Please note that French property law is a complex subject and you should not rely on this article without professional advice on the facts of your case.
Mandates for the purchase of French property are often signed in haste by keen sellers and buyers and repented on at leisure. They are a fruitful source of work for litigation lawyers in France and regularly keep the French Appeal Courts and Supreme Court occupied. English buyers and sellers are at a big disadvantage as the system in England is not the same and they do not understand what they are signing. Mandates are a form of agency and importantly can give the agent the power to conclude a sale with a buyer on the spot without further involvement by the seller. Disputes brought by sellers who think they could have obtained a higher price are likely to happen with property prices in France starting to increase again.
Purchasers of French property usually encounter both estate agent mandates and preliminary contracts. When buying through an estate agent or a notaire, who in France may act as an estate agent, prospective buyers are likely to need to sign a receipt for every property they visit. This is normal and is a way for the estate agent or notaire to prove that he introduced any buyer to the property in case there is a dispute later about his commission. Although the seller will normally have entered into a mandate for sale with the agent or notaire, buyers may also be asked to sign a mandate for purchase under which they agree to pay a commission if they purchase the property they are viewing or any other property introduced to them by the agent. Needless to say buyers are best advised to think carefully about whether they sign such a document and are best advised to ensure if they sign anything it relates to a specific property only and bear in mind the agent may end up receiving two commissions from the buyer and the seller.
It can be possible for a mandate alone to lead to a contract for sale. This can be unexpected and have unforeseen and unpalatable consequences including a purchaser having the right to force a sale. Recent case law has confirmed that any potential purchaser's rights to force the completion of a purchase will depend on the exact nature of any such mandate for sale. The fact that it is headed "Mandate for Sale" will not mean that the agent has the power to conclude a sale unless the specific power to do so is in the text of the mandate. When signing any mandate either as a buyer or seller, great care should be taken to understand the terms, as these may not accurately reflect the title given to the mandate. You should also tell the agent or notaire that you need time to consider the document and not sign it when presented with it.
It is common, but by no means universal, that a mandate for sale signed by a potential seller giving power to an estate agent to market the property will include the power for the estate agent to sign the preliminary purchase contract on the seller's behalf. It is possible that an offer to sell sent out by an agent to a buyer, without the sellers knowledge, could result in a binding contract of sale if the buyer writes back accepting to pay the full asking price and agreeing to all the terms. In such a case a seller who may think that he could have obtained a higher price may be forced to sell at the advertised price. One of the few ways out will be to argue that the mandate did not include power to sell.
If you wish to sell a property, you should pay great attention to the exact terms and conditions of any mandate which you are invited to sign. Many estate agents will claim that the pre printed mandate contract is in a standard form because it is printed in an official looking way. However this is not true and it is always possible to amend it. If your mandate permits the estate agent to sell the property on your behalf, rather than just market it, it could be that on acceptance of the sale offer the purchaser is in a position to force a sale even if you had subsequently decided not to sell or have reservations about selling to this particular purchaser. Sellers will also need to be aware of the difference between exclusive and non-exclusive mandates and the potential consequences of entering into either of these.
Under French law, a contract for sale can be agreed solely on the basis of an offer and an acceptance by the relevant parties and without any particular formalities. A notarial deed still needs to be signed and registered at the (French) Land Registry to have effect against third parties. As such, there are cases in which prospective sellers and/or purchasers decide to try to enforce what might otherwise be described as verbal agreements or contracts. It is always important therefore to ensure that all offers or interest expressed in purchasing or selling a property are formally recorded and correctly worded and that the appropriate conditions are included to avoid lengthy and unpalatable legal proceedings ensuing.
January 2011
Solicitor and Chartered Tax Adviser
Solicitor and Clerc de Notaire
Sykes Anderson LLP9 Devonshire Square
London EC2M 4YF
Telephone + 44 20 3178 3770
E-mail: david.anderson@sykesanderson.com
Website: www.sykesanderson.com