditional on selling his/her own house, and would not

(indeed have not) agreed to such a condition.

[/quote]I agree. 

Incidentally, I don't much like the principle of the 1979 law.  If

the buyer changed his mind, and was just a little unscrupulous, he

could always write his loan application in such a way that it had no

chance of being approved.

[Llwyncelyn]

Ok we are in France and the law of France and its civil codes apply.

However basic common sense says that whilst you can incorporate a clause that gives you both time and the ability to arrange finance this is only on the basis that one is roughly able to do what you say.

Imagine such a clause and later much later down the line you are unable to deliver?

Unfortunate certainly and for all parties but for very simplistic reasons and be it in the UK or France this Welsh 'bloke' suggests it is far the better way for your finances to be in place before one proceeds for otherwise you could repeat the exercise with numerous properties and you do not then cross the rubicon until say you sell in the UK.  Yes if you take a bridging loan then I absolutely agree its a decision of yours and yours only but I may be old fashioned but I would not even go down that road unless I had made enquiries of the ability of my  purchaser to do what he or she says they are able to do. Again if you are in the South East and have equity but not necessarily cash Iwith these two things being different) tied up in the property and you are in SE enhanced salary brackets of course go ahead because you should be able to deliver. However if you are on Bodmin Moor or Llwyncelyn then that is entirely a differing scenario.

Of course in the UK you are able to accept an offer but until one exchanges contracts then you are able to accept as many offers and thus submit contracts to the other side as you see fit.  This too is unacceptable conduct on behalf of the vendor but it does happen for the property is not sold until exchange.

Many views on many subjects as I say I am old-fashioned and whilst I do not necessarily agree our forefathers or at least some of them in the UK would not purchase something on Hire Purchase or loan from the Bank on the basis if they could not pay for it then they do not buy it.  Agree totally differing concept but theory is correct.

[Alexis]

Yes, you do lose your deposit if you can't proceed 'on a whim' so to speak.  (I am sure if something tragic such as a death or serious accident arose, that would be taken into account.)

When one of the houses in the village was being sold, everything went smoothly until the day before the final signing when the prospective purchasers had a fall out and everything went pear shaped.  They lost 100,000F which fitted very nicely into the sellers pockets.