Numerous wine lovers purchase vineyards in France, including wine professionals who want to expand, middle age people who want to start a new business, and those looking for either an investment project or a new lifestyle. Now the question is: where to invest? The answer depends on your project and budget. France has plenty to offer with different types of land and over 800,000 ha of vineyards.
When choosing the vineyard, several points should be taken into consideration, such as: the geographical situation, the soil quality, the appellation to identify where the grapes were grown and the state of the property. A team of experts will be required in order to make the acquisition successful. These experts (including wine estate specialist, an auditor/accountant, legal advisors and a notaire) should advise you throughout the process. Due to its complexity, this time of buying process takes much longer that a standard property purchase. Indeed, you won’t be able to find any luxury property vineyards or big appellations advertised on the internet. An independent wine property agent will also be needed in order to both approach off-market vineyards who match your criteria and analyse the market itself. This will compare recent transactions in the region with the same appellation. The agent as well as a legal advisor will contribute greatly to the co-ordination of the sales process and the sale’s success.
Your property agent will most likely ask you to sign a NDA (non-disclosure agreement). Since the identity of the parties and the information provided by the vendor and the conditions of the transactions must remain confidential, NDAs are extremely important in the context of wine transactions. As soon as your agent will find a vineyard matching your criteria, he will then ask you to sign a letter of intent or a non-binding offer, mentioning the main conditions of the transaction (price, scope of the acquisition, period of exclusivity to allow the parties to negotiate and most importantly the period to carry out your own due diligence). Wine lovers tend to forget they are purchasing a business as well as a house to live in, yet the diligence is a very important part of the process. It is therefore a requirement to carry out due diligence on the business and on the property before signing a binding contract.
The due diligence check list varies according to the size and type of French vineyard. It could include:
-An audit and valuation of the property to be carried by experts.
-An inspection of the vineyard quality by an oenologist involving location and size of each plot, density of planting, company assets and equipment.
-An evaluation of the stock and compliance regulations regarding appellation.
-An environmental inspection of the cellars carried out by a laboratory.
-Surveys of the château (structural survey, asbestos, lead poisoning, termites).
-Conditions of the transaction and administrative authorisations,
-Preferential rights of third parties, and encumbrances affecting the property,
-The permitted use of the property and corporate organisation of ownership of the company,
-Intellectual property rights, trade marks, leases, and insurances.
-Financial and accounting due diligence including valuation of the wine inventory, business plan, and profit and loss accounts.
A successful due diligence will help the buyer to understand the cost of the transaction and its possible risks, as well as to negotiate security clauses in the preliminary purchase and sale agreement.
When the buyer is satisfied with the outcome of the due diligence, he/she will make a restrictive offer to the vendor confirming his intent to buy and his conditions. Assuming that the vendor agrees to the offer, the two parties will then sign a preliminary purchase and sale agreement, written by the vendor’s lawyers or the notaire. A detailed description of the purchase involving equipment, shares, assets, the price and its methods of calculation and the payment terms, should be included in the agreement. The security clauses specify that an administrative authorisation should be obtained by both parties (in their own interest), including a mortgage, lack of encumbrances of the property and other special conditions. The rest of the agreement will be made up by the vacation of the property, the date of completion of the transaction, payment of a deposit (usually 5%) and penalty clauses. Another significant element to consider (especially if the vineyard is an asset purchase) for the buyer and his family, is the right buying structure.
The parties will then sign a deed of sale (acte de vente in French) at the notaire’s office to conclude the agreement. A share purchase agreement could also be signed, if the sale of the vineyard consists of the sale of a business.
Click here to view our list of French vineyards
Loïc Raboteau, MBA
International Legal Advisor & Director
Tel: +44 (0) 203 356 9742