All property transactions in France take place in two steps: first, after the seller has agreed to the price offer, the seller and buyer sign a promise to sell in the form of either a promesse de vente (unilateral promise to sell) or a compromis de vente (bilateral promise to sell). This can take place privately, in a real estate agency or in a notaire’s office. Then, usually about 3 months later, when all the conveyancing has been done, both parties sign the acte de vente to close the sale.
The first time I purchased a property in France, in the early 1980s, I was told that it was better to sign a compromis de vente rather than a promesse de vente so I was surprised to learn recently, when asked to interpret during the signing of a promise to sell in a notaire’s office that it was a promesse de vente and not a compromis.
Despite my research I was not able to really determine the difference between the two so I asked the notaire, who told me that he only used the promesse de vente agreement. His explanation did not fully satisfy me, apart from the fact that the promesse de vente would appear to be in the purchaser’s favour and the compromis in the seller’s favour. Also, a real estate agent can only use a compromis de vente agreement which probably explains why I was told it was preferable. Real estate agents who have obtained the corresponding certification can prepare the compromis without going through a notaire and the price of the agreement is included in their commission. The promesse de vente is an acte authentique which means that it is always signed in front of a notaire.
After looking at my own records (my husband and I have bought or sold 8 times, 3 times with a real estate agent and 5 times privately), I discovered that there was a compromis de vente each time a real estate agent was involved and a promesse de vente all the other times. However, I have since attended a training course on the subject for court sworn translators and have updated my knowledge on the subject. Here are my conclusions.
Promesse de vente or unilateral promise to sell (the least common)
The seller promises to sell the property to the future buyer at a price agreed upon by the parties thus giving the future buyer exclusivity for a pre-determined period (usually two to three months).
During this time, the seller cannot promise to sell the property to anyone else whereas the future buyer can cancel the sale if they wish to, the only drawback being that they will lose the indemnité d’immobilisation or reservation fee (which roughly corresponds to non-refundable earnest money) if they do not go through with the sale. The reservation fee is usually 10% of the sales price.
If the future buyer does go through with the sale, the 10% is deducted from the price still to be paid.
To be valid, the promise of sale must be registered with the tax department within ten days of signature and if the reservation period is more than 18 months, it must be signed at a notaire’s office. This particular point may be changed in 2020. The registration fee, paid by the future buyer, is 125 euros. The fee charged by the notaire for preparing the agreement is not fixed by law and is usually about 200 euros. You should ask the notaire beforehand.
Compromis de vente or reciprocal promise to sell (the most common)
The seller and the future buyer both undertake to conclude the sale at a price determined jointly. Legally, the compromis is therefore a sale. If one of the parties wants to pull out of the transaction (except if the one of the conditions precedent is not met), the other party can take them to court and force them to do so, in addition to claiming damages. However this can be a very lengthy process.
When the compromis is signed, the purchaser pays earnest money (dépôt de garantie) corresponding to 5% to 10% of the sales price. The earnest money is deducted from the final sales price.
The compromis de vente does not have to be registered with the tax department. However, if there is a dispute about the conditions precedent, the parties will both be bound by the agreement, unless the dispute is settled amicably between the parties or by a court decision. In the case of a promesse de vente, both parties are released from the agreement if the future purchaser decides not to buy. The vendor cannot change their mind and the agreement is immediately enforceable without going to court.
Cooling off period for purchasers – promesse de vente et compromis de vente
Whether you sign a unilateral promise to sell (promesse) or a reciprocal promise to sell (compromis), you have ten-day cooling-off period (délai de retractation) during which you can decide not to purchase the property. The letter stating your intent must be sent by registered letter with acknowledgement of receipt to the seller. If you go through a notaire, this can be done electronically.
Whatever the reason for cancelling the sale, any amount paid by way of reservation fee (indemnité d’immobilisation) or earnest money (dépôt de garantie) during the cooling-off period will be reimbursed. The 10-day cooling-off period starts on the day following the day on which the promise to sell is signed at a notaire’s office or, if a private promise to sell is signed, at the first presentation by the postman of the registered letter with acknowledgement of receipt containing the agreement.
For example, if the letter is sent on 10th of the month and the first presentation is the 12th of the month, the cooling-off period will begin on the 13th and end on 22nd at midnight.
Conditions precedent – promesse de vente and compromis de vente
I mentioned the question of conditions precedent (conditions suspensives) earlier on. These are conditions that must be met for closure of the sale to take place.
Whether the promise to sell is unilateral (promesse) or reciprocal (compromis), the seller and buyer can agree to insert one or more conditions precedent in the agreement. This means that if events defined as conditions precedent do not take place before the final sale, the agreement is null and void.
- Examples: the purchaser’s bank loan is refused; the municipality has a pre-emption right; a serious town planning easement is discovered. In these cases, the amounts paid by the purchaser are refunded.
- A compromis de vente can also contain a clause called a “clause de dédit” (retraction clause) which enables the seller and/or the purchaser to cancel the sale without giving a reason, in return for leaving the other party an agreed-upon amount. However, this practice is very rare.
- The above clause must not be confused with the penalty clause, which exists in most compromis de vente according to which the purchaser must pay the seller a fixed amount in damages if the purchaser refuses to go through with the sale.
To sum up, if you are purchasing a property in France and you want to be able to cancel the sale without giving a reason (and are prepared to lose the 10% reservation fee!) or if you want to guarantee the date of sale, then you will need to sign a promesse de vente at a notaire’s office.
If you are selling a property in France and the purchaser needs to get a mortgage loan, it is also better to sign a promesse de vente because if the loan has not come through on the stipulated date, you can simply walk away from the sale and find another buyer. If you have signed a compromis, you will have to go through the court to have the sale cancelled which can be a lengthy process.
In all other cases, you can choose either a promesse de vente or a compromis de vente, but if you are going through a real estate agent, then it will be necessarily be a compromis de vente unless you specifically ask for a promesse de vente through a notaire.
Whatever you choose, you will have to sign the final deed of sale at the notaire’s office. I strongly advise choosing your own notaire (in which case the fees are split between all the notaires involved), not because of any possible dishonesty on the part of a notaire, but simply because you will always have an unbiased opinion.
My second recommendation is to make sure you understand EVERYTHING in the deed of sale (which you can request beforehand). Some real estate agents are competent to explain all the details. Otherwise you can call on a sworn translator who can also be present during the sale.
For all inquiries, please contact Rosemary Kneipp at kneipp@kneipp-traduction.com or phone 06 76 41 99 43.