Monday, April 22, 2013

Paying a deposit when buying French property

Buyers and sellers of French property are often confused about the implications of paying or receiving an initial deposit when buying or selling a French property. Note the following guidelines:

- There are no hard and fast rules or applicable laws, either as to a precentage or the amount requested/paid over - this can range from Nil to 10% of the property selling price.
- Some licensed French estate agents (not all) are authorised and insured to receive deposits from buyers, and this information should be posted prominently at their place of business, including the maximum amount they are legally permitted to receive and details of their appropirate insurance cover. Any sums received are paid into a special sequestered clients account.

- French Notaires  are authorised to receive deposits from buyers and these are paid into a special state-controlled bank account, which does not earn interest.

- Deposits can be paid at the time of signing an initial agreement (offer to purchase) but more often on signature of the 'compromis de vente' (initial contract) drawn up by the Notaire or an estate agent. Buyers however may prefer to wait until the end of the seven-day 'cooling-off' period, after signature of the 'compromis de vente', before handing over a deposit.

- In the event that the sale falls through - for example, the buyer simply changes his mind after signature of the 'compromis de vente' and after expiry of the seven-days 'cooling off period' - the deposit may be witheld as compensation to the vendor. This however is not automatic and normally requires the consent of the buyer.

- Where a buyer is purchasing a property and seeking a mortgage or loan, the 'cooling off' period is extended by a further 7 - 8 weeks to allow him to secure and agree a mortgage or bank loan to finance the purchase. During this period the buyer must prove 'due diligence' in actively seeking such a loan - he cannot simply sit back and do nothing and then withdraw from the sale. In such a case he could be at risk of losing any deposit paid, subject to the conditions noted abouve.

- The above are general guidelines only and not a substitute for appropriate legal counsel.