When buying real estate, preliminary agreements such as the “promise of sale” and the “sales agreement” (compromis de vente) are essential in securing the commitment between the buyer and the seller. These contracts outline the terms of the sale and protect the interests of both parties until the final deed of sale is signed.
Despite their common goals, these two documents have distinct characteristics and legal consequences. It’s crucial for both buyers and sellers to fully understand what each document entails before committing.
A promise of sale, or "unilateral promise of sale," is an agreement in which the seller commits to selling their property to a buyer while granting the buyer an exclusive option to purchase the property within a specified period. Unlike the sales agreement, where both buyer and seller mutually commit upon signing, the promise of sale gives the buyer an option to purchase, which they can choose to exercise or not.
The promise of sale should be carefully drafted, ideally by a notary, to ensure all legal aspects are correctly addressed. It should include detailed information about the property, the sale price, the validity period of the offer, and any suspensive conditions. This agreement is usually valid for two to three months. During this period, the buyer has exclusivity to decide whether to proceed with the purchase.
Important to Know: Upon signing the promise of sale, the buyer generally pays the seller a deposit, usually around 10% of the sale price. This sum secures the seller's assurance that the buyer is serious about their intent to purchase and will be deducted from the final sale price if the purchase is completed. However, if the buyer chooses not to buy the property, they may forfeit the deposit paid to the seller.
If the sale does not proceed due to a suspensive condition not being met, such as the buyer failing to secure a mortgage, the deposit will be returned.
A sales agreement is a preliminary contract in which both the seller and buyer firmly commit to concluding the sale under agreed conditions. This legally binding document means that, barring unmet suspensive conditions, the sale must proceed. It is often seen as a "pre-contract" that seals the agreement between the two parties on the essential elements of the transaction.
The agreement includes a timeframe for completing the sale, often set at three months. This period allows the buyer to secure financing and the notary to prepare the final deed of sale.
Like the promise of sale, the sales agreement must be precisely drafted to include all details of the transaction: property description, sale price, suspensive conditions, and timelines. The involvement of a notary is recommended for legal security!
A deposit, typically 5% to 10% of the purchase price, is paid by the buyer at the time of signing the sales agreement. The buyer benefits from a 10-day cooling-off period during which they can withdraw from the purchase without penalties or justification. After this period, if the buyer retracts without a valid reason, the deposit may be kept by the seller.
The decision between signing a compromise or a promise of sale depends on several factors, including the specific situation of the buyer and seller, as well as their intentions and needs. Here is a detailed comparison to help understand the main differences and guide your choice.
Before making a decision, it is advisable to consult a notary or a lawyer specialized in real estate law. They can provide personalized advice based on your specific situation and the details of the property in question.
