CORONAVIRUS FRENCH LEGAL UPDATE: Further legal changes to contractual deadlines

The law changing contractual deadlines and clauses has been modified and completed (15th April 2020 – see link to the original text below). The law is extensive and concerns French contractual law generally (this article may also be of interest as background if you are involved in a French contract at the present time) but I will concentrate on property transactions here.

The main aspects relating to real estate sales/purchases in France are as follows:

  • Purchaser’s 10-day cooling-off period

In France a property purchaser benefits from a 10-day cooling off period that runs from the day after receipt of the official notification of the signed preliminary contract. The law was initially changed to extend the purchaser’s cooling-off period when it expired in the ‘crisis period’ (designated as being from 12th March to 24th June) until beyond the end of the crisis period, date to be fixed in accordance with the period left to run in relation to 12th March. This is no longer applicable and the cooling-off period is deemed not to have been interrupted at all. For example, initially a buyer who first received the official notification of the signed preliminary contract on 5th March 2020 would have been able to withdraw from the purchase until 3rd July 2020. The modifications, which have retrospective effect, mean that the purchaser only had the normal time period ie until 17th March 2020.

A buyer cannot therefore use this law to pull out of a purchase after the end of the 10-day cooling-off period which is calculated in the usual way.

  • Contractual clauses and deadlines for obtaining a loan

In France preliminary contracts include contractual clauses with deadlines to protect a purchaser who needs a loan to finance the purchase. It appears that this particular case comes within the general extension of contractual deadlines covered in more detail below. You will therefore find information about it below.

  • Changes to contractual deadlines

Hold on to your hat, this is where it gets even more complicated! In the context of a property transaction, here we are mainly talking about one party refusing to sign the completion deed (acte authentique). It is obvious that there is a huge practical difficulty with this in a country where the law requires a physical presence to sign (or strict witnessing requirements for a power of attorney) when people cannot move about freely. Remote signing is slowly being introduced but it is not always technically, or legally, possible. If you are currently purchasing a French property and are encountering a problem of this nature (either as the party who cannot sign or on the other side as the party who wants to complete) then we strongly advise that you obtain proper legal advice relating to your own particular situation.

The penalties for a breach of contract occurring between 12th March 2020 and 24th June 2020 have been ‘neutralised’. Initially the end of the ‘neutral’ period was fixed as one month from 24th June (ie until 24th July). This has been replaced by a sliding deadline calculated on the basis of when the contractual period started and was due to end.

  • The contractual period was ongoing on 12th March (contract signed before that date)

Extension of contractual obligations for the period remaining from 12th March to the initial contractual deadline from 24th June.

  • The contractual period started to run during the neutral period and ends during that period

Extension of contractual obligations for the entirety of the initial contractual period from 24th June.

So, let’s turn our attention to the specific case of the preliminary contract most commonly used in property transactions, namely a compromis de vente. When a contractual deadline is breached in this case, the aggrieved party usually has more than one option. They can sue the defaulting party for damages on the basis of the penalty clause stipulated in the contract, and either seek termination of the contract (so they can then sell to somebody else or take the property off the market if they are the owner, or be released from their obligation to purchase if they are the buyer), or force the defaulting party to sell or purchase (known as specific performance).

The deadline from which action for breach of contract can be taken will now be calculated in accordance with a sliding scale dependent upon the dates stipulated initially and when the contract came into force.

For example, a compromis was signed on 12th January 2020 and completion should have happened by 12th April 2020. No action for breach of contract is possible until beyond 24th July 2020 (extension of one month because that is the residual time period remaining from the start of the neutral period).

If in the same case this sale was due to complete by 12th July 2020, completion is extended for the whole of the neutral period (3 months and 12 days) ie until 24th October.

If a compromis was signed on say 24th April 2020 with completion due in 5 months’ time ie by 24th September, the deadline is extended by 2 months (period between 24th April and 24th June). In this case completion is to happen by 24th November 2020.

  • The specific case of a purchase conditional on obtaining a loan

In France, the property purchaser who needs a loan to finance a purchase is protected by a specific set of clauses in the contract. If the lender refuses the loan then the buyer can withdraw from the purchase without penalty. A contractual deadline by which the loan is to be obtained is always stipulated to ensure that an owner can be released from the contract if the application takes too long (this in order to avoid the clause being used abusively). The minimum time period specified by the law is 30 days from the signing of the compromis.

If the time period for obtaining the loan was still running on 12th March then the residual time period from that date is added to that of the end of the neutral period, the 24th June. Say the contractual deadline for obtaining the loan was 12th April 2020, the buyer will have until 24th July to get the loan.

If it started (and ended) during the neutral period then the time period will be extended for the entire period stipulated in the contract ie a compromis signed on 5th April gave a 2-month deadline until 5th June. The purchaser will have the full two months from 24th June until 24th August to get the loan.

The other main type of contract used for property purchases is called une promesse. It is not possible to go into further detail here about these here but essentially the general rules above are applied to the various contractual deadlines specific to those types of contract.

  • Other contractual deadlines such as planning consent and rights of pre-emption (compulsory purchase mechanisms)

The contractual deadlines relating to matters such as obtaining planning consent (outline planning permission, a planning permit) and rights of pre-emption (where an individual such as a tenant or an administrative body such as a local authority can purchase instead of a buyer) which had started to run before 12th March have been suspended. They will recommence for the period that remained on that date from the end of the state of health emergency (24th May 2020).

This article is based on the following provided by the Professional Body of which I am a member:

30th April 2020

By Victoria Headdon LLB Hons, MD of Compass Immobilier.