Disputes about breaches Of Real Estate Sales Contracts in France

You are planning to purchase or sale a real estate in France ? Under the French real estate law, there are basically two kind of contracts: the agreement for sale and the sales contract.

Disputes about breaches Of Real Estate Sales Contracts in France

Under the French law, the agreement for sale is called “promesse de vente » and the sales contract « contrat de vente ».

Agreement for sale (promesse de vente) is not a simple offer to purchase. It is binding. Each party will have to perform severalobligations.

If one party may not execute the contract, the other party is entitled to enforce a damages clause called “clause pénale” or “clause d’immobilisation”.

When a contract is subject to a suspensive condition, the contract comes into effect only when the buyer secured a loan for instance (or authorization of the authorities).

Mandatory Suspensive Condition of Loan for a Purchase by an Individual

If the sale will be paid, directly or indirectly, even partially, using one or more loans, the contract is concluded under the condition of obtaining the loans who take on the funding. (Article L312-6 of the French consumer code)

Meaning that if the buyer doesn’t get his loan, he hasn’t to pay damages to the seller. (If he asked for the same loan stated in the contract: same amount, same rate, same duration).

The duration and validity period of this condition (the loan) cannot be less than one month from the date of the signing of the deed.

Clause imposing a filing date of the loan application

The agreement for sale / sale agreement cannot validly impose on purchasers new and increased requirements compare to the rules of the consumer code.

For instance, the contract cannot states that the buyer has to obtain the loan before a date. He has only to provide evidence he asked for.

Evidence of a loan application meets the characteristics defined in agreement for sale (promesse de vente)

The buyer who wants to take advantage of the suspensive condition of loan must prove that he applied for a loan meeting the characteristics defined in the agreement for sale (promesse de vente).

Number of Loan Applications and Banks

Sometimes, the buyer has to ask several banks for his loan under the contract.

The buyer must prove that he filled the number of applications in the number of Bank required under the agreement for sale (promesse de vente).

Required amount of Capital, Interest rate and Duration

The loan application has to meet the requirements of the clause in the agreement of sale, i.e.:

ü same amount of capital,

ü same interest rate,

ü same loan duration.

It means the buyer cannot ask for money to refurbish / renovate / improve the real estate, if he wants to benefit of the protection of the clause of suspensive condition.  

Buyers do not report such evidence, if they just providea letter of refusal of Bank loan, without the capital, interest rates and duration of the loan or the loan application date.

Penalty Clause (clause pénale)

If the buyer does not report such evidence, he will be condemned to pay the penalty clause.

The judge has the power to reduce the penalty clause.

If the amount of the penalty clause appears manifestly excessive in the circumstances of the case, the Court can reduce it.

No penalty clause in the absence of formal notice

The penalty clause is a flat-rate assessment of the damages suffered by the seller.

But, this clause can be enforced only if the seller justifies having put on notice the purchaser to regularize the sale by deed. If not, the damages are not due.