Suspensive condition
When buying real estate, you should always be careful, because it is a project that cannot be completed in a snap. Before the signing of the final act of sale, the seller and the future purchaser will sign a preliminary contract called a promise or compromise of sale. It includes suspensive conditions that each party must comply with. What is it really about? Is the suspensive condition mandatory? Why is a suspensive condition so important? The answers to all of these questions in this article.
Suspensive condition — what exactly is it?
The suspensive condition is a clause that states that the contract can only be effective when a certain event occurs. Article 1304 of the Civil Code states that the obligation is conditional when it depends on a future and uncertain event and that the condition is suspensive when its fulfillment makes the obligation pure and simple.
During a real estate transaction, the seller and the purchaser will establish a contract whose obligations mentioned there are not immediately final. This is a conditional obligation meaning that the completion of this contract is subject to a condition such as obtaining a mortgage for example.
The suspensive condition therefore means that the completion of the contract depends on a particular condition, a future and uncertain event. If this event takes place, the contract may be effective. Otherwise, the contract will not be valid.
Is the suspensive condition mandatory?
All suspensive conditions depend on the agreement of the seller and the purchaser, except for obtaining a mortgage. This is the only mandatory suspensive condition for the purchase of any type of real estate: housing, land, mixed-use property, etc. It is in particular the most frequent, because most buyers finance their purchase with a mortgage.
If the purchaser requests a home loan to finance the purchase of a property, the suspensive condition for obtaining a mortgage gives him the right to cancel the sale if his bank does not grant it. It will then be necessary to specify this detail in the preliminary contract to benefit from coverage of the clause suspensive for obtaining a loan.
A condition suspensive for obtaining credit is only valid when it mentions several elements, namely the amount to be borrowed, the maximum loan rate, the duration of the loan and the period authorized to fulfill the clause. This period is generally between 45 and 60 days.
It should be noted that this suspensive condition is not only beneficial for the buyer. Thanks to it, the seller is protected from possible abuse, as this suspensive clause must be respected in every detail. For its part, the purchaser will not be obliged to conclude a purchase if he does not have the necessary amount to finance it. His security deposit will be refunded at the same time.
The other suspensive conditions
The seller and the purchaser may establish suspensive conditions in addition to obtaining a loan. Here are some of the most common ones.
The suspensive condition in the urban planning file
It states that the sale can only take place when the notary obtains the urban planning file.
The suspensive condition linked to the sale of another property
That is to say, it is possible to subject the act of purchase to the suspensive condition of prior sale of a property belonging to the purchaser if he has another one.
The suspensive condition associated with obtaining a change of use authorization
If the purchaser plans to transform the use of the property, for example, to transform a residential building into a professional building, this change must be subject to authorizations independent of the will of the parties.
Administrative or private servitude
This clause allows the purchaser to cancel the sale in the event of the presence of urban planning or public utility easements relating to the property.
The right of pre-emption
It allows the cancellation of the sale if there is a right of first refusal from a local authority or a tenant.
Carrying out the work
It is a suspensive condition allowing the cancellation of the sale if the current owner of the property does not carry out the work he was supposed to do.
Obtaining a building permit
This suspensive condition is very common when it comes to building land. If it is mentioned in the promise to sell, the purchaser can cancel the sale if he does not get his building permit.
Asserting a suspensive condition — how do you go about it?
If the suspensive clause has not been fulfilled, the purchaser or the notary may invoke it. It is then necessary to react before the signing of the authentic act of sale. If a clause in the contract indicates a specific deadline, it is necessary to respect it.
The purchaser or the notary must send a registered letter with acknowledgement of receipt to the attention of the seller to inform him of this non-compliance with the suspensive condition. It is also necessary to attach supporting documents that will attest to the non-fulfilment of the clause.
In all cases, attention must also be paid to the duration of validity of the suspensive condition. At least, it is valid for 1 month from the date of signing the sales agreement. The maximum validity period is 60 days.
What would happen if the suspensive condition did not come true?
The non-fulfilment of a suspensive condition may lead to the cancellation of the contract. Neither party will be subject to a penalty and the amounts incurred will be refunded in full. The seller and the purchaser will not have the right to claim damages or interest.
It should be noted, however, that the reasons for this non-realization of the latter must be independent of the will of the purchaser. For example, it may be a failure to obtain financing if he were to apply for a home loan.
In the event that the purchaser has voluntarily acted to prevent the execution of the suspensive clause, the seller may keep the immobilization compensation and he even has the right to claim damages for the abusive non-completion of the sale. He can also ask for his forced execution.
If, on the contrary, all the suspensive conditions mentioned in the promise of sale are met, both parties may proceed with the signing of the act of sale in the presence of a notary. The sale will be regulated within the period set out in the promise to sell. The security deposit paid by the purchaser is also included in the final sale price.
