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GUARANTEES FOR THE BUYER
When a developer sells the dwelling before it is built, it is referred to as a « Vente en l'état futur d'achèvement (VEFA) » which is subjected to specific regulations, set by the Code of construction and dwelling.
In France the real estate legislation offers a full guarantee and increased buyer protection through every step of his/her investment.
The Deposit Guarantee:
Upon reservation of the property, the buyer is required to make a deposit for delivery to the notary responsible for the transaction or to a bank named by the real estate developer upon signature of the deed (the guarantee is the same). This amount cannot be cashed before the signature of the formal sale deed, when the buyer becomes the official owner of the property. Should the signature of the formal sale deed be cancelled on account of a problem generated by the real estate developer, the notary is legally obliged to reimburse the potential buyer the full amount of the deposit.
Deposit
· 5% of the property price upon reservation in the case of a new development to be built (VEFA vente en état futur d’achèvement)
· 10% of the property price upon reservation in the case of an existing property
Guarantee of the surface area of the property:
Designed to protect the buyer, the ‘Carrez law’ poses an obligation to the sellers to certify the net floor area of the property using a specific calculation method. Should the buyer report within 12 months of the delivery that the surface is 5% smaller than indicated on the sale deed, the buyer can request a rebate on the price (or a reimbursement) proportional to the square footage that was erroneously declared.
Furthermore, the law provides a 10 year guarantee for hidden defects. This includes invisible defects to the structure that might render the property uninhabitable or that jeopardize its soundness or reliability. The buyer has 10 years to act upon such defects.
BUYING A NEW DEVELOPMENT IN VEFA (VENTE EN ÉTAT FUTUR D'ACHÈVEMENT)
The Completion Guarantee (garantie d'achèvement) is one of the provisions that protects the VEFA buyer. This guarantee is underwritten by the building contractor through an approved organisation that guarantees the buyer that the dwelling will be completed or that the down payments will be reimbursed. This guarantee is mandatory and guarantees that the seller finalise the construction of the dwelling. The buyer does not incur any risks and the delivery of the property is vouched for.
Under VEFA the sale deeds are generally drawn up as soon as the construction work starts and at latest after the building contractor has obtained the Completion Guarantee. Further payments are made according to a schedule known as « Appels de fonds » (call for funds). Here is an example, call for funds may vary according to the transactions:
Upon reservation
5%
Upon signature of the formal sale deed
25%
Upon completion of the foundations
15%
Upon completion of the floor of the second floor
15%
Upon boxing up
15%
Upon completion of the partitioning
15%
Upon completion of the dwelling
5%
Upon handing over the keys
5%
When the buyer has secured financing, the bank will release the funds according to the amount of the loan. For instance if the buyer has taken a loan for 70% of the total amount, he will directly finance the call for funds up to 30% of the total amount and the bank will finance the remainder. The buyer will then have to pay the monthly instalments according to the mortgage contract:
· Payment of the first monthly loan instalment one month after the date of signature of the formal deed
· Payment only of the interest during the call for funds period and first full monthly instalment after the handing over of the keys
· Payment of the first instalment after the handing over of the keys (some banks offer this possibility) and payment of an insurance during the call for funds period.