What is the real estate reservation contract?
The reservation contract, also known as the booking contract, in French the VEFA sale, “Vente en l'état futur d'achèvement (VEFA), is a preliminary agreement signed by both parties (seller and buyer), with or without the presence of a notary. It serves as a sales agreement that allows the purchase of a property currently under construction or has yet to be built.
What is a booking contract?
The VEFA Sale (sale in the state of future completion) consists of buying a property that is not yet built or is still under construction. This type of purchase is governed by the Construction and Housing Code and requires a reservation contract for the sale to continue.
As already mentioned, the reservation contract is considered a preliminary contract for the real estate sale. Upon signing it, the seller will reserve the property to be sold exclusively to the buyer. And in turn, the latter will pay a deposit.
Additionally, the reservation contract makes it possible to determine the precise conditions of the sale. While it is not mandatory, it's still recommended.
The reservation contract can be signed between both parties exclusively or in the presence of a notary. In the case of the latter, the seller's notary will check the priority rights and assemble the documents necessary for the drafting of the document. Afterward, the reservation contract must be sent to the buyer, be it via a registered letter with an acknowledgment of receipt or delivered by hand. Only then will the buyer pay the security deposit.
Most notably, purchasing a property via a VEFA sale allows the seller to ensure that their real estate will find a new owner and help find financing to complete the construction. As for the buyer, it allows them to buy real estate that meets their expectations (i.e. location, characteristics, etc.).
> Useful link : What is the difference between the deposit and the security deposit?
When do I have to pay notary fees in VEFA ?
One of the main advantages of buying property through a VEFA sale benefitting from reduced notary fees. Typically, notary fees for purchasing new properties range between 2% and 3% of the purchase price, against 7% to 8% when it's an old property.
Important Note: Notary fees must be paid at the time of signing the final deed of sale.
Can we retract?
The buyer can rescind their reservation within 10 calendar days after signing the booking contract. If the last day of the withdrawal period is on a weekend or a public holiday, the period is extended until the 1st working day.
This withdrawal period begins the day after the contract is signed or when an acknowledgment of receipt of the document has been given to the seller.
The seller must be notified of the buyer’s rescission before the expiry of the withdrawal period via a registered letter with acknowledgment of receipt.
Useful Link: Sample letter of withdrawal
What deposit must be paid?
The amount of the security deposit must be limited to:
- 5% of the sale price if the deed of sale is signed within less than a year.
- 2% of the sale price if the deed is signed within 1 to 2 years.
But if the deed of sale is signed beyond 2 years, the seller cannot ask for a security deposit from the buyer.
Moreover, the security deposit is to be returned to the buyer, without deduction or penalty, within 3 months in certain situations:
- The request for a loan was refused by the financial institution
- Contract not concluded by the seller within the stipulated period
- Higher selling price (more than 5% above the forecast price)
- Abnormal difference between the sales contract and the forecasts of the reservation contract
What should the booking contract contain?
Information concerning both parties
- Seller's contact information
- Buyer's contact information
- Financial guarantee of reimbursement (Guarantee made by a surety to reimburse the payments made by the buyer in the event of amicable/judicial resolution of a sale for failure to complete) or financial guarantee of completion of the work (Guarantee made by a financial institution to advance the sums necessary for the completion of the work) in case of financial default of the seller (not the funds needed to complete the construction).
Detailed Information of The Property
- Address of the property
- Living area
- Number of main rooms, service rooms, outbuildings
- Description of mandatory equipment and included furniture
- Description of the materials used
- Location of the property in the building or on its land
- State of air noise pollution for property located in one of the noise zones defined by a noise exposure plan.
Set Conditions for The Sale
- Estimated selling price
- Method of payment of the property
- Date of conclusion of the sale
- Conditions for revision
- Amount of loan(s), conditions, and name of lender
- Security deposit recovery conditions
- Delivery time
- Conditions for exercising the right of withdrawal (failure to comply with this obligation to inform is punishable by a fine of up to €15,000.00)
- Late delivery penalties
- The reservation contract serves as a preliminary contract for a real estate sale.
- It's signed by both parties (seller and buyer)with or without the presence of a notary.
- The contract also serves as a sales agreement for a property that is yet to be built or currently under construction.
- Purchasing a property via a VEFA sale makes It possible for the seller to benefit from reduced notary fees.
- To reserve the accommodation, the seller may request the payment of a security deposit.
- The buyer can withdraw his commitment to buy the property within 10 working days.
You want to
to sell in Paris or its surroundings ?
Posted on 17/05/2023 by
Andy LECUYER
