What is a forward sale?
A forward sale is a form of property transaction that allows the buyer to acquire a property without taking out a traditional bank loan. The system is based on staggered payments: the buyer pays an initial capital sum ("bouquet") when the notarial deed is signed, and then pays the balance in monthly instalments over a set period (generally between 10 and 20 years, although there is nothing to prevent this period being set at a few weeks).
Unlike life annuities, where the payment of an annuity is linked to the seller's lifetime, forward sales are based on a fixed timetable laid down when the contract is signed. This means that the seller retains certainty over payments, while the buyer benefits from greater financial predictability.
Why opt for a forward sale?
Advantages for the buyer
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Allows you to purchase a property without taking out a bank loan.
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Offers an alternative to restrictive mortgage conditions.
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Fixed-term commitment with pre-established monthly payments, making it easier to manage your budget.
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Possibility of enjoying the property immediately or at a later date, depending on the nature of the contract.
Advantages for the seller
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Regular income guarantees financial security.
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Tax benefits: instalment payments are not regarded as taxable property income.
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Payment guarantee with a vendor's lien published with the Land Registry and a resolutory clause in the event of non-payment.
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In the event of the seller's death, his heirs continue to receive the monthly payments.
The different forms of forward sale
1. Free forward sale
The buyer takes possession of the property as soon as the deed of sale is signed, and can occupy or rent it immediately. They become responsible for all charges (property tax, maintenance, works).
2. Occupied forward sale
The seller retains the right to use and live in the property for a specified period. The buyer has to wait until the end of this period to dispose of the property, but benefits from a reduced purchase price.
Differences between forward sales and life annuities
|
Characteristics |
Forward sale |
Life annuity |
|---|---|---|
|
Duration of payments |
Fixed, defined in advance |
Indefinite (depending on the seller's lifetime) |
|
Taxation of payments |
Exempt from income tax |
Taxable |
|
In the event of the seller's death |
Monthly payments to heirs |
End of payments |
Guarantees and precautions to take
1. Securing the seller
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Vendor's lien: Protects the vendor by giving them priority in the event of resale of the property.
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Resolutory clause: Allows the sale to be cancelled in the event of non-payment of the monthly instalments, with the seller regaining ownership of the property while retaining the sums already received.
Please note that these two guarantees prevent the buyer from taking out a bank mortgage to cover the cash payment and the costs associated with the purchase.
2. Commitment by the buyer
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Payment of the monthly instalments on the due date.
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In the event of early resale, the seller must retain his guarantees for the balance of the price still to be received.
Example of a vendor's lien and resolutory clause
Seller's lien - resolutory action
"To secure and guarantee payment of the balance of the price of the present sale, in principal, and of all interest, costs and accessories, the property sold will remain affected by the special lien reserved for the benefit of the seller. In the event of a payment incident, the sale may be cancelled ipso jure at the seller's discretion, one month after an unsuccessful summons to pay.
Conclusion
The forward sale is an interesting alternative for both buyers and sellers, particularly in a context of restricted bank credit. It offers a flexible solution for accessing property, while providing the parties with security through solid legal guarantees. Before concluding a sale of this kind, it is advisable to consult a professional to avoid any legal and financial risks.
