An American or British company wishing to buy land to construct a building for apartments, offices, or shops will follow the same procedure as an American or British private individual purchasing a house. First, the investor has to find the Real Estate to buy. Many professional Real Estate offices exist in France, and some of them do have international skills, allowing them to deal with American clients. Some Notaires also have a Real Estate department, and might be able to be of assistance in finding a property. Once the Real Estate has been found, completing the purchase involves the following steps:
(a) the Promise of Sale;
(b) the Final Sales Agreement.
(a) The Promise of Sale
This step is the most important one, as all the legal aspects of the sales agreement are fixed at the time. At this stage of the contract, the Law does not stipulate that the deed be authentic, meaning it does not need to be supervised by a Notaire. A Lawyer or a Real Estate agent may thus sign a Promise of Sale. However, this mistake is not to be made by American investors, for only a Notaire is qualified to counsel the clients and prepare contracts at no extra-cost. This is true not only from a legal stand point, but also from a Tax stand point. Many promises result in litigation because the clients are genuinely not aware of the consequences of the deed they have signed.
Once the Promise of Sale is signed, the commitments of the parties to a contract are final and may not be modified. It is at this stage of a Real Estate purchase that the Notaire’s advice is most useful for the client because all future obligations of the parties rely on the Promise of Sale.
Many forms of contracts could be signed before closing the final sales agreement. But only the Notaires use the Promise of Sale which is the most secure form. The buyer usually places a deposit of 10% of the property price in the hands of the Notaire. This security deposit guarantees the buyer’s commitment. If the buyer cannot purchase or does not wish to continue with the purchase anymore, he loses the 10% he has paid which is then given to the seller.
The buyer pays the remaining 90% of the property price on the day of the final purchase. Signing a Promise of Sale with a Notaire provides another advantage to the buyer if the purchaser happens to die during the proceedings, an insurance contracted by the Notaires will enable his heirs to finalize the purchase or lose the safety deposit, up to 500,000 French Francs under specific conditions.
For the above mentioned reasons, it is very important for foreign investors to rely on a Notaire at the beginning of the transaction. If the chosen Notaire has international skills and often deals with American or English clients, he will be able to send them to Real Estate agents with files in English.
Moreover, consulting a Notaire before the transaction may be very useful as Notaires often have Real Estate at interesting prices within their files.
(b) The Final Sales agreement
Once the Promise of Sale has been signed, all the commitments of the parties are fixed. The Notaire must then collect various documents, such as property titles and mortgage documents to verify that all the paper work is in order.
Collecting the documents and verifying them may take up to three months. This delay may be shorter, but it may still seem long to many American or English investors. This time period is extremely important because it serves as insurance for the Final Sales Agreement.
After the Notaire has collected all the documents, the Final Sales Agreement is signed. It is an authentic contract and is almost undisputable in court. Litigations on such contracts are very rare, unlike litigations concerning contracts not prepared by a Notaire.