France was among the first countries to decree a full lockdown, which is expected to last until the end of April.
French Notaires play a key part in property transactions. Despite their crucial role as public officers, they were asked to close their offices to slow the spread of the virus and protect the public. In recent years, France has gradually introduced legislation to modernise processes but the legal system remains heavily reliant on the signing and exchange of documents which require attendance in person. Under the current lockdown, this isn’t possible as most transactions aren’t sufficiently urgent to benefit from an exemption.
So, how is France adapting to the health crisis and what is the current impact of the coronavirus on ongoing transactions?
Sale and purchase
Estate agents aren’t considered essential workers and most are now working remotely, along with Notaires. Consequently, there has been a recent trend towards signing sales mandates and preliminary sales and purchase contracts using secure electronic signatures software such as DocuSign. However, the following issues are still causing significant delays in progressing and completing transactions:
- Viewings are not possible
- If you are purchasing a property off plan, you cannot go on site for the handover. Therefore, the process will stall at this crucial point
- If your offer has been accepted (or you have accepted an offer) but the mandatory diagnostic survey reports haven’t yet been carried out, the drafting of the preliminary sale and purchase contracts will be delayed as surveyors are currently unsure whether they are go on site to conduct them
- Land Registries are continuing with skeleton staff which has slowed the issuing of statements of charges against the property which are mandatory before the Notaire can complete the transaction
- Likewise, where the property is in a Résidence under the co-ownership regime, the syndic may be delayed in issuing the mandatory documents regarding the financial health of the co-ownership
As regards attending the Notaire’s office in person, most Notaires recommend using French Powers of Attorneys (or proxies) signed by their clients and delegating the authority to sign to staff at the Notaire’s office. This is especially helpful for transactions where the preliminary contract has already been signed by proxy prior to the state of emergency.
However, the situation regarding signing by proxy isn’t yet clear. Usually, the signature of a proxy must be witnessed either by a Notaire or a Mairie official but, in current circumstances, this isn’t possible. Some Notaires are adopting a pragmatic attitude, allowing their clients to print their proxies and sign them at home unwitnessed, as well as accepting emailed copies. However, the postal system is currently unreliable for sending original documents. Equally it’s an unacceptable solution where a mortgage Deed is involved, as the proxy must be “authentic” i.e. signed in front of a Notaire to be valid.
Thankfully, in the coming days, a new emergency Ordonnance (Decree) to relax the rules from a strict “physical presence” to a “remote presence”, e.g. through video conference, is expected. This would allow the Notaire to see their clients sign the documents in their home which should assist with moving forward with transactions.
Unfortunately, many sales and purchases due for completion shortly after the emergency state was decreed have been complicated by the Ordonnance where a pre-emption right or other administration decision is involved.
In the French conveyancing process, the Notaire must serve notice of the sale on the local authority in case they wish to pre-empt the sale and purchase the property themselves. Whilst this is not a frequent occurrence, the notice must be served for all sale and purchases and the local authority has two months to respond, after which deadline the sale can then proceed.
Under the Ordonnance, all pre-emption rights notice periods are suspended, backdated to 12 March. The affected notice periods are suspended until a month after the emergency period ends (See NB below for an update on this point). For sales and purchases where the notice has not yet been served, or was served after 12 March, the two months delay will only start running from the 26 June. The only sales and purchases unaffected by this decree are the ones where there is no pre-emption right to the benefit of the local authority but those are rare occurrences.
Delays can be especially concerning where the buyer needs a mortgage. If the mortgage offer was issued and accepted by the buyer, in principle, it’s valid for four months, subject to terms and conditions. If the offer was issued but hasn’t yet been accepted, the terms and conditions must be checked to see how long it’s valid for and whether the bank can withdraw the offer.
If you are buying subject to a mortgage, have received a mortgage offer, but have not yet accepted it and are considering not accepting it altogether given the economic uncertainty caused by the crisis, you could find yourself in breach of contract and financially at risk as the mortgage condition precedent would be considered to be fulfilled.
If you are selling a property in France and the completion deadline is approaching, contact your Notaire immediately and ask to sign a formal addendum with your buyer to contractually extend the completion deadline. There have been concerns that, in cases where the completion deadline has passed, the buyers could use this to try and renegotiate the terms and conditions of the sale including the sale price. Signing an addendum would allow you to lock in the already agreed terms and conditions of the sale for a longer period.
If you are about to sign a preliminary sale and purchase contract, scrutinise the various deadlines that will be included, as everything is currently taking longer. We would recommend considering delaying the completion deadline until late September (a usual completion deadline would be two or three months from the signature of the preliminary sale and purchase contract).
In general, it’s advisable to discuss any concerns with your legal adviser, your Notaire, the estate agent and the other party.
NB: a new Decree dated 8 May 2020 now sets in stone the date of 24 May in this respect. Please see our most recent separate update for additional detail.
