• Offer letter

Parties usually sign an offer letter (Lettre d’intention) for the direct or indirect purchase of real estate property. Such document is usually the first document entered into in relation to a property transaction and includes the purchase price, the tax treatment of the sale, the main terms and conditions of the sale, the different conditions precedent to be fulfilled (as the case may be) and the timing of the transaction, including the timing necessary for the purchaser to complete its due diligence.

• Due diligence report

Once the offer letter is signed, the purchaser will usually carry out, through its legal and technical advisors, due diligence with respect to the property and/or the company that is in the process of being sold.

This due diligence will include review of titles, zoning searches, review of building authorizations, review of any leases and carrying out of technical and environmental surveys of the real estate property.

• Sale and purchase agreement (under conditions precedent)

After completion of due diligence, a sale and purchase agreement under conditions precedent is usually signed between the vendor and purchaser.

This sale and purchase agreement will contain all necessary terms and conditions for the transaction, including description of the land, the purchase price, the tax treatment of the sale, payment of a deposit (if any) and the list of the conditions precedent to be fulfilled, which usually includes a waiver from the public authorities to the benefit of their preemption right. This sale and purchase agreement will also contain specific conditions precedent to the benefit of the purchaser such as the obtaining of the necessary construction authorizations and some representations and warranties granted by the vendor for specific issues identified during the due diligence process carried out by the purchaser.

• Final sale and purchase agreement

Once all the conditions precedent listed in the sale and purchase agreement under conditions precedent are fulfilled, parties will sign the final sale and purchase agreement drawn up by and signed before a French notary (please see response to “What is the land registration system?”).

The French Civil Code provides for conditions applicable to all sales of real estate properties which are not, to some extent, mandatory. Parties will therefore negotiate and agree upon appropriate terms and conditions in the sale and purchase agreement. Recent trend, however, is for vendors to give limited representations and warranties.

Parties are legally bound as soon as they execute a reciprocal sale and purchase agreement under conditions precedent and/or a final sale and purchase agreement.

However, under French law, a sale is binding between vendor and purchaser as soon as there is an agreement on the subject matter of the transaction and on the price. As a consequence, for instance, an unqualified offer letter made by a purchaser which is duly accepted by the vendor could result in a binding sale and purchase agreement.

Parties are legally bound as soon as they execute a final sale and purchase agreement and transfer of ownership will occur upon signing of this agreement before a French notary.

However, all documents transferring ownership of real estate property must be published at the Land Registry. Until a final sale and purchase agreement is published at the Land Registry, it is not binding on third parties.

Purchasers will usually pay for the following:

• Buyer’s agent’s fees
• Legal costs borne by the purchaser
• Due diligence costs 
• French notaries fees
• Registration duties and/or VAT 
• Land Registry fees

• Legal costs borne by the vendor
• Income tax on any profit made on the sale of the real estate property