coin-gauche Buying an off-plan property in Francecoin-droit

 

What is an off-plan property?
An off-plan property is an apartment or house which is sold literally off of the plans and has yet to be constructed or completed. This arrangement is beneficial for developers as it allows them to secure buyers and capital before beginning construction but is equally beneficial for buyers as they can pay for their property often at a lower rate and benefit from favorable progressive payment options and may even have the opportunity to personalise their property. 
The sale of an off-plan property in France is called a “vente en l'état futur d'achèvement” or Vefa and is strictly regulated by French law (articles 261.1 and following of the Code of Construction and Housing).

Financing your purchase
Before starting to search for the ideal property or visiting any developments, we always strongly advice our clients to organize their finances. Most of our customers choose to have a French mortgage as they are normally easier to get and offer better rates than UK mortgages.

A French mortgage also has the advantage of protecting the buyer from currency fluctuations. For example our currency broker (Foreign Currency Direct) can set the currency rate up for 2 years so your monthly paiments will be done at the same rate for 2 years thus saving you thousand of pounds. On the graph below you can see a sample of a fix rate illustrated by the red line: 

graph-fluctuationGBP-EUR

With a UK mortgage, the buyer is left vulnerable to the variable exchange rate from Pounds Sterling to Euro. With a French mortgage, however, it is possible for a broker to set the exchange rate for up to two years, thereby protecting the buyer.


Choosing the right property
There are several types of off-plan property available to buy in France:
arrow2 Classic off-plan properties        (which you buy freehold and keep for your own use)
arrow2 Buy to Let properties         (which you buy freehold and rent out through a management company for a secured rental income)
arrow2 Leaseback properties         (which you buy freehold and sign over to a management company on a
9 or 11 years lease in exchange for a guaranteed rental income for the length of the lease. Most of the time, you can also use the property for up to 8 weeks per year, subject to agreement with the rental company).

In order to choose the right property, you need to think about your reasons for looking for a property in France (are you looking to buy a property purely as an investment or do you want a holiday home?)
If you decide you are interested in one of our developments then the next step is to arrange a visit. We always advise visiting the site before purchasing a property as it crucially gives you an opportunity to explore the local area. Moreover, although most of the time when purchasing an off-plan property the site is just a field, if the project is being built in several phases and you purchase a property at stage 2 or 3 you may also have the opportunity to see what your completed property will actually look like and where it will be in relation to the others.

Buying an off-plan property – The process
arrow2 Mettre une option - Placing a hold on a property
If you decide to purchase a property, placing an option will hold it exclusively for you. This will give you up to two days to organize and transfer your fully-refundable deposit. The deposit is 5 % of the purchase price if the completion date of the sale does not exceed a year or 2% if the build time is in excess of one year. The deposit will be placed into an escrow account belonging to the notaire dealing with the sale. Thereafter you have two weeks to sign and return the preliminary contract.

arrow2 The preliminary contract  - Securing the property

The next stage in the process is to sign a “contrat preliminaire” (preliminary contract), also known as a “contrat de reservation” which commits the developer to selling the property to you and constitutes a real commitment on your part.
This contract establishes in writing the details of the property being sold to you and contains certain obligatory details: a detailed description of the future property (approximate living space, number of rooms, outbuildings, etc.); the quality of the construction (materials employed…) and other technical details annexed to the contract; the sale price; methods of reviewing the contract; and the date on which the final sale contract will be signed.
Once you have received a copy of the signed contract from the developer you then have a 7 day cooling off period.

arrow2 The final deed of sale (contrat definitif de vente)

You will be given one month’s notice by the agent of the final signature.
The aim of this notice period is to enable you to check that the project conforms to the agreed specifications. This contract must have more details than the preliminary contract, in particular a detailed description of the property, the price and modes of payment, a delivery period, a guarantee of completion or refund and a clause whereby if you cannot get a mortgage you are released from the contract of sale. 
The agent must also give you a plan with the housing dimensions and a duplicate of the joint ownership rules. If there is a discrepancy between the final contract and the preliminary contract you can abandon the sale and your deposit will be refunded to you within three months. The final sale contract must be signed in the presence of a notaire.

arrow2 Paying for your property
Off-plan properties are purchased on a progressive basis according to the advancement of the building work often as follows: 

arrow2 5% Initial deposit 
arrow2 35% of the total price when the foundations have been laid
arrow2 70% of the total price when the property is weatherproof
arrow2 95% of the total price when construction is complete
arrow2 100% of the total price the day the property becomes available to the buyer (the day you receive the keys).

(The payments requested by the promoter will not exceed these cumulative amounts)

Off-plan properties benefit from a reduced notaire fee of between 2.5 and 3% of the net purchase price (compared with the 6 to 8% notaire fee payable on resale properties).

arrow2 The delivery
The delivery date for an off-plan property as specified in the contract can be either a specified date or a certain period (eg: last quarter 2010) or a mixture of the two, within a certain period of time from a specified date. The contract may contain penalty clauses (favorable to the buyer) against a delay in the delivery of the property.

GUARANTEES
Buyers of off-plan properties in France are protected by a number of guarantees (guarantees from the builder and legal guarantees). The aim of these is to ensure that the property the buyer receives upon completion conforms to all the specifications set out in the preliminary contract and final deed of sale and to provide the buyer with a means of redress should this not be the case. These legal guarantees also exist to enable the owner to appeal if defects are found after the buyer has taken ownership of their property. 

arrow2 Guarantee of completion
The first guarantee protecting the buyer is the guarantee of completion. This compulsory guarantee ensures that the promoter will be able to complete construction and can take one of two forms:
The “garantie extrinsèque” or extrinsic guarantee is a guarantee of completion underwritten by a financial institution, an insurance company or guarantee company which agrees to meet the costs of completion in the event that the promoter is unable to do so.
The “garantie intrinsèque” or intrinsic guarantee is a guarantee given by the construction company that they can meet the costs of completion. This guarantee is not underwritten and is usually only given once the foundations have been laid and financing secured for 75 % of the intended sale price or when the building has been weatherproofed.

arrow2 Guarantee against any defects of conformity
Off-plan properties are guaranteed by the promoter to conform to the specifications agreed in the preliminary contract and the final deed of sale. These specifications are contractually binding and the buyer is under no obligation to accept a property which differs from these. In the event of non-conformity, the buyer has the right to ask for changes to be made in order for the property to conform to the specifications agreed (if this is still possible) or to cancel the contract for a full refund and thereafter to possibly claim damages.

arrow2 Guarantee against apparent and hidden defects
The buyer of an off-plan property is also protected against any defects in the construction and soundproofing.

Off-plan properties are guaranteed against apparent defects (defects detectable by a non-professional) for a period of one month by promoters. If such a defect is present the buyer must inform the promoter before the one month guarantee has expired via a recorded letter with acknowledgement of delivery. If the promoter does not then carry out the work required in order to correct the defect the buyer is entitled to ask for a price reduction or may take the promoter to court to oblige them to carry out the necessary work. In the event of substantial defects it may be possible to cancel the contract and thereafter claim damages. The buyer has 13 months from the delivery date during which to take any matter arising from this guarantee to court.
Off-plan properties are also guaranteed for 10 years against any hidden defects, even those arising as a result of the geographical location of the property, which compromise the structural stability of the property or which make it uninhabitable. This guarantee dates from the handover date and is issued by both the promoter and the professional who carried out the work. 
There is a separate, concurrent 2 year guarantee of correct operation which applies to fixtures and fittings - elements which can be removed or replaced without deteriorating the structure of the building (eg shutters, interior doors).
The soundproofing of off-plan properties is covered by a one year guarantee dating from the handover date. The promoter is responsible for ensuring that the minimum standards of soundproofing in the eyes of the law are met, although it is the responsibility of the contractor to carry out any work required to meet this standard.

arrow2 Guarantee of quality – the ‘labels’
 The final type of guarantee for those purchasing an off-plan property is that offered by the presence of what the French call a ‘label’. ‘Labels’ are awarded when a product (in this case the construction) meets a set of stringent criteria laid down by an independent not-for-profit body and are a guarantee of quality. The two main labels applicable to off-plan properties are the Promotélec and Qualitel labels.
The Promotélec label is a guarantee of the quality of the electrical installation, its performance and its safety, guaranteeing that the installation was carried out according to the industry code of practice. This label also covers heating, insulation, ventilation and the production of domestic hot water by electricity.
The Qualitel label guarantees the quality of the construction of the property as a whole based on its performance across seven criteria:  the effectiveness of the soundproofing, the performance of the insulation (in summer as well as winter), the quality of the plumbing, the quality of the materials employed in the construction, the estimated cost of heating and water etc and the durability of the roofs and frontage.   
You can view our latest New build and off-plan properties in France here

 

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Buying Process
Introduction
What is an Off Plan?
1- Property search
2- Financing
3- The purchase
4- Final signing
5- Champagne
Guarantees
Tips for investors
Legal process
French Taxes
After sales support