Buying Real Estate Off-plan: Steps and Difficulties
– Buying off-plan: the essential steps
– Buying a house or apartment off-plan: your rights in case of problems
Buying off-plan is also a sale in the future state of completion. Buying off-plan is governed by law.
Buying off-plan allows the buyer to purchase a property before its construction or completion of the work. The other possibility of buying a new property is selling a completed home.
Buying off-plan: the essential steps
Step 1 – Reservation contract or preliminary contract
The reservation contract allows you to reserve a property offered for purchase off-plan, as its name suggests. It determines the conditions of the sale. Everything mentioned in it by the seller/developer must be honoured.
What it must contain (under penalty of nullity of the contract):
– the contact details of the seller and the purchaser;
– the address of the property;
– the precise description of the property: living area, number of rooms, outbuildings, co-ownership, construction materials, collective equipment, estimated selling price, revision conditions, technical annexes, the location of the property in the building;
– the expected date of signature of the final sales contract.
Good to know: as the property’s surface area is approximate on the day of the reservation contract, a tolerance of plus or minus 5% is allowed on the property’s surface area.
Include all the other important (non-mandatory) information that is binding on the seller:
– resolutory and suspensive clauses:
◦ non-completion of the sale of your previous property;
◦ in case of a loan, provide for a suspensive clause allowing you to recover your security deposit in case the loan is refused;
– the deadline for the execution of the work, the delivery of the property;
– the loans required to finance the property;
– the final sale price of the property;
– the payment deadlines;
– the conditions for returning the security deposit in the event of withdrawal;
– the financial guarantees of completion of the work;
– construction insurance;
– the administrative authorizations obtained.
To reduce the acquisition cost, the preliminary contract of the sale in the future state of completion can also foresee that the purchaser reserves the execution of work of completion or installation of equipment that it gets by itself.
Good to know: the buyer can change his mind and reconsider his decision to do specific work. In this case, he must notify the seller of his decision by registered letter acknowledging receipt.
You sign the sales contract. Two possibilities are offered to you:
– either sign at the notary’s office;
– or sign a private deed (signed directly between the seller and the buyer).
You send it to the seller by registered mail with acknowledgement of receipt.
Step 2 – Deposit: to be paid on the day of the reservation contract
The amount is deposited in an account with the notary (in your name).
The amount varies according to the time between the date of the reservation contract and the signing of the final sales contract:
– less than one year: 2% of the sale price;
– from 1 to 2 years: 5% of the sale price. This is the maximum percentage of the security deposit;
– more than 2 years: no security deposit.
Good to know: in case of door-to-door sales, no security deposit payment can be made before the expiration of 14 days.
Step 3 – Withdrawal possible within 10 days
To withdraw from the sale, you have 10 days since the Macron law (previously, this period was 7 days) from the day after the first presentation of the registered letter with acknowledgment of receipt or the hand delivery:
– during this period, you get your deposit back;
– after this period, it is lost if you do not sign the final sales contract (the higher the percentage of the security deposit, the more it is likely to cost you).
A code of law provides this period of retraction. Under penalty of a fine, the deed must indicate legibly and understandably the information relating to the conditions and modalities for exercising this right of withdrawal.
Good to know: in the case of door-to-door sales, the withdrawal period is 14 days.
– signing of the final sales contract outside the deadline, the reason being attributable to the seller;
– an increase of the final sales price by more than 5% compared to the forecasted sales price;
– some instances of non-compliance with the commitments stipulated in the reservation contract;
– non-obtaining of the loan by the purchaser;
– atypical disparities between the project for sale in its future completion stage and the preliminary contract’s estimates.
Step 4 – Final sales contract and payment
What it must contain:
– the accurate description of the property: living area, number of rooms, outbuildings, co-ownership, building materials, collective equipment…
– the precise description of the other buildings in the case of a group of buildings;
– the co-ownership regulations;
– the descriptive state of division;
– the specifications of the allotment, if applicable;
– the firm and definitive sale price;
– the payment schedule;
– the delivery period;
– the penalties for delay.
Deadline: it must be sent to you at least one month before the date of signing the final sales contract.
After signing, you will begin to make payments to the developer according to the progress of the work. The main deadlines:
– Upon completion of the foundation:
◦ 35% maximum of the sales price for a collective housing unit;
◦ 20% maximum for an individual housing unit;
– Upon completion of the waterproofing:
◦ 70% max (multifamily housing);
◦ 45% max (individual housing);
– upon completion of the work:
◦ 95% max (multifamily housing);
◦ 85% max (individual housing).
The remaining amount due is paid upon delivery of the housing.
Step 5 – Delivery of your property
The delivery of the property corresponds to the date when the keys are handed over to you. This is the seller’s obligation to deliver the property to the buyer. On this date, you are supposed to make your last payment to the seller, except in the case of a dispute over the conformity of the property:
– 5% of the selling price maximum for a collective dwelling;
– 15% of the selling price maximum for an individual dwelling.
With the seller, you make an accurate inventory of fixtures: defects, faults… It is advisable to be assisted by a building professional. You have one month to report any other problems and communicate them to the seller by registered letter. A report of delivery materializes the delivery of the good. If necessary, it contains the reservations that the buyer wishes to include. The buyer has a period of one month to express his reservations. He can thus if he forgot to mention certain reserves in the report of delivery, address a registered letter with acknowledgement of delivery to the developer within this time. The reservations generally relate to apparent defects such as completion defects and conformity defects. The developer must remove these reservations within one year, for example, defective electrical installation, lack of windows, parking space narrower than expected, presence of tiles instead of parquet.
There are two hypotheses:
– either the reservations are lifted. A report on the lifting of the reservations is then established;
– or the reservations are not lifted. It is then necessary to put into play the guarantee of perfect completion. You can go to court to either cancel the sale or ask for a reduction in the price.
The delivery date can be postponed for several days or months in some instances:
– exceptional circumstances;
– bad weather.
Prejudice caused by a significant delay can be defended in court and lead to damages.