Seven day cooling off period and buying from overseas

THE seven day cooling off period that allows the buyer of a French property to withdraw from a sale contract of a residential property can prove very helpful.

Here Guillaume Barlet offers some advice on how it works and the options available if living overseas.

Enforcement of the decree of December 19, 2008 regarding the cooling-off period granted to a non-professional buyer was awaited since the National Pledge for Housing Act of July 13, 2006 (engagement national pour le logement or ENL) in order to set the practicalities of the notice and of the handover of the contract to the buyer.

This new measure has modified the article L. 271-1 of the French Construction and Habitation Code, this article allows provision for the buyer in a ‘residential property private agreement’ to withdraw from the contract.

This withdrawal can be done during a seven-day cooling-off period which starts from the day after the day of receipt of the letter notifying the contract.

The obvious purpose of this measure is to protect the buyer against any ill-considered decision he or she would have made.

This letter should be in the form of a registered post with acknowledgement of receipt (lettre recommandée avec demande d'avis de réception or LRAR), or any other way ensuring the same level of guarantee, to determine the date of receipt or handover.

The formality of signing this receipt is required by French Law, however when the buyer is living abroad, the LRAR is not always complied with, as local post offices are not always aware of its importance. Therefore the LRAR may not always be the safest way to ensure the notice will start when the buyer is resident outside of France.

Not starting the seven-day cooling off period may sound like an advantage for the buyer. Indeed, in so far as the cooling-off period has not started, the buyer can theoretically withdraw from the contract at any point and even after seven days have passed since the notice was received. However, it may also create more issues:

- If the cooling-off period has not started, the buyer may technically not be able to withdraw from the contract or the buyer may find more difficult to carry out this withdrawal as conditions to accept such withdrawal are very strict

- If the buyer wishes to withdraw from the contract, the equivalent of the LRAR may not exist in his/her country or the form of this equivalent, if any, may not be duly complied with by the French post offices

In order for the withdrawal to be accepted the buyer must follow the same formal conditions i.e. the withdrawal must be sent as an LRAR or another way that is providing the same guarantees. This rule also applies when an authenticated deed (signed with a notary) was not preceded by a private agreement.

French law authorises the electronic LRAR which could avoid any reliance on the international post systems but this solution is fairly uncommon and not always possible to carry out in practice.

This is why a notice given in an alternative way to the LRAR that ensures the same level of guarantee to determine the date of reception or a handover could prove more useful as far as a buyer residing outside France is concerned.

Unfortunately, these modes of notice could not be applied before a decree defined the conditions of these alternative modes of notice. Although some have tried to apply other modes of notice in spite of the absence of a decree, the lack of rules meant the notice could be backdated without the buyer realising and could deprive him/her of his/her legal protection.

The modification to the ENL Act makes provision for the handover of the notice to be made by a professional person who has received power to contribute to the sale but some Court decisions have forbidden such handover, the judge considering that in the absence of a decree the application of the Act was not possible.

The decree of December 19, 2008 authorises at last (over two years after the Act!) the handover of the notice with the creation of articles D. 271-6 and D. 271-7 of the French Construction and Habitation Code.

However, in practice, this authorisation does not include complete details regarding the modalities of an alternative way to the LRAR ensuring the same level of guarantee to determine the date of reception or handover; nor does it give a definition of a "professional person who has received power to contribute to the sale".

It is clear that a notice given by a bailiff would comply with the law, but bailiffs in some countries (such as the UK) do not have this kind of prerogative which prevents this option from being used.

The notice could also be given by the notary but a private agreement is not necessarily signed with a notary or even signed in France which limits the application of this option as well.

The ENL Act allows, within formal conditions, the handover of the contract agreed with the assistance of a professional person who has received power to contribute to the sale.

There does not seem to be any legal interdiction for that person to be the estate agent or even the buyer’s legal adviser (which would make sense since he/she is committed to protect the buyer’s best interest).

In addition, if this professional person is in the UK, he/she can guarantee the date of the handover and ensure that a notice proving the date is drafted in the correct form and signed by the buyer who can also receive proper information and advice regarding the seven-day cooling-off period.

The assistance of the right person to protect your interests could also be useful since some vendors have considered that despite its compulsory nature, the cooling-off period could be avoided since the law does not provide any sanction if the rules of the cooling-off period are not complied with.

In such situation, some Court decisions have rendered the contract null and void and seem to protect the buyer in that sense. However, the caveat emptor rule should not be overlooked and it is better to be safe by being legally represented than sorry as the Court proceedings could take months if not years to draw the dispute to a conclusion.

Guillaume Barlet is a French lawyer specialising in French assets and wealth management issues for Bank House Investment Management Limited, contact him by e-mail or call 01242 520074.