Monday, July 27, 2009
Seven day cooling-off period
Unfortunately we do not mean a quick dip in the Mediterranean during your annual holiday, but the seven day period of 'reflexion' that is allowed to buyers of French property, under recent changes to the country's consumer protection laws. The seven-day period runs from receipt by registered post at the buyer's home address of the pre-contract (compromis de vente), which may include a number of conditional clauses related to the property's purchase (see separate entry under Compromis de vente, for more information).
However, if the property purchase relies on the buyer securing a mortgage or bank loan, additional time is allowed for him to get his funds in place. This includes an initial period of 30 days to arrange a suitable mortgage and a further 15 days in which to accept or reject the finance provider's firm offer. Even at this late stage, a potential buyer could reject the loan provider's offer (interest rates too high, term too short etc) and withdraw from the transaction without penalty.
During the 30 day search period, the buyer must however demonstrate due diligence in trying to raise funds, and the notaire or the agent can insist on written proof of this, such as in letters to and from the loan provider. The buyer cannot simply sit back and do nothing, and enjoy another month or so of 'cooling off' without risking penalties. These could include paying damages to the vendor and a fee to the estate agent involved, as well as reimbursing any work already done by the notaire and others involved in the transaction.
It is invariably frustrating for vendors to see a property deal collapse due to the buyer not securing the necessary funds, and some agents and vendors try to deal only with cash buyers or at least insist that potential buyers arrive with written proof of a loan agreement in principle from their bank or mortgage provider.
It is of course possible for a transaction to collapse as a result of conditional clauses written into the pre-contract not being fulfilled - for example, planning permission not obtained or as a result of an unsatisfactory report by a surveyor. And while ones first reaction may be to attribute blame and seek remedies through the court, it can be difficult to prove bad faith (see my note on Vices Cachés). It is often wiser to turn your back on the deal and redouble your efforts to secure another buyer or find another property.
Labels: Finance and legal