Purchasing a pre-construction property

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The legislation has special provisions for the sale of pre-construction buildings, as opposed to already-constructed buildings. To protect the future buyer, there are specific rules and formalities that need to be followed.

Who is concerned?

  • potential buyers of a pre-construction building;
  • professional property developers selling pre-construction buildings.

How to proceed

Types of pre-construction building sales

The sale of a pre-construction building is defined as a sale where the seller undertakes to erect a building within a period of time specified in an agreement.

There are 2 types of pre-construction sales:

  • forward sales, in which the seller undertakes to deliver a building upon its completion to a buyer, who in turn undertakes to accept delivery of the building and pay the agreed price on that date. As such, it is only at the time of completion that ownership is transferred from the seller to the buyer;
  • future-completion sales, in which the seller immediately transfers to the buyer their rights to the land and, where applicable, ownership of existing constructions. The buyer becomes the owner gradually as the construction progresses and pays in tranches as the work moves forward.

Scope of application of the legislation on the sale of pre-construction buildings

In order to fall under the specific legal provisions on the sale of pre-construction buildings, an agreement must satisfy 3 conditions:

  • the building must be for residential or residential and professional purposes;
  • the seller must have secured powers as project owner;
  • the sale must be effected in consideration for payments or deposits of funds to be made before construction is completed;

Reserving a pre-construction building

As with the ordinary sale of a building, the sale of a pre-construction building may be preceded by a preliminary agreement, known as a reservation agreement. Unlike in an ordinary sale, a contract of sale agreement is not necessary to reserve the object before the notarial deed of sale has been signed;

The reservation agreement creates obligations for each of the parties to the contract. Indeed, as consideration for a security deposit paid into an account opened in the name of the reserving party— i.e., the buyer, the contract beneficiary—the seller—i.e., the party making the reservation—undertakes to reserve the building or a portion of the building for the buyer. The amount of the security deposit may not exceed 2 % of the provisional price.

The funds will then be unavailable until the sales agreement has been signed. The funds are repaid to the depositor if:

  • the final contract is not concluded as a result of the seller's fault within a period provided for in the preliminary contract; or
  • the proposed contract shows a significant difference from the preliminary contract (e.g. the final sales price is more than 5% higher than initially anticipated or one of the planned items of equipment has not been carried out).

The reserving party is never required to purchase the building. If they do purchase it, the security deposit will be returned, since they will pay the agreed price. If they abandon the purchase, the deposit will be allocated as compensation to the party that made the reservation.

Information that must be included in a sales agreement for a pre-construction building

Sales agreements for pre-construction buildings can only be concluded if the authorisations required for the projected construction have been issued by the competent administrations.

They must be concluded by notarial deed and contain the following information, failing which they will be deemed null and void:

  • the identity of the owner of the land and the constructions;
  • the date of issue of the administrative authorisations and the terms and conditions under which they are granted;
  • a description of the building or part of the building being sold, and the degree of completion agreed upon;
  • the price and payment conditions;
  • deadline for delivery of the building;
  • for future-completion sales, a guarantee of full completion of the building.

Caution: in the event of an increase in the index, the property developer may apply a 2.5% increase to the total payment instalments for the building under construction. As a consequence, the sales price will go up.

However, the contract must clearly state whether or not the price is revisable and, if so, the terms of its revision.

The purchaser has, however, the right to terminate a contract where such a clause leads to a final price much higher than they expected at the time of conclusion of the contract.

Documents to be attached to the sales agreement

On pain of nullity, contracts for the sale of property to be built must also include the following annexes:

  • construction plans with facades, the plans for the various levels of the building, and a sectional plan of the building;
  • a description indicating the contents and technical features of the building, as well as the materials to be used;
  • in the case of condominium construction, the condominium by-laws.

The nullity of the contract may be invoked only by the purchaser and before completion of the building work.

End of construction work

The building is considered completed when the structures have been built and the fixtures/features that are essential for the use of the building have been installed.

Completion of a building sold under a forward agreement is confirmed by the parties or by a qualified person. The confirmation is formalised in a notarial deed produced by the same notary with whom the original deed of forward sale was filed.

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