Why letting buyers move in early can backfire in France

The risks of allowing buyers to move into a property before the final signature were highlighted by a recent court case in which the sellers lost their house after it was destroyed by fire.

France’s property purchasing system typically involves a delay of at least three months between the initial agreement, the compromis de vente, and the final signature, the acte de vente. 

However, it is not uncommon for buyers and sellers to reach an arrangement to hand over keys before the sale is officially finalised.

In a case heard before France’s highest court, the Cour de cassation, a seller was required to carry out work on their property after the compromis de vente, before the purchasing couple signed the acte de vente.

While waiting for the work to be completed, the seller permitted the buyers to move into the house rent-free, with the arrangement recorded in an acte sous seing privé.

An acte sous seing privé is a legally binding contract signed privately by the parties, without being drawn up by a notaire. It is commonly used for the preliminary stages of property sales. When a notaire draws up the agreement, it becomes an acte authentique, which carries greater legal authority.

After signing the private agreement on November 29, 2019, the sellers cancelled their home insurance policy for the property.

Buyers withdraw from sale

But on December 9, the house was destroyed by fire, after which the buyers withdrew from the sale. 

Their insurers refused to pay out, arguing that the acte sous seing privé did not constitute a valid rental agreement.

The sellers brought legal action against the buyers, the insurance company and their bank in an attempt to secure funds to rebuild the house

However, the court rejected their claims, stating in its judgment that the fact the buyers were occupying the property rent-free at the time of the fire meant the usual obligations of tenants to insure the property in which they were living did not apply.