When it comes to real estate transactions in Mauritius, the trend that is being observed since a couple of years is off-plan property acquisition. This simply implies buying a property from architects’ drawings where the construction is only at the planning stage. The common name of the “Buying off-plan” contract is known as a VEFA (Vente en l’état future d’achèvement).
How does the VEFA work?
Under the VEFA, buyers are able to perform payments by installments according to the construction works progress. Future owners may contribute to the design of their dream homes’ plans. One of the main features of a VEFA contract is that land ownership passes to the buyer upon execution of the deed of sale. On the other hand, building ownership only passes to the purchaser upon completion of constructions.
From a legal point of view
A VEFA is governed by the French Civil Code (Mauritian civil law is based on French civil law as a result of the country’s colonial past) and has to be validated by a contract. In simpler terms, VEFA contracts are directed by the same rules, totally protective of buyers, as those laid down by the French Civil Code. Under the VEFA, the promoter is bound to provide for a GFA (Garantie financière d’achèvement), a financial guarantee which ensures the buyer that construction will be duly completed in case of failure in obligations from the promoter’s side. (bankruptcy). It is either the promoter himself who shall provide this financial guarantee or a third-party, for instance a bank.
The Sales contract
An off-plan property acquisition is performed according to two distinct procedures, each of which is validated by a contract:
The reservation contract
Under an off-plan buying, the buyer will be asked to sign a ‘preliminary reservation agreement’ where he legally agrees to purchase the property according to the various clauses contained in it. This document, established in writing, must include some mandatory information. Once signed, a deposit should be paid by the buyer as deposit upon the estimated selling price. This is deposited on a special account generally opened by the notary in charge of the sale.
The final Sale Contract
The final sale contract represents the title deed. It puts forwards the rights and obligations of the vendor until construction works are terminated. One month before its signature, the buyer receives the contract sent to him by the vendor. The former can hence check whether if the project is in conformity with the original commitments. This one-month notice is granted to give the buyer time to study all the items of the contract before the final signature.
Schedule of payments
According the provisions of Article 1601-3 of the French Civil Code, the schedule of payments for a property sold under VEFA is as follows:
- Upon signing the purchase agreement: 25%
- Upon completion of the foundations: 10%
- Upon completion of the roofing: 35%
- Upon completion of the building works: 25%
- On the date the keys to the property are handed over