Sales compromise

The sale compromise (or synallagmatic promise of sale) helps seal an agreement between a seller and a buyer. A key document of the transaction, it outlines the details of the sale down to the smallest detail:  prices and ancillary costs, financing method, general conditions, suspensive clauses, deadline to carry out the sale… In summary, it guarantees that the sale will be completed, with exceptions to the contract.

Why use a sales compromise model?

Sometimes the sale compromise is signed between two individuals, without a notary. As with the promise of sale, it is called an act under private seeing. A sales compromise model is then essential to respect the layout and ensure the legal value of the drafting.  it is always better to be assisted by a professional for the drafting of the contract (notary or real estate agent), which avoids legal pitfalls and impasses by including all the suspensive clauses necessary for particular cases.

Content of a sales compromise

Sales trade-offs differ from case to case, including suspensive conditions or financing plan. However, there are unavoidable elements that must include:

• Name of parties
• Designation of the property
• Expenses and liabilities that may weigh on the property (servitudes, mortgages, current rentals, etc.) or absence of expenses
• Right of retraction
• Suspended conditions (compulsory and optional depending on each situation)
• Date of transfer of ownership (and date of enjoyment of property)
• Property price (net seller price)
• Ancillary expenses (agency fees, notary fees)

The validity of the sale compromise

A sale compromise is valid until the contract deadline, unless extended by mutual agreement. However, if the deadline does not validate all the suspensive clauses, the notary may decide to postpone the signing of the deed of sale.

The deadline is set by the buyer and seller and included in the sale compromise. It must provide sufficient time to validate all suspensive clauses. Generally, the maximum duration of the sale compromise is therefore between 3 and 4months. It is primarily a deadline, which means that the deed of sale can be signed on an earlier date if nothing and no one objects to it.

On the scheduled date, if all the conditions are met, the notary summons both parties for the signature of the authentic deed of sale. If one of the two parties do not attend the summons, it drafts a minute of deficiency which shows that the contract commitments have not been met.

The suspensive clauses

The suspensive clauses are conditions that must be validated before the signing of the deed of sale. Each may require a different time frame.

For example, the suspensive condition of obtaining a loan requires a period of 2 months (the law provides for a minimum of one month)

This is considered sufficient time for the purchaser to apply for bank credit financing from three banks, and to issue their loan offer. 

The right of pre-emption by the town hall requires a delay that differs depending on the municipality. To purge the right of pre-emption, the notary will publish an IAD (declaration of intent to alienate) with the municipality or local community concerned. The latter can enforce its right of pre-emption. In the absence of a response to the expiry of the allotted time, the right of pre-emption is considered purged.

The final example is that the suspensive condition for the sale of a property is validated when the purchaser manages to sell a property on which he relied to finance his purchase. The deadline therefore depends on the deadline set out in the compromise to sell this property.

Extended validity

Sometimes one of the two parties want to postpone the signature of the authentic act. It can request it: if it is accepted, an endorsement is then signed by mutual agreement to set a new deadline.

Cancellation of the sales compromise

Some events may end the sales compromise before it expires:

• Retraction: After signing a sale agreement, the purchaser has a legal and incompressible period of 10 days, during which he can reseal his commitments. Notified by registered mail, the retraction cancels the sales compromise without repairs for the seller.
• Failure to achieve any of the suspensive conditions. In this case, the sale compromise is cancelled and the possible deposit of guarantee is returned to the purchaser without penalty or fees of any kind. 

The main suspensive clauses of the sale compromise

Getting credit

When buying a home by an individual, the sale compromise is valid only if the purchaser succeeds in having his financing plan validated and obtained a loan from a credit institution (bank or loan broker), the sale compromise must therefore mention this suspensive clause (except in exceptional cases where the purchaser buys without a loan), and indicate the maximum bank interest rate, the maximum period envisaged, the maximum amount to be borrowed, and the maturity date of this suspensive condition (generally two months).

Sale of previous home

Similarly, a buyer may depend on an ongoing real estate sale  (signed sales compromise) in order to make the purchase. In order to avoid a bridging loan, he can register the sale of his property as a suspensive clause, within a maximum of 6 months.

Lack of pre-emption of a local community

This mandatory clause occurs in cases where the town hall has a right of pre-emption on the property. it can happen when a municipality covets private land or buildings, with the aim of carrying out public development. It then has the right to substitute for the purchaser and to purchase the property on the terms of the compromise. The notary will send a “declaration of intent to alienate” (DIA) to the town hall. In the absence of a response within the allotted time (different depending on the municipalities), the right of pre-emption is “purged”:  the sale can be carried out.

No bondage

Easements are the use rights of a third party on a property. Inherited from ancient times, they most often concern a right of way on land and are transmitted with changes of owners. The appearance of an easement can be prohibitive for a buyer, so this type of clause can be included in the sale compromise.

Obtaining a building permit

The purchaser may require this suspensive clause when the interest for the purchase is conditional on obtaining a building permit or any other administrative authorization. In the event of a refusal, it may therefore disengage from the sales compromise. This clause is provided with sufficient time for the purchaser to apply and for the administration to respond.

The promise of house sale

During a house sale, once negotiations have reached an agreement, several pre-contracts lay the groundwork for the transaction. This can be one of three types:

• Sale compromise (also known as synallagmatic sales promise);
• Unilateral Promise to Sell (or PUV), commonly known as Promise to Sell
• Unilateral promise to buy (or PUA, much rarer).

Whatever pre-contract is chosen It will be ratified a few months later when the authentic deed of sale is signed by the notary.

A unilateral promise to sell a home allows the future purchaser to put a firm option on the dwelling. He has an exclusivity for a period of time under the contract, during which he can“lift the option”and proceed with the purchase of the house. It is a pre-contract that engages the seller more firmly than the buyer, at least in appearance. Indeed, the promise of house sale also includes strong commitments for the future buyer, also known as “beneficiary”. The pre-contract is almost always accompanied by a fixed asset allowance:  fixed freely, it can reach for example 10% of the net selling price.

The capital allowance is paid by the beneficiary of the promise of sale. In case he decides not to proceed with the purchase (excluding legal withdrawal time), it is kept by the seller, who finds compensation for having blocked his property. 

To ensure the completion of the sale of the house, both parties have every interest in signing the PUV with a notary. This is optional: they can also sign a pre-contract between individuals, or in front of a real estate agent. Without a notary, we speak of a contract “under private seing”.

Having your notary write the promise to sell the house is a guarantee that the contract protects the interests of both parties. The public officer will also ensure that both parties meet their commitments beyond the signing of the pre-contract. For a seller, this is a way to secure the sale of the house.

Any promise to sell is accompanied by a DDT, or technical diagnostics file. If the sale is for a detached house, it will include specific diagnoses that are recommended to order in advance of the pre-contract:

• EPD, or energy performance diagnosis. At the end of the evaluation some owners may choose to carry out energy optimization work to upgrade the house before the sale.
• If the facilities are more than 15 years old, the seller must also provide gas and electricity diagnostics. In rural commune, if the house has its own wastewater reprocessing system, a sanitation diagnosis will have to beadded.
• Older homes will need to add a lead diagnosis, if the building permit predates 1949.
• All houses built before 1997 must also provide for asbestos diagnosis.
• Finally, depending on the geographical location of the municipality, termite and ESRIS diagnoses may be mandatory. The situation in the area at risk is determined by prefectural decree. You can consult your town hall to find out what your obligations are in case of a house sale.

Promise to sell or compromise?

The promise or sale compromise are pre-contracts for real estate sales. Both are signed ahead of the notarial deed of sale, once the two parties have agreed on the details of the transaction.

The compromise or promise to sell must define all the contours of the sale in every detail. In addition to the sale price, it can determine the ancillary costs and their allocation, the suspensive conditions, the various clauses, the down payment or the capital allowance…

The compromise usually includes a deadline for signing the deed of sale. On the other hand, in the case of a promise to sell, the end date is the deadline at which, at the latest, the purchaser must decide to waive its option to purchase. In practice, the time between the signing of the pre-contract and the signing of the deed of sale is similar, whether one opts for a promise or a compromise.

The pre-contract is therefore a crucial step in the transaction! It must be prepared well, starting with a choice between compromise or promise of sale. 

The sale compromise

The sales compromise is also called the “synallagmatic sales promise” (or PSV). It is a contract that engages both parties in a symmetrical manner: by signing it, the seller and the purchaser ensure that the sale will be carried out (unless legal retraction or suspensive conditions).

To ensure the seriousness of the purchaser, the sale compromise is usually matched with a down payment of 5% to 10% of the price of the property. It is paid into a receiver account (e.g. the notary) when the pre-contract is signed. Legally, the “sale-worth” compromise:  if one party reverses its commitments, the other party can enforce the sale by way of justice, seek damages or retain the down payment.

That said, a few legal clauses allow the cancellation of the sale compromise without penalty, in the event of non-fulfilment of the suspensive conditions or  legal retraction  of the purchaser. It should be noted that the same clauses apply to the promise of sale.

The unilateral promise to sell

The unilateral promise of sale (or PUV) is, as the name suggests, an asymmetrical commitment. By signing it, the owner agrees to reserve the exclusivity of the sale to a single buyer, for a given period of time. The latter may, if he wishes, waive the option to purchase and acquire the property on the terms of the contract.

Seemingly unfavorable to the seller, the unilateral promise of sale is not so unbalanced. It is generally accompanied by a capital allowance. During the down payment, it can reach 10% of the selling price. It will be kept by the seller if the buyer withdraws! In practice, the promise and the compromise of sale are therefore two very close pre-contracts.

In addition, the suspensive clauses and the retraction period apply in the same way to the promise of sale. On the other hand, unlike the compromise, the PUV must always be registered with the notary (worth about 125 euros).

Sales compromise, the preferred choice to secure the sale

In light of the differences between promise and sales compromise, the latter is the best option for sellers who want to secure the transaction at all costs. For them, there is no particular advantage in opting for the promise of sale (except a faster re-sale of the property if the pre-contract is broken by the purchaser).

The sale compromise is the contract closest to the deed of sale. Once signed, the transaction is on track! It will only be cancelled if the buyer withdraws (for a period of 10 days) or if the suspensive clauses are not fulfilled: failure of funding, pre-emption by the town hall, appearance of easements, etc.

When should you prefer a promise to sell?

Less common, the unilateral promise of sale remains used in some cases. It responds to a need for flexibility for the purchaser, who can impose it if he is in a position of strength. If it cannot be avoided, it must be matched at all costs with a sufficiently high capital allowance (5% to 10% of the price of the property): it prevents a last-minute withdrawal from being too detrimental to the seller. 

Promise or sale compromise: the withdrawal period

As we have seen, the retraction period applies in the same way in either of the pre-contracts. It is therefore not a criterion of distinction between promise and compromise of sale!  

it offers the purchaser a 10-day period during which he can rescind his commitments and have the contract cancelled without penalty. If a down payment or capital allowance has been paid, it is recovered.

Beware, the possibility of retraction only concerns the purchaser.

Compromise or promise to sell

It is always advisable to have the pre-contract of sale written by a professional, if possible by a notary. In addition to guaranteeing the legal content of the formulations, this allows to include all the suspensive clauses that it believes are justified to avoid deadlocks.

What they must contain: Compromise or promise to sell, the pre-contract should always include:

• Designation of parties (buyer and seller)
• Designation of the property
• Legal
• Mortgage and rental situation
• Servitudes or lack of easements
• Pre-contract expiry date
• Price of property
• Ancillary fees (agency fees and transfer fees)
• Funding plan
• Suspended cause of obtaining the loan (or waiving this mandatory clause if purchase of equity)
• Other suspensive conditions (preemption, servitudes, etc.)
• Right of retraction
• Appendixes (technical diagnostics, condominium documents…)

Cancellation of a sales compromise: Withdrawal period, suspensive clauses…

The sales compromise is a strong commitment between the seller and the buyer. In most cases, it guarantees that the sale will be realized, with exceptions! Withdrawal period, suspensive clauses, disaster or deficiency… There are several legal avenues to terminate the validity of a sales compromise before the transaction is completed.

The deadline for retracting the sale compromise

Any sales compromise has a mandatory and incompressible withdrawal period. It must be recalled in the contract. Exclusively reserved for the purchaser, it allows him to rescind his commitments, having the validity of the compromise annulled.

The 10-day retraction period (Macron Act 2015) begins the day after the purchaser hands-on the copy of the sale compromise signed by both parties, including all mandatory annexes (technical diagnostics plus documents made mandatory by the Alur law), or the day after the first presentation of the recommended letter with AR including all these documents.

To exercise his right, the purchaser must send a registered letter to the seller or intermediary who had the contract signed (notary or real estate agent). He does not need to give a reason. The legal retraction results in the cancellation of the sales compromise, without any compensation for the seller.

Cancellation of the sales compromise for non-fulfilment of a suspensive condition

The suspensive clauses are designed to allow the cancellation of the sales compromise in the event that an unforeseen or contrary event prevents its realization.

The suspensive clauses of the sale compromise can be varied: refusal of financing by the banks, right of pre-emption by the town hall or the tenant of the property, appearance of servitude …

It is enough that only one of the suspensive clauses in the contract does not materialize to have a sale compromise cancelled. It is up to the notary to verify the validity of the clauses.

Cancellation of the sale compromise for disaster

There is another case of cancellation of the validity of the sale compromise: sinister between its signature and that of the deed of sale!  If the dwelling is damaged to the point of becoming “unfit for its destination”, the pre-contract is called into question.

To be activated, this clause must have been mentioned in the sales compromise contract. It specifies the alternatives in the event of a disaster seriously affecting the dwelling: the purchaser then has the choice between continuing the sale, or renouncing his commitments without penalty.

Cancellation for deficiency

The “deficiency” describes a situation where one of the two parties fails to attend the notary’s summons to sign the deed of sale. In the event that the other party (usually the buyer) does not respond to prior requests, you must still appear before the notary on the scheduled date.

The absence of the seller or purchaser is a clear sign that he does not wish to honor his commitments made at the signing of the sale compromise. Whatever the reason, the notary will write a report of deficiency that allows to have legal proof.  

Deficiency is another way to end the validity of the sales compromise. That said, it has more important consequences than the others: it allows the aggrieved party to obtain compensation.

What compensation in case of cancellation of the sales compromise?

If the sale compromise was cancelled as a result of a withdrawal from the purchaser during the legal period, a suspensive clause or a claim, no remedy is provided. if a security deposit has been made, it is returned to the purchaser. The agency fee is also not charged, and the seller cannot receive any consideration for the immobilization of his property.

If the sale compromise ends with a failure of the purchaser, a repair is possible for the seller. It can be framed: this is the case if the pre-contract contains a deed clause, or criminal clause. It defines a certain amount that will be paid to the aggrieved party in the event of a deficiency. Freely fixed, it is usually between 5% and 10% of the price of the property. It can be powered by the security deposit.

If the sale compromise does not provide for a criminal clause or a security deposit, the seller can take legal action. This may be intended to force the execution of the sale. That said, this procedure has limitations: laborious, it can lead to a deadlock if the purchaser is not solvent. In addition, it immobilizes the property until the dispute is resolved. Many sellers prefer to simply seek damages, damages and interests for an amount located around 5% to 10% of the price of the property.

Signing the sale compromise

A sales compromise is therefore a final commitment, which must be carefully prepared. The stage of the compromise of sale looms from the moment the buyer and the seller have agreed “on the price and on the thing”, as the civil code says. In practical terms, it occurs once the offer to buy or one of the counter-proposals has been accepted by the other party, either in writing or oral.

The deadline to sign the sale agreement will be used to gather all the documents that will have to be attached to the sale compromise at the time of signing: this includes a number of real estate diagnoses and documents relating to the condominium, among others.  

Once the sale compromise is signed, there is a normal period of several months until the deed of sale. A deadline is set in the contract. This period will have to be long enough to verify all the suspensive clauses, if any: obtaining the loan, purging the right of pre-emption and mortgages, the realization of a real estate transaction if the purchaser is in the process of selling his own property… it takes an average of 3 months.

A sale compromise can very well be signed “under private seeing” (between two individuals or in front of a real estate agent). There is no obligation to involve his notary. 

Signing a sales compromise in front of your notary allows you to take advantage of the expertise of a public officer who specializes in real estate law. The strict ethics of the profession guarantee you the compliance of the procedure at a key stage, which will define the contours of the transaction. 

The seller offers a notary to sign the sale compromise. He will therefore be able to choose his own, or if not, to find one near his place of residence.

The purchaser can also propose his notary. The two public officers will then work together, each representing the interests of his client. Using two notaries does not cost more: the registration fee is then divided into two equal parts.

The most common suspensive clauses of the sales compromise

• Obtaining a home loan
• completion of an ongoing real estate sale, on which the purchaser relies to finance the transaction;
• lack of pre-emption of the town hall;
• lack of pre-emption of the tenant occupying the property;
• lack of bondage;
• purging mortgages by the seller;
• Obtaining a building permit
• etc…

The other clauses of the contract

A sale compromise also includes a number of negotiable elements. You can also have a deadline to make the sale and/or shift the buyer’s enjoyment of the property.

Finally, the signing of the sales compromise allows to define the distribution of certain expenses. It is common to divide the property tax in proportion to the period of occupancy. On the other hand, the residential tax is due by the occupants on 1 January, and this for the whole of the coming year.

If he wishes, the seller can also negotiate the distribution of the co-ownership charges already paid or the substantive appeals for the work already voted in general assembly. 

Review of the purchaser’s financing plan

To avoid any unpleasant surprises, the sales compromise must detail precisely the financing plan of the future purchaser, as he will present it to the banks. As a seller, look in detail at the strength of this financing plan, the ideal being to deal with a buyer who has already received an agreement in principle from a credit institution. The sale compromise should include: personal contribution, repayment duration, monthly payments.

Provide a penalty if you refuse to honor your commitments

The signing of the sale agreement results in the seller being immobilized and negotiations with other potential buyers interrupted. If the purchaser refuses to honor his commitments, it is a considerable prejudice! It is therefore common to provide for a disclaimer, or criminal clause, in the event that one of the two parties withdraws (excluding the legal retraction of the purchaser).

This penal clause provides for a sum to be paid by the party that has renounced its commitments, which may be 10% of the sale price. It comes with a security deposit, paid by the purchaser into the notary’s receiver account on the day the sale compromise is signed.

The accompanying documents:

They must be attached to the sales compromise before it is signed. They respond to a need to inform purchasers in a comprehensive manner. They must be complete or risk delaying the start of the purchaser’s legal withdrawal period.

• Mandatory real estate diagnostics

Real estate diagnoses are mandatory in case of sale of housing. Nine of them never apply at the same time! It all depends on the date of the building permit, the age of the facilities, the geographical location and the nature of the property.

The main real estate diagnoses are the diagnosis of energy performance (or DPE), gas diagnostics, electricity, Carrez law (co-ownership), termite, etc. At the expense of the seller, they are entrusted to a certified diagnostic company. You can consult on mandatory diagnoses to find out exactly what diagnoses are required for you.

All mandatory real estate diagnoses must be valid on the day of the signing of the sales compromise. It is recommended that they be made as soon as the property is put up for sale.

• Documents relating to the condominium

If the property you are selling is in co-ownership, the list of ancillary documents grows. The Alur law requires you to inform the purchaser about the condition of the building and the condominium, its financial situation, the work in progress, etc.

The documents to be attached to the sale agreement are to be requested directly from the trustee, who charges the benefit (rates provided for in the trustee contract). They include:

• Co-ownership regulations
• Descriptive status of indivision
• Last three minutes of the general meetings of condominiums
• Building maintenance book
• Global technical diagnosis of the building (if it exists)
• Synthetic condominium sheet
• Registration certificate
• Amount of condominium expenses paid by the seller in the last two fiscal years
• Pre-dated condition (financial situation of the condominium, the co-owner surrendering, sums due by the future co-owner…)
• Other documents to be submitted at the signing of the sale compromise

In addition to these documents, the seller must present a title and the last deed of sale. If necessary, it must provide land references and the precise situation of the terrain.

The security deposit paid to the sale compromise

At the signing of a sales agreement, the security deposit serves as proof of good faith between the buyer and the seller. it reassures the owner by guaranteeing the completion of the sale, with exceptions… How much is it and in what cases is it returned or cashed by the seller? 

The security deposit is a down payment made by the future purchaser as a result of a sale compromise. Calculated as a percentage of the sale price, the amount is transferred to the receiver account of an intermediary (notary or agent), it helps to reassure on the  seriousness  of the purchaser, which proves that he has personal funds to obtain his credit from the banks, provision a blocked sum, deterring buyers who refuse to honor their commitments, sealing the  link between the two parties, each locking in his property or a sum of money, pending the signature of the deed.

Is the security deposit mandatory in the event of a sale compromise?

No, there is no obligation to make a down payment or security deposit in the event of a sale compromise. This clause is the initiative of the seller and may be the subject of negotiation. Neither its presence nor its amount (as a percentage of the sale price) are frozen by law.

How much is it in practice?

The security deposit is calculated from a percentage applied to the sale price. Fixed freely, it is usually between 5% and 10%.

In fact, sellers are understanding and rarely require 10%. Indeed, 5% of the sale price is already a substantial sum that is enough to deter a buyer from breaking its commitments.

As a general rule, the amount of the sale-compromise security deposit is set on a case-by-case basis: the more the seller trusts the buyer, the more he will lower the percentage. If he feels that he will have no problem obtaining credit, given his professional and personal situation, the security deposit can be lowered to 3% or 2%, especially if the selling price is high.

This sum may be returned to the purchaser only in the following cases: Withdrawal during the authorized period, Non-achievement of a suspensive clause,

The seller, on the other hand, will be able to recover the amount of the security deposit on the day of the signing of the authentic deed, the sum will be deducted from the amount to be paid by the purchaser.

In the event that a buyer refuses to honor his commitments, he must therefore repair the damage suffered by the seller, the seller then recovers the security deposit. If the sum is considered insufficient in light of the damage suffered, the owner may take legal action to seek compensation, or force the execution of the sale. This procedure is long, expensive and uncertain and may delay the sale for an indeterminate period of time. Many sellers prefer to bypass and put their property back on the market.

The ideal for both parties is to attach a deed clause to the sale agreement.  It identifies the possibility of reversing its commitments and quantifies the damage in advance. The security deposit is then used to pay this penalty.