Off Plan Property
When buying a property in France that has not been built yet i.e. buying “off-plan” - you will need to be prepared to wait for your property, as normally building doesn’t start until much of the development is sold. You will be able to view the site and situation of your property, and the surrounding environment which is often difficult to glean from brochures. You may also be able to view similar properties that the developer has completed, or indeed, if the development is quite advanced in the construction process, the first units may have been completed, and being used as show-homes.
In France a purchase off-plan is known as a VEFA purchase, “Vente en Futur Achèvement”.
Procedure for Purchasing Off-Plan Property
Once you have decided on the property you will sign a “Contrat de Reservation” and pay a deposit of up to 5%. The contract will specify the building schedule and payments to be made at each stage of the construction.
The stages of payment vary, but normally the first stage payment will be due once the foundations are laid, at which time you will be asked to pay 25%, making your payments so far add up to 30%. At this time you will sign the “acte authentique” and become the freehold owner of the property; the Notaire’s fees are payable at this time. This acte is the “VEFA” document. For new properties there are reduced Notaire’s fees, which are usually between 2.5% and 4% of the purchase price.
French regulations regarding purchase of new properties are very protective of the purchaser. It is a very secure way to buy a property, unlike other European countries which have a bad reputation for mistaken title and developments which get ripped down by government officials. The developer must have a bank guarantee in place which gives the purchaser a guarantee that he will get his property even if the developer runs into financial problems.
As the property construction progresses, further stage payments will be requested until 95% has been paid. At this moment you should then visit the property to check that all is in order and give the developer a “snagging list” if necessary, before paying the final 5% and receiving the keys.
If you are taking a mortgage to purchase an off-plan French property, the lender will pay the stage payments as necessary once you have paid your contribution; they will however check with you prior to handing over any money. They can also arrange for deferral periods at the beginning of the loan during the construction period – eg. mortgage payments will commence upon delivery.