FRANCE Law and Practice Contributed by: Antoine Mercier, Myriam Mejdoubi and Gabriel Dalarun, DLA Piper France LLP
7.7 Requirements Before Use or Inhabitation
Construction risks are also covered through spe - cific/mandatory insurance. 7.4 Management of Schedule-Related Risk Construction contracts provide for damages for delay. An owner is entitled to monetary compensation for delays in achieving milestones and comple - tion dates, through delay penalties. Parties may even provide for termination of the contract by the owner for material delay. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Additional forms of security are often requested by owners in major projects, such as perfor - mance bonds issued by banks or a contractor’s parent company. If an advance payment is made to the contractor, owners also often request a corporate or bank guarantee to secure the repayment of such advance payment in case of termination of the contract. 7.6 Liens or Encumbrances in the Event of Non-payment In most contractor agreements, the owner will either provide for a direct payment by the bank to the contractor in the event a loan was secured by the owner to finance the construction works, or provide the contractor with a joint bank guar - antee (or any other type of agreed guarantee) equal to the entire price of the contract. These provisions are mandatory, otherwise the contractor – if unpaid – can legally suspend the construction works. Architects and contractors benefit from a legal lien ( privilège ) over the building.
A building is deemed to be completed once the works and associated essential equipment can be operated in compliance with the agreed use. Parties are free to provide for any other definition of completion, except for residential buildings subject to mandatory requirements. From a town planning perspective, the owner has the obligation to file a declaration of comple - tion and compliance of the works. Upon receiv - ing this declaration, the administrative authori - ties have from three to five months to verify that the works are compliant with the administrative authorisation obtained. Thereafter, the owner can request a certificate of non-opposition to the compliance of the works. Specific administrative authorisations may be necessary in order to be able to use/operate the building in some limited cases (eg, high-rise buildings and premises to be opened to the pub - lic). 8. Tax 8.1 VAT and Sales Tax Some of the rules applicable to VAT are described below: • Transactions involving non-developable land ( terrain non-constructible ) are exempt from VAT (unless an election for VAT to be payable is filed, in which case the VAT is due on the total purchase price). • Transactions involving developable land ( ter- rain à bâtir ) are subject to VAT: (a) on the total purchase price if the VAT incurred by the seller on the initial acquisi - tion was deducted; or
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