With a focus on the conditions precedent related to the mortgage loan
The preliminary sales agreement is a key step in any real estate transaction. It legally binds both the seller and the buyer, formalizing their shared intention to complete the sale under certain conditions. Drafting a comprehensive and thorough preliminary agreement is essential to ensure a secure transaction, avoid disputes, and streamline the process until the final signing at the notary's office.
At the heart of this process, the quality and completeness of the file provided to the notary play a crucial role. Indeed, the notary can only proceed with preparing the deed if all the necessary documents are in their possession. Among the fundamental elements are the suspensive conditions, particularly those related to the buyer obtaining a mortgage, which often determine the validity of the sale.
This article provides a comprehensive overview of the documents required to draft an effective sales agreement, while emphasizing the specificities and challenges of suspensive clauses relating to financing.
Part 1: Understanding the Sales Agreement
What is a preliminary sales agreement?
The preliminary sales agreement, often called a "bilateral promise of sale," is a pre-contract that binds both parties: the seller commits to selling, and the buyer to purchasing, the property. This document must contain a number of mandatory clauses and specifies the terms of the sale, such as the price, the description of the property, and any conditions precedent.
Difference between a preliminary agreement and a unilateral promise of sale
A preliminary sales agreement should not be confused with a unilateral promise of sale. In the latter, only the seller is obligated to sell to the beneficiary, who retains the freedom to buy or not. A preliminary sales agreement binds both parties. This reinforces its importance in securing the transaction.
The role of the notary in drafting
Even though the preliminary sales agreement can be drafted by a real estate agent or lawyer, the notary remains a key player. They guarantee legal compliance, verify the property's legal status, collect the necessary documents, and ensure the legal security of the sale. An incomplete file slows down their work and can delay the signing.
Legal consequences of the signed compromise
Once signed, the preliminary sales agreement is binding on both parties. The seller can no longer withdraw without compensating the buyer, and the buyer is also obligated to fulfill any conditions precedent or cancel the sale. Penalties may be applied in case of non-compliance.
Part 2: Essential documents for drafting a preliminary sales agreement
For a notary to draft a reliable, clear, and legally sound preliminary sales agreement, they must have a complete and organized file. This file includes several categories of essential documents relating to the parties to the sale, the property itself, and the legal and administrative context surrounding the transaction.
2.1. Identity and capacity of the parties
Identity documents of the parties : Valid identity card, passport or residence permit, to clearly identify seller and buyer.
Proof of legal capacity : For example, if one of the parties is a company, a recent Kbis extract, the articles of association, and the resolution authorizing the sale or purchase.
Power of attorney : If one of the parties is acting by proxy (agent), the written and signed power of attorney must be attached.
2.2. Documents relating to the property
Title deed : Document attesting to the seller's ownership, often issued by the notary who carried out the previous acquisition.
Cadastral plan : Allows for the precise location of the property and the delimitation of its plots.
Mandatory technical diagnostics :
Energy Performance Diagnosis (DPE)
Asbestos
Lead
Termites
Statement of natural, mining and technological risks (ERNMT)
Gas
Electricity
Non-collective sanitation, etc.
Condominium regulations and minutes of general meetings : If the property is in co-ownership, these documents specify the rules, charges and any voted work.
Latest utility bill receipts : To inform the buyer of current expenses.
Certificate of administrative status : Allows verification of the absence of ongoing procedures (expropriation, pre-emption).
2.3. Administrative and financial documents
Planning certificate : Provides information on the planning regulations applicable to the land or property.
Surface area certificate (Carrez Law) : Mandatory for condominium units, it certifies the private surface area.
Property tax and housing tax : Tax notices allow you to calculate the tax charges.
Mortgage status : Certificate issued by the mortgage office indicating whether there are any mortgages or other liens encumbering the property.
Easements : Documents specifying any easements (right of way, pipeline, view, etc.).
Rental situation : Current lease, rent receipts, inventory of fixtures if the property is rented.
Certificate of no lien : If a vehicle is linked to the sale (rare but possible in certain atypical real estate sales).
2.4. Additional information
Recent or planned work : Quotes, work authorizations, building permits or prior declarations if modifications have taken place.
History of claims : Declarations made to insurance companies, expert assessments, repairs carried out.
Sanitation diagnosis : In the case of individual sanitation, certificate of conformity.
Documents relating to co-owners : List of co-owners, contact details of the trustee.
Part 3: Conditions precedent to the mortgage loan
When a buyer needs bank financing to purchase a property, including a loan contingency clause in the preliminary sales agreement is an essential step to secure the transaction.
3.1. What is a loan suspensive condition?
A loan contingency clause is a clause in the preliminary sales agreement stipulating that the sale will only be finalized if the buyer obtains a bank loan that meets certain criteria. This clause protects the buyer: if the loan is refused, they can cancel the sale without penalty and recover their deposit.
3.2. Duration of the suspensive condition
Generally, the duration is set at 30 to 60 days after the signing of the preliminary agreement.
This period corresponds to the time during which the buyer must submit their loan application and wait for the bank's response.
It is possible to request an extension, but it must be accepted by the seller.
3.3. Maximum amount and rate
The agreement must state the amount of the loan requested : generally, a percentage of the sale price (example: 80% of the price).
The maximum acceptable interest rate must also be specified: for example, a fixed rate not exceeding 3.5%.
These parameters allow us to precisely define the financial conditions acceptable to the buyer.
3.4. Fundraising Obligations
The buyer must be diligent in their search for a loan.
He must submit at least one or more loan applications to banking institutions within the given timeframe.
It is advisable to keep all documents attesting to the steps taken (letters, emails, refusals, proposals).
If he does not take these steps, he could be considered to have waived the suspensive condition.
3.5. Escrow and potential amount
A security deposit is usually paid when the preliminary agreement is signed: often 5 to 10% of the price.
This amount is held in escrow by the notary or the real estate agency.
If the suspensive condition is not met (loan refused), this deposit is returned to the buyer.
If the suspensive condition is lifted (loan granted), this deposit is deducted from the sale price.
3.6. Consequences of non-compliance
If the buyer does not comply with their loan search obligations or does not provide proof of refusal, the seller may request the removal of the condition and possibly retain the deposit.
If the loan is accepted, the condition is lifted and the sale can be finalized.
This suspensive condition is a key element in securing the transaction, for both the buyer and the seller. It must be drafted precisely to avoid disputes.
Part 4: Other conditions precedent in a preliminary sales agreement
In addition to the condition precedent of obtaining a mortgage, several other clauses can be included in a preliminary sales agreement to protect the parties, particularly the buyer. These conditions are essential to secure the transaction against unforeseen legal, administrative, or technical issues.
4.1. Condition precedent of obtaining administrative authorizations
Building permits, prior declarations, or other authorizations : when the purchase concerns a building plot, a construction project, or a major modification, the completion of the operation often depends on obtaining administrative authorizations.
The agreement may stipulate that the sale is conditional upon obtaining these authorizations within a specified period.
In case of refusal, the buyer can withdraw without losing their security deposit.
4.2. Suspensive condition of non-pre-emption
In some cases, the local authority (town hall, department) may exercise a right of pre-emption on the property being sold.
The sale is then suspended for the legal duration of exercising this right (generally 2 months).
The suspensive condition specifies that the sale will only be final if the community does not exercise this right of pre-emption.
If the pre-emption right is exercised, the seller must sell to the community and the sale is cancelled for the buyer.
4.3. Condition precedent linked to the completion of technical diagnostics
Certain mandatory assessments (asbestos, lead, termites, etc.) can reveal significant anomalies.
The agreement may include a suspensive condition linked to the completion of these assessments and the possibility for the buyer to withdraw if major risks are detected.
4.4. Suspensive condition related to the conformity of the goods
The buyer may include a suspensive condition linked to the conformity of the property to the standards in force (urban planning, accessibility, safety, etc.).
If serious irregularities are found, the sale may be cancelled.
4.5. Condition precedent linked to obtaining additional financing
Sometimes, the buyer needs additional financing (bridging loan, personal loan, etc.).
The agreement may stipulate that the sale is contingent upon obtaining this additional financing.
The importance of precisely drafting the suspensive conditions
Each condition must be clearly written, setting precise deadlines and objective criteria. This avoids conflicts and disputes between the parties.
Part 5: Essential documents to provide to the notary for drafting a complete and reliable preliminary sales agreement
A preliminary sales agreement can only be properly drafted by the notary if they have a complete file containing all the necessary documents to verify the legal, administrative, technical, and financial status of the property. The absence of essential documents leads to significant delays and can jeopardize the signing of the agreement.
5.1. Party Identification Documents
Valid identity documents : national identity cards, passports, or residence permits for foreign nationals.
Articles of association and Kbis extract (for sellers or buyers who are legal entities).
Mandates of representation if applicable (agent, power of attorney).
5.2. Documents relating to the property
Title deed : authentic deed of acquisition or certificate of ownership.
Latest property tax and housing tax notice.
Cadastral plan to precisely locate the property.
Condominium regulations and financial statements (for a unit in a condominium).
Urban planning documents :
Recent planning certificate (simple and operational).
Building permit, prior declaration, or certificates of conformity, if recent work or construction project.
Mandatory technical diagnostics :
Energy performance diagnosis (EPC).
Asbestos, lead, termites, gas, electricity, natural and technological risks (ERNMT).
Carrez Law surface area for units in co-ownership.
certificates and attestations (compliance of installations, building permit cleared of all appeals).
5.3. Financial and mortgage documents
mortgage status certificate (to check for any charges or mortgages).
Certificate of no lien (for properties with the right to no lien, such as certain lands).
Statement of current loan status (if there is an existing loan on the property being sold).
Estimate or bank loan offer (for the buyer).
5.4. Documents related to conditions precedent
Bank loan offer or conditional certificate.
Administrative files related to planning permissions.
Documents proving the absence of a right of pre-emption or the absence of an objection.
5.5. Any additional documents
Deed of division (for land or co-ownerships).
Certificate of completion of works.
Documents relating to any easements.
Insurance certificates for certain specific cases.
Key role of the real estate agent or representative
In order for the notary to be able to draft a preliminary agreement quickly and without errors, the file must be carefully prepared beforehand, with up-to-date, complete and clear documents.
The agent must:
List precisely the documents needed ;
Anticipate the notary's requests ;
Contact the relevant authorities, technical services, or previous owners if needed ;
Clearly classify and name each file submitted.
A complete and thorough file is key to a smooth transaction. The notary can then ensure the preliminary sales agreement is drafted quickly and securely, minimizing the risk of errors or misunderstandings that could delay the sale.
Part 6: Drafting the preliminary sales agreement — key points and essential precautions
Drafting the preliminary sales agreement is a crucial step that legally binds both sellers and buyers. It must be done rigorously and clearly to avoid any subsequent disputes.
6.1. Legal nature of the compromise
The preliminary sales agreement is a preliminary contract that sets out the terms of the sale and firmly binds the parties, subject to any suspensive conditions.
Once signed, the agreement can be enforced (obligation to buy and sell), unless a suspensive condition is not lifted.
It also serves as a basis for obtaining financing from banks.
6.2. Essential clauses
Full identity of the parties : sellers and buyers, with their contact details.
Precise description of the property : address, area, type, cadastral references.
Sale price and payment terms (deposit, balance, costs to be borne by the parties).
Conditions precedent :
Obtaining the loan by the buyer (with time frame, maximum rate, amount, duration…).
Obtaining the necessary administrative authorizations.
No right of pre-emption.
Time limit :
Validity period of the agreement.
Deadline for the lifting of suspensive conditions.
Deadline for signing the final deed.
Amount of the security deposit (often 5 to 10% of the price) to be paid upon signing the preliminary agreement.
Clauses relating to late payment penalties or compensation in the event of non-completion of the sale.
Obligations of the parties (access to the property, maintenance, condition of the property…).
Mention of the possibility of resorting to mediation in the event of a dispute.
6.3. Points of vigilance not to be overlooked
Accuracy of information : any error may lead to the nullity of the agreement or disputes.
Clarity of suspensive conditions : define precisely the criteria and deadlines to avoid any ambiguity.
Diagnostic checks : ensuring that they are valid and compliant.
Mention of easements, charges, mortgages : crucial information for the buyer.
Inclusion of annexes : technical documents, regulatory documents, plans, diagnostics, certificates.
Signatures of the parties : essential, either in original or via secure electronic means.
Receipt of a copy signed by each party.
6.4. Role of the notary and the parties in drafting
The notary ensures the legal compliance of the agreement and its legal security.
The real estate agent or representative assists the parties in collecting documents, understanding clauses, and signing.
The buyer and the seller must be clearly informed of their rights and obligations .
A thorough and comprehensive drafting of the preliminary agreement is key to a successful transaction, free from unnecessary risks and surprises. It legally secures the parties' commitments and allows for a smooth preparation for the signing of the final deed.
Part 7: Conditions precedent — focus on the condition precedent of a bank loan
7.1. What is a suspensive condition?
A suspensive condition is a clause in a preliminary sales agreement that suspends the final execution of the contract until a specific event has occurred. If this condition is not met within the allotted time, the agreement becomes null and void, and the parties are released from their obligations without penalty.
Of all the conditions precedent, the most frequent is that related to obtaining bank financing.
7.2. Why is the loan contingency condition crucial?
It protects the buyer, who does not want to be committed if he is unable to finance the purchase.
It also provides security for the seller, because the agreement only becomes a final sale if the buyer has the funds.
The time frame for obtaining the loan is strictly regulated, often around 30 to 60 days.
Without this clause, the buyer could be forced to buy even without financing, which is very risky.
7.3. The essential elements of the loan suspensive condition
To be valid and secure, the clause must specify several points:
Duration of the period : the time given to the buyer to obtain a response from the bank, generally 30 to 60 days from the signing of the preliminary agreement.
Maximum loan amount : must correspond to the amount needed to finance the purchase, with a margin if necessary.
Maximum acceptable interest rate : often set to prevent the buyer from being tied to an excessively expensive loan.
Maximum loan term : sometimes specified to avoid financing offers that are too far apart.
Obligation to actively seek financing : the buyer must justify having taken serious and multiple steps (e.g., providing proof of loan applications).
Declaration on honor : attesting that the buyer has done everything possible to obtain a loan.
7.4. Practical consequences and advice for the buyer
Apply for loans quickly : in order to meet deadlines and avoid the condition being voided.
Ensure that the loan application covers the amount stated in the preliminary agreement.
Follow the bank's instructions closely, and provide all the requested supporting documents.
Inform the seller or the notary in case of difficulty or refusal.
Make sure you have several loan proposals , especially by comparing rates and conditions.
Respect the formalities : any refusal or acceptance must be formalized to be enforceable.
7.5. Role of the notary and real estate agents in this phase
The notary verifies that the clause is correctly inserted in the preliminary agreement.
He advises the parties on the deadlines and procedures.
Real estate agents must support the buyer in their efforts and relay important information.
They can also play a mediating role in case of difficulties.
7.6. Other common conditions precedent
Obtaining administrative authorizations (e.g., building permits).
No right of pre-emption.
Obtaining additional certificates or diagnoses.
Removal of any easements or potential charges.
The condition precedent of obtaining financing is an essential safeguard in a preliminary sales agreement. Its precise drafting, strict adherence to deadlines, and transparency throughout the process are crucial to securing the transaction, avoiding disputes, and allowing all parties to proceed smoothly to the signing of the final deed.
Part 8: Banking procedures related to the loan contingency condition
8.1. Preparing the loan application file
Upon signing the preliminary sales agreement, the buyer must quickly:
Prepare a complete file including proof of identity, income (pay slips, tax notices), bank statements, proof of expenses and debts, and any document required by the bank.
Define your needs precisely : amount, duration, type of loan (amortizing, bullet loan, fixed or variable rate).
Contact several financial institutions to compare offers and negotiate terms.
8.2. Bank instruction: how does it work?
The bank examines the buyer's creditworthiness (income, personal contribution, debt ratio).
She analyzes the asset to be financed (value, location, condition).
The decision can be quick or take several weeks depending on the complexity of the case.
The buyer must be responsive in providing all the additional documents requested.
8.3. The banking response and its consequences
If accepted , the bank issues a formal loan offer.
The buyer must observe a 10-day reflection period before accepting the offer.
The accepted offer triggers the lifting of the suspensive condition in the preliminary agreement.
In case of refusal , the suspensive condition is not lifted, which allows the buyer to withdraw without penalty.
8.4. The buyer's obligations in seeking financing
The buyer must demonstrate an active and sincere approach.
He needs to make multiple requests, not be satisfied with just one proposal.
He must keep all the evidence (letters, emails, responses from banks).
If he encounters difficulties, he can seek the assistance of a mortgage broker.
Part 9: Other common suspensive conditions and their implications
9.1. Obtaining administrative authorizations
Building permits, prior declarations, or other authorizations may be required.
The agreement includes a deadline for obtaining these documents.
Failure to comply with this condition may invalidate the sale.
9.2. No right of pre-emption
Some local authorities have a right of pre-emption on sales.
The compromise is subject to a review period by these communities.
If a right of pre-emption is exercised, the sale is cancelled.
9.3. Removal of easements and charges
Part 10: Practical tips for ensuring the proper drafting and monitoring of conditions precedent
Clearly state each condition in the agreement, with specific deadlines.
Plan how the steps taken will be proven.
Anticipate risks by diversifying funding sources.
Involve the notary and professionals from the outset to support the buyer.
Regular communication between buyer, seller, notary and real estate agents is essential to avoid misunderstandings.
Common mistakes to avoid
Limit yourself to a single loan application instead of multiplying the steps.
Failure to respect the deadlines stipulated in the agreement.
Providing an incomplete or disorganized bank file.
Failure to communicate clearly with the notary or real estate agent.
Failing to request a maximum rate or maximum duration in the suspensive condition exposes the buyer to an excessively expensive loan.
Ignoring other suspensive conditions (right of pre-emption, building permit).
Step-by-step guide for the buyer
Step 1: Read and understand the compromise carefully
Step 2: Prepare your financial file
Step 3: Submit loan applications
Step 4: Closely monitor bank responses
Step 5: Inform the notary and the seller
Step 6: In case of refusal
The preliminary sales agreement is a key step in buying a property. It binds both the seller and the buyer, and often includes essential conditions precedent to secure the transaction. These conditions, particularly those related to obtaining a loan, must be clearly understood and respected to avoid complications that could jeopardize the sale.
The careful management of conditions precedent is crucial for the success of a real estate transaction. A well-drafted preliminary sales agreement, a complete file, and clear communication between the buyer, the notary, and the banks help prevent delays and cancellations. Anticipating and understanding everyone's obligations ensures a smooth and secure final signing. By adhering to these best practices, you can safeguard your real estate project and avoid unpleasant surprises.
