NEW KIDS ON THE BLOCK
While buying an existing property is surely the most common option for Brits looking to secure their home in France, we are regularly instructed to assist those who are looking to buy a new house or apartment. Sometimes, this will involve the purchase of a completed building that has never been occupied and is being sold by a developer. Most commonly, though, a buyer will have seen plans, and perhaps a model or computer-generated visual, but nothing more.
It may seem to some to be a brave decision to buy a French property based on a few plans. In reality we all accept that no purchase – old or new – is entirely free of any risk, yet clearly an off-plan purchase gives rise to its own risks. In this article, we shall consider some of the main points of note in the process of buying a home that is yet to be built.
DO YOUR HOMEWORK
Perhaps the first question to ask is whether the builder is suitably reputable. If at all possible, it is wise to visit any previous developments, both those that have been finished and any that may be in the process of construction. Just as is the case for a standard property purchase rather than a new build, there is very little that can replace a visit and inspection. Visiting a previous site will demonstrate the construction quality, and a visit to the intended new development is invaluable. Clearly, one of the risks of buying a new-build property is that the construction will not be complete. To protect against this, the purchase deed will need to contain extra guarantees on the part of the developer. In the event that the developer company became insolvent during the construction process, there should be a guarantee by virtue of which sufficient finance would be available to continue the build. It is important to ensure that this guarantee is in place, and it should be reiterated in the initial purchase contract. This initial contract differs in various ways from what one may expect in a ‘standard’ purchase, when the parties would typically sign a promesse de vente or a compromis de vente. In a new-build purchase the buyer is generally asked to sign a contrat de réservation (reservation contract). The reasons for the differences are understandable: if the property does not exist, it is not possible to complete a contract to purchase it. Instead, therefore, a buyer will reserve the right to complete a purchase as and when a property is developed.
A reservation contract also means that if for any reason the construction work does not start, the buyer is entitled to a full reimbursement of the deposit they have paid, albeit no further penalties could be imposed on the developer.
Yet why would a developer not proceed with any work? This question appears to be one of the most misunderstood points of the new-build process, at least in relation to multiple property developments such as a housing estate or an apartment block.
It is often the case that the developer company may not even own the land upon which the construction work is to take place. A relatively common scenario is that a developer will agree with a landowner
Above: This new development in St-Raphaël in Var includes apartments ranging in price from €217,000 to €492,000 ( sextantproperties.com)
Considering buying a new-build property in France?
Matthew Cameron explains the legal process and the guarantees in place to protect your investment