Conditions precedent for a mortgage loan
November 18, 2018
The different conditions precedent
When signing your sales agreement, various conditions precedent are incorporated in the latter. Indeed, the realization of your real estate purchase will depend in particular on the fulfillment of these conditions precedent or not. For this reason, it is extremely important to know them. The suspensive condition is an element that must be able to describe a specific event that is not related to the will of both parties, namely the acquirer and the seller. The suspensive condition must therefore be clearly described and clearly define the event concerned so that no litigation takes place. It should nevertheless be taken into account that the law stipulates only one condition precedent, that related to the obtaining of the mortgage loan , but other conditions precedent can be included when signing the sales agreement. by mutual agreement between the buyer and the seller. Here are all the conditions precedent that can be found:
- Obtaining the planning certificate for carrying out future work.
- Obtaining a building permit if you want to build a new home.
- Obtaining a mortgage statement.
- The lack of pre-emption on the part of the municipality or a potential tenant.
- Financing by a mortgage loan.
- The resale of another property for the acquisition of the property in question or obtaining a bridging loan.
- The fact that the purchaser is still alive at the time of signing the authentic deed.
- Settlement of the selling price on the day of signature of the authentic deed.
Attention all the same, it is totally forbidden by the law to unload a professional seller of the hidden defects of a property.
The condition precedent to obtaining the loan offer
If you want to finance your purchase by a mortgage, it is mandatory that this sale be made with the condition precedent of obtaining the mortgage. Generally, a 30 day period is left to the purchaser so that he can obtain his mortgage. This is only a base, because in reality the period is 45 days to also include the withdrawal period of the future purchaser. Of course, it is possible that this period is extended by stipulating it simply in the sales agreement. If the mortgage is refused by the bank, the purchaser is therefore perfectly entitled to withdraw from the sale and recover his security deposit. It should be known that an official paper of the refusal of the bank will then be necessary to prove your good faith to the notary and the owners, and in particular to be able to exercise the condition precedent of obtaining the mortgage loan. If you have used a real estate agency, the agent will not receive his commission on the sale since it will not take place.
In any case, it must be taken into account that a financing plan of the buyer is required when signing the sales agreement . This means that you will be asked in particular what is your personal contribution, the amount of your mortgage, the maximum rate accepted for your mortgage, the desired duration, your monthly repayment, but also all banks that you will contact to make your mortgage application.
Be aware that the condition precedent is considered not waived if:
- If the potential buyer does not apply for a home loan.
- If the potential buyer makes a different mortgage application than the one he indicated when signing the sales agreement. Indeed, the bank can refuse because the characteristics requested will not be at all those stipulated in the sales agreement.
You should also know that if you decide to finance your project without resorting to a mortgage, the condition precedent of obtaining the loan offer will not appear in the compromise. Thus, if at the last moment you wish to subscribe to a mortgage, you will not be protected by the law, and you will not be able to benefit from this condition precedent.
The fulfillment of the condition precedent
It should be noted that the suspensive condition is fulfilled when a banking institution sends the loan offer. Whether or not you buy the property stipulated in the sales agreement, the condition precedent is fulfilled and you can then avail yourself of it. Be aware that the loan offer must perfectly match what is stipulated in the sales agreement. In any case, if the buyer accepts the characteristics of the loan offer, the condition precedent is fulfilled, simply because the financing is obtained, which is the goal.
Failure to fulfill the condition precedent
In the eyes of the law, the condition precedent is not fulfilled if the deadline for granting a mortgage by a banking institution is completed. If the potential buyer has made all necessary steps and has not obtained a return within the legal period, the condition precedent is canceled, and this does not engage its responsibility. Indeed, it should be known that the sales agreement does not require that a response be made by a banking institution within the legal period. However, it is still necessary to have proof that you have filed a mortgage application.
Of course, if the outcome of this request can be favorable and the seller agrees to extend the period, the purchaser can take advantage of additional time. Attention, it is still necessary to sign an amendment between the two parties to stipulate that the time is extended. This will help avoid possible conflicts if the mortgage is obtained after the initial period indicated in the sales agreement.
What becomes the sales agreement then?
If the condition precedent is fulfilled, then the authentic instrument may be signed by both parties depending on the original conditions. However, if the suspensive condition is not fulfilled, the sales agreement is simply canceled and the authentic deed is not signed by both parties. All sums whose security has been paid to the buyer must imperatively be reimbursed by the latter, and this without taking into account any compensation. Obviously, if the purchaser takes more than fifteen days to make the repayment, he will then be obliged to pay interest according to the legal rates in force. In any case, let us not forget that the buyer must be able to justify all the steps that have been taken to ensure that the condition precedent can be fulfilled.