4. Contract Conditions when Buying Property in France

1. Conditional Clauses
2. Cooling Off Period
3. Options to Buy
4. Deposit
5. Statutory Disclosures
6. Local Rates
7. Fixtures/Fittings

4.4. Purchase Deposit

The purchaser normally pays a deposit of up to 10% on signing the sale and purchase agreement.

Whilst 10% is the normal deposit it is quite legal to pay a lesser amount. Indeed, it is increasingly the case that a 5% deposit is being adopted.

Arguably, the higher the value of the property being purchased then the more justified you are in proposing that a lower percentage figure is sufficient.

It is even possible to pay no deposit at all, although the agreement will contain a penalty clause that will apply in the event you withdraw outside of the terms of the contract.

Thus, although a buyer may pay only 5% deposit, the contract may well contain in it a damages clause of 10%. The only problem for the seller is that in the event there is a breach of contract by the buyer it would be more difficult to obtain full compensation, as it is likely court proceedings would be necessary.

The deposit is not paid to the seller, but to the estate agent or notaire on signing of the contract.

Under no circumstances should you hand over any monies to the seller at any stage of the proceedings.

The deposit will be held by the notaire in 'escrow' as part of the purchase proceeds.

If you are handing over a deposit to an estate agent, as part of the process of signing a sale and purchase agreement, ask to see and write down the number of their carte professionelle.

Their professional card should clearly state that they have appropriate registration to deal with property sales with the words de transactions sur immeubles et fonds de commerce.

If all conditions in the contract are met, but the buyer does not proceed with the purchase, then the deposit is payable to the seller, who may also take legal proceedings for additional damages.

It is even possible that the seller could take court proceedings to oblige the buyer to sign the contract, although this is extremely rare, and there is always the risk that the court would not agree to the demand.

Alternatively, it is possible for the contract to state precisely the damages that would be payable on default by the buyer.

Conversely, if completion is subject to one or more conditions, which are not realised, then the buyer is entitled to a full refund of the deposit. The law requires that the deposit be returned within 21 days.

In these circumstances, it is not unusual for there to be conflict over the repayment of a deposit, either because the notaire or estate agent delay in repayment, or because there is some ambiguity as to whether or not the condition has been fulfilled.

Accordingly, if you do sign a conditional contract, you would be well advised to go for the minimum deposit possible, and to also ensure precise legal drafting of the condition(s).

In the event of default by the seller then the buyer can take legal proceedings to oblige them to proceed with the sale and/or for damages. The judge may also declare the sale to have been realised.

However, each case is considered on its merits and, if there are mitigating circumstances enforcement of the sale may be waived by the court.

It is also possible for a penalty clause to be included in the contract to the benefit of the buyer so that, if the seller withdraws from the sale, they are liable to compensate the buyer.

Whilst such a clause may have a dissuasive influence on the seller there remains the problem of enforcing the clause, which may necessitate legal proceedings.

We consider in more detail the issue of enforcement of the penalty clause at The Penalty Clause in Property Sale Contracts.

Next: Statutory Disclosures

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