Are you planning to buy a property? There are several ways we can help make the transaction go smoothly, including preparing the document known as the avant-contrat, or preliminary contract. Here the property development specialists at MGM reveal all you need to know about this preliminary contract, and help you understand its various conditions.
What is a preliminary contract?
The preliminary contract precedes the signature of the authentic deed of sale. It can be a provisional sales agreement, a reservation contract or a unilateral promise of sale. In all cases, this preparatory contract sets all the legal and economic conditions of the future notarial deed, but also the selling price, as well as your commitments and those of the seller.
Definition of the preliminary contract
The preliminary contract is a deed that summarises all the conditions of sale established between you and the seller: price of the property, conditions precedent and sale cut-off date. It also includes the promises of commitment (from the seller and yourself), and acknowledges your agreement to the principles of sale and conditions precedent.
The preliminary contract “formalises” your commitment, and the conditions on which you have agreed. The time between the signature of the preliminary contract and the signature of the authentic deed of sale (generally 3 months) will also give you the necessary time to complete the sale-related formalities: securing finance, purging possible pre-emption rights... This document is therefore a key step in your property purchase project.
All preliminary contracts must contain:
- The identities of both parties;
- The designation of the property, its surface area, sale price and habitable space;
- Conditions precedent (varying according to the case);
- The date of exercise of the option, for unilateral promises.
The different types of preliminary contract
MGM can tell you about all the main types of preliminary contract available on the property market:
- The unilateral promise of sale: only the seller commits to selling;
- The unilateral promise of purchase: the buyer agrees to purchase the property in the event of the person selling their property;
- The provisional sales agreement (or synallagmatic promise of sale), known as sales agreement: the two parties make a commitment to each other; the principle of sale is then established, and the seller and buyer wait for the conditions precedent to be fulfilled in order to conclude the sale;
- The pact of preference: the seller commits to selling their property in the event of putting it up for sale
- The reservation contract: this contract concerns only the purchase of a new property or a property to be completed in the future (not yet built); the real estate developer agrees to reserve the dwelling for the buyer. If purchasing a property in an MGM new-build residence, you may be required to sign a reservation contract.
Why enter into a preliminary contract?
Entering into a preliminary contract allows you to formalise the principles of sale, but also to set out the conditions precedent to the sale. The clauses of the preliminary contract will also bind you with the seller during the time necessary to fulfil the conditions precedent.
It is also important to enter into a preliminary contract because it gives you the opportunity to benefit from a right of withdrawal of 10 days after the signature.
What is the difference between the promise of sale and the provisional sales agreement?
In the case of a real estate sale, you may have to sign a provisional sales agreement or a unilateral promise of sale. The two deeds are similar in many ways, but there are some differences between them. However, they remain very similar legally.
Points in common between the unilateral promise of sale and the provisional sales agreement:
- The buyer has a right of withdrawal period of 10 days;
- The clause stating the condition precedent of credit appears in both preparatory contracts;
- The period of sale (the period between the signing of the preliminary contract and the signing of the authentic deed of sale) is generally three months;
- The buyer pays between 5 and 10% of the sale price at the preliminary contract stage.
Differences between the unilateral promise of sale and the provisional sales agreement:
- The unilateral promise allows the seller to immediately regain their freedom to sell if the buyer pulls out; the seller then receives the 5 or 10% of the price paid by the buyer. If the buyer pulls out of a provisional sales agreement, the seller has to have a certificate of deficiency drawn up by the notary.
In any case, the notary will advise you on the most suitable preparatory contract for your property purchase plans. Although it is not mandatory to use a professional, it is more advantageous to go through a notary, because they will guarantee the legal validity of the sale, and take care of all steps related to the preliminary contract: drafting of the preliminary contract, verification of the documents to be appended... The notary can also advise you on the best ways to proceed, and may include specific clauses according to your buyer profile.
Documents to provide with the preliminary contract
The preliminary contract must be accompanied by several mandatory documents, whether you are using a notary or not:
- The Technical Diagnostic File (DDT)1
In the case of a purchase in an outright purchase:
- The documents relating to the organisation of the building2 ;
- The documents relating to the state of the building: maintenance record produced by the co-owners’ association;
- The documents relating to the financial situation of the condominium and the lot being sold.
Having specialised in real estate development for over 50 years, we can assist you at all stages of your property purchase, including preparation of the preliminary contract. Located in the most beautiful mountain resorts and on the shores of Lake Annecy (department 74), our upmarket apartments are available in leaseback or outright purchase. Discover MGM’s prestige property services and benefit from our experts’ advice, to make your mountain investment and tax reduction plans a success.
1The Technical Diagnostic File (DDT) must include: asbestos survey or asbestos report (for buildings with a building permit issued prior to 1 July 1997); lead exposure risk statement (for buildings constructed before 1 January 1949); termite and dry rot surveys (for buildings constructed in at-risk zones defined by the prefect); gas installation report; prior electricity installation report; and natural, mining and technological risks report.
2Condominium regulations and descriptive inventory of divisions; minutes of general meetings; condominium summary drawn up by the association, containing financial and technical data on the building.