Canceling a Pledge to Sell: Everything You Need to Know Before Backing Out
Our real estate agency in Paris's 16th arrondissement, our offices CENTURY 21 Auteuil Immobilier and Auteuil Seine explain the steps you need to take and the legal consequences you should anticipate in order to avoid any disputes.
What is a preliminary sales agreement, and why is it binding?
The preliminary sales agreement is a preliminary contract entered into during the sale of real estate. It obligates the seller to reserve the property for a buyer, under predetermined terms, for a specified period.
In return, the buyer pays a deposit, which is generally equivalent to 5 to 10 percent of the sale price.
This legal document is binding because it formalizes the agreement between the two parties regarding the transaction and sets forth the essential terms, such as the price, deadlines, and any conditions precedent.
Who can cancel a preliminary sales agreement, and under what conditions?
A preliminary sales agreement may be canceled at the initiative of either the buyer or the seller, but only under specific conditions.
For the buyer, cancellation is possible under a statutory right of withdrawal of 10 days from the date the contract is signed, without having to provide a reason. After this period, cancellation is permitted only if a suspensive clause included in the preliminary sales agreement is triggered (for example, lack of financing or a building permit).
From the seller’s perspective, cancellation is much more restrictive: the seller must demonstrate that the buyer has failed to fulfill their obligations or obtain the buyer’s explicit consent.
Is there a cooling-off period for canceling a preliminary sales agreement?
The law grants the buyer a 10-day cooling-off period following the signing of the preliminary sales agreement. During this time, the buyer may withdraw from the agreement without penalty and without providing a reason.
Good to Know : If the purchase is canceled within this time frame, the buyer will receive a full refund of the reservation fee paid.
Is it possible to cancel a preliminary sales agreement after the withdrawal period has expired?
After the withdrawal period has expired, canceling a preliminary sales agreement becomes much more complicated. It is generally contingent upon the failure to fulfill a a condition precedent specified in the contract.
For example, if the buyer is unable to obtain a mortgage despite their efforts, they may request cancellation under this clause.
However, in the absence of a clause or legal justification, cancellation is not possible without the mutual consent of both parties.
In this case, negotiations may be initiated, but they could result in penalties or legal disputes.
