Delays and Extensions are the New Normal
Volume XVIII, Issue 17
What is France best at doing? Creating rules and regulations is the answer. And the French are pretty good at following them — one reason they’re doing so well staying at home and battling the Covid-19 pandemic without too much fuss. In the midst of this, the French government has enacted a new set of rules for concluding a property purchase during confinement. Signing a Promesse/Compromis de Vente, finalizing a real estate purchase, or carrying out real estate diagnostics is again possible with the publication of new regulatory texts…but parts are still vague.
People who had a real estate purchase project in progress can now continue their steps and sign a Promesse/Compromis de Vente (pre-sale agreement) or Acte de Vente (final deed). The decree n° 2020-395 published on April 4, 2020, provides that notaries can draw up a notarial deed on an electronic medium outside the presence of signatories until June 25, 2020, one month after the end of confinement (currently set for May 11th). After this date, everyone must be present again in the notarial office in order to validate the transactions, so don’t expect virtual signatory to stay!
In addition to the possibility of using videoconferencing, notaries have digital tools allowing them to remotely verify the identity of the signatories, to ensure that they have received the correct documents and that they understand the terms for the electronic signature.
However, not all offices are operational. According to the National Real Estate Federation (FNAIM), 40 percent of offices are working almost normally, 40 percent work in a modulated mode, and 20 percent have stopped altogether. Even with the equipment, the work has slowed down, in particular, because of verifications to do with the administration that are notably dependent on the response of the town halls on their pre-emption rights. During a real estate transaction, cities can, in effect, take the place of the buyer thanks to their pre-emption rights, and in normal times, they have two months to make their decision. The ordinance of April 15, 2020 laying down various provisions regarding the deadlines for dealing with the Covid-19 epidemic gives them until July 25, 2020, to decide.
Some town halls, like Paris, nevertheless have indicated that they would do their best to respond as quickly as possible, but this is not possible for all town halls. Parts of the transactions will therefore remain blocked. The order of April 15, 2020, also specifies that in the event of the signing of a Promesse/Compromis de Vente, the buyer’s withdrawal period continues to run for the normal ten days and the buyer can recover the earnest money paid without any penalty. But, with the suspension of most of the deadlines until May 24, 2020, the question arises as to whether the withdrawal period would run as normal or whether the purchaser could retract later, taking advantage of the extension. The order settles that question. For some people sure of their acquisition or for the sellers, this is good news but, for those who thought they still have a little time to retract, the situation may become complicated because they will discover that their deadline has passed. (My advice is to try to avoid entering into a transaction if you’re not sure of it from the outset!)
Many buyers need credit to buy and still can retract if they don’t get their loans when a conditional precedent (Clause Suspensive) has been included in the Promesse/Compromis de Vente — we’re still unsure how the postponement of the suspensive conditions will apply. And the banks are experiencing the same delays as are the notaires.
The notaires advise that the best method is to stick to the current practice to opt for an automatic extension of the deadline for obtaining the loan, but without exceeding the deadline for completion of the Promesse/Compromis de Vente because after the deadline, the agreement between buyer and seller then lapses. The fact remains that a Promesse/Compromis de Vente often lasts about three months during which the borrower must obtain his loan. The banks must therefore grant it in time, which is not currently evident and likely impossible under the circumstance. The only solution for people who wish to maintain their Promesse/Compromis de Vente is to officially sign an amendment with the seller to postpone the deadline.
Whether it is the condition of the electrical installation, the gas, or the presence of asbestos, having the diagnostics done is essential when signing the Promesse/Compromis de Vente but this goes against the confinement rules. The diagnosticians within FNAIM have drawn up a guide to good practices to follow in order to resolve the situation. The diagnosticians will be able to intervene, but only in dwellings that have been empty for 48 hours. The obligation of an empty residence for 48 hours indeed limits the possibilities of diagnosis at a time when everyone is supposed to stay at home!
For people who have applied for building permits (not likely any of you, but anything is possible!), the administration of the application has been postponed until May 24th. If the permit had been issued for a month at the beginning of the confinement, it will last another month after the end of it, therefore the extension is automatic. Without a response from the administration, the permit extension is supposed to be granted, but given the difficulties currently encountered by town halls, as a precaution, it is preferable to obtain a firm and written response from the administration. Otherwise, the permit risks being compromised. Finally, if one wishes to appeal against a building permit, in normal times, people opposed to the building project have two months to act against the permit from the date of posting of it, but for the moment, this period will start running again at the end of the confinement.
Bottom line…everyone is working toward managing under the circumstances…but expect delays and there’s not a thing you can do about it!
Adrian Leeds Group
P.S. For those of you sheltering-at-home (by order or not) and dreaming of a move to France, or even a property purchase, this can be a good time to prepare for and work toward that dream. I’m at home, too, and happy to connect with you on Skype or by phone. We can talk about a strategy to change and enrich your life by living or investing here. To schedule your time, contact us today!