Protection of the purchaser
The SRU law
The SRU law regarding the Urban Solidary and Renewal voted in 2000 defines the rules in terms of social diversity, urban planning (Zoning Map - PLU) and on the protection of potential purchasers and tenants.
Mandatory period to back out at the time of a purchase in real estate
The SRU law established a period to back-out of 7 days in favour of the non-professional purchaser of a new or older accommodation. The purchases of professional premises are thus not subject to it.
This cooling-off period cannot be reduced and is mandatory, it starts on the day after the first presentation of the registered post notifying the prior-agreement. When the authentic deed of sale has not been preceded by a prior-agreement, the draft of the deed must be notified to the purchaser in order to open the seven-days cooling-off period. After this period, if the purchaser has not notified any decision, the sale is claimed to be firm, except for the condition precedents.
The backing-out does not have to be justified. The purchaser will be released from his commitment without having to pay any penalties.
The purpose of this system is to avoid any possible precipitation during the purchase be harm the purchaser. It regards the totality of the real estate property, so matter its type (new, old, houses, flats).
The prohibition of a prior payment to a non-professional
The SRU law prohibits to the non-professional seller or a private individual to demand any payment of monies before and during this period to back out. Limiting the risk of possible frauds, this regulation ensures to the purchaser a period to reflect truly without any financial constraints or preoccupations.
Prohibition of the offers to purchase with a payment of monies
The offer to purchase or commitment (unilateral) to purchase, cannot be subject to any payment of monies in favour of the seller. The payment of a security deposit (approximately 10% of the price), cashed by the seller in order to formalize the commitment made is now prohibited by law.
Modification of the system promulgated by the SRU law
The ENL law of July 13, 2006, modified the initial system of the SRU law. The non-professional purchaser can now back-out during seven days from "any deed having the purpose the construction or the purchase of a building used for housing". A professional in real estate purchasing for personal purposes, can benefit from this protection like any individual purchasing a building to rent it. The new article L. 271-1 arising from the NEL law provides that this period to back-out is only valid in case of a private or authentic prior-agreement. However, are excluded from this system, the unilateral offers, the countersigned offers to purchase as well as the property with mixed usage (professional and housing).
The condition precedent
This clause enables its beneficiary to withdraw from a deed after an unpredictable event occurring after the execution of the contract. The most common example is the condition precedent of the granting of a mortgage that subjects the completion of the sale by the fact that the purchaser obtains the financing necessary. In case of a refusal of a loan any purchaser of a property has the benefit of the possibility to cancel his deed of purchase without any damages. The deed having become null and void, the purchase recovers the totality of his deposit.
He must however have complied with some formalities:
The application for the mortgage (mentioned in the prior-agreement to sell) must have been made in a banking establishment at least 10 days after the prior-agreement.
The purchaser must inform, within 30 to 45 days after the prior-agreement, the real-estate agency of a refusal of his financing.
This condition precedent can also be valid in case of a right of first refusal by the city or after the refusal of a building license.
The warranty for hidden defects
Any purchaser who finds a problem after the sale has an action against his seller: it is the warranty action for hidden defects. There cannot be a hidden defect when the seller is not aware of it. Thus, the purchaser does not have any recourse on all the points mentioned by the mandatory surveys provided before the sale.
The purchaser has a two-years period to start a warranty action from the time of the discovery of the defect.
Three conditions must be complied with:
- The defect must be anterior to the sale
- The defect must be hidden from and unknown to the purchaser
- The defect must make the property unfit for the use it is intended
According to article 1644, the purchaser can obtain the cancellation of the sale's contract or the decrease in the price of sale.
If the sale is cancelled, the purchaser returns the property. The seller returns the price of the property, the fees for the litigation and transfer as well as the interest accumulated since the payment.
In this case, the experts must estimate the depreciation that is the result of this defect based on the cost of the works to be made so the property finds its real nature again. The purchaser sees the return of a part of the price and keeps the accommodation.
The purchaser victim of hidden defects can also be awarded damages, if the seller is judged to be of bad faith.