Step 3: Signing the Preliminary Sales Agreement (Compromise/Promise to Sell) under French law
Under French law, although very common, signing a preliminary sales agreement (compromise/promise to sell) is not mandatory. If all conditions are met, the final sales deed can be executed immediately. However, this requires that no suspensive conditions need to be fulfilled.
In most cases, the buyer finances their purchase with a bank loan, making it necessary to sign a preliminary sales agreement while waiting for the bank’s approval.
Similarly, the transaction may be subject to a pre-emption right, such as the urban pre-emption right (DPU). In this case, a compromise/promise to sell is also necessary while waiting for the designated beneficiary to decide whether or not to exercise this right.
Notarial vs. Private Preliminary Agreement
The preliminary sales agreement does not necessarily have to be notarized (except in rare cases). The seller and buyer may draft and sign this contract on their own or with the assistance of a real estate agent, who can prepare a customized agreement. However, for more complex transactions, it is strongly recommended to involve a french public notary.
The compromise/promise to sell formalizes the seller’s commitment to selling and the buyer’s commitment to purchasing.
To strengthen this commitment, the buyer usually pays a deposit to the notary:
- In a “compromis de vente” (bilateral agreement), this deposit is called a security deposit.
- In a “promesse unilatérale de vente” (PUV) (unilateral promise), it is called an option fee.
This sum serves as a guarantee for the seller against a potential withdrawal by the buyer. If the buyer backs out at the time of the final sale (except in legally defined cases such as withdrawal periods or unfulfilled suspensive conditions), the seller may keep the deposit.
If the transaction is completed, this amount is deducted from the final purchase price, and the buyer only needs to pay the remaining balance to the seller. The deposit amount is freely agreed upon by both parties, but it is typically:
- 5% of the sale price for a compromise de vente.
- 10% of the sale price for a promesse unilatérale de vente.
Documents Provided by the Seller
At the time of signing the preliminary sales agreement, the seller must provide the buyer with various documents to ensure full transparency about the property. These include:
- Technical diagnostic file (Dossier de Diagnostics Techniques – DDT).
- Documents related to the co-ownership (if applicable): co-ownership regulations, minutes of general assembly meetings, pre-dated statement, maintenance log, etc.
These documents may be provided by the seller directly, or they can be collected on their behalf by the notary or real estate agent drafting the contract.
Suspensive Conditions in the Preliminary Sales Agreement
The compromise/promise to sell includes suspensive conditions, which must be fulfilled before the final sale can take place. These conditions are objective (such as the buyer obtaining a mortgage), and both parties acknowledge that the sale cannot proceed if they are not met.
Suspensive conditions are the primary purpose of a preliminary sales agreement. They allow the parties to commit to the transaction early while keeping the option to cancel if these conditions are not satisfied.
The most common suspensive conditions include:
- The buyer obtaining a mortgage.
- The clearance of any pre-emption rights.
However, the buyer and seller are free to include additional suspensive conditions, as long as:
- They do not depend solely on the will of the parties, as this would render the agreement void.
- They do not contradict public order or moral standards.
Your Notary’s Role in the Process
The Chassaint & Cerclé Notarial Office assists individuals and professionals in carrying out the necessary steps for buying or selling real estate.
Find the previous step here: “Choosing the Notary in Charge of the Real Estate Transaction“, and continue to the next step: “Timelines Following the Signing of the Preliminary Sales Agreement.“
