Buying
a property in France
Buying
a property in France has become very popular over the past few
years by many Europeans, particularly the British. People buy
for a number of reasons – holiday homes, investment property
or moving to the country.
The French administrative formalities are bound up in "red tape",
and a property transaction is no exception. However, the system
is in many ways better and safer than that applying in most
other countries, including England and Wales. The French law
concerning property is more like Scottish law than English and
Welsh and it is not possible to agree one price with one buyer
and then agree a higher price with another one and "Gazump".
First of all you make a written offer on a property that is
accepted by the owner, you will usually be expected to put down
a deposit of 10% of the purchase price, which you may forfeit
if you change your mind, unless there is a bona fide reason
for doing so or if you having a mortgage and this is not accepted.
The process of the purchase transaction must go through a "notaire"
(notary) who is the only person who can make the title searches
and obtain certain legal documents necessary to make the transaction
possible.
The purchaser can choose the notary he wants to handle the transaction.
The purchaser is responsible for the payment of the "notary
fees", which depending on the selling price, can be as much
as 8% on small old properties (though around 6.5% is more usual),
or as little as 1.5 to 2.% on newly built properties, with an
additional cost of around 1 - 1.5% if a mortgage is to be registered
on the property. It should be noted that prices of property
are generally advertised exclusive of these charges. The
notary does not get the entire fee. His fees are determined
by the French state (on a scale which is the same for all notaries),
the state take a much larger part (similar to property taxes
in Belgium, stamp duty in the UK etc)
If an owner wants to use his/her notary - which is allowed under
French law - be aware that you have the right to choose your
own notary who will work in collaboration with the owner's notary.
It is quite common to have two notaries working on the same
transaction, with no additional cost to the purchaser as fees
are shared. However, the delay may be a little longer due to
the necessity for the two notaries to correspond with each other.
If you do not speak and understand French fluently it is advisable
to use a notaire who understands your language.
Once the two parties have come to an agreement on the sale price,
the terms and conditions of the sale are discussed with the
notary who then prepares the preliminary contract or "compromis
de vente". This contract is just as important as the final
document transferring title as it must contain all the clauses
and conditions precedent to the sale. These include clear title,
easements, certificates stating whether the property conforms
to current legislation on asbestos and other matters, and, most
importantly, whether the purchase is subject to the condition
of obtaining finance.
Once the compromis de vente has been signed It is usual
at this stage to pay a deposit of 10% of the purchase price
(5% when purchasing property "off plan"). This can be done by
payment, by cheque, which must be drawn on a French bank, or
bank transfer, will normally be made to a notary. The compromis
de vente signed by both parties is sent to the purchaser
and from the date of receiving it he/she has seven days in which
to change his/her mind.
At the end of this period, the contract becomes binding and
the transaction is now "under compromis". The owner cannot sell
to anyone else, nor change the price, and if he refuses to sign
the final document the purchaser can obtain a court order forcing
him to sell. The purchaser can pull out of the deal without
loosing the deposit if one of the clauses or conditions precedent
inserted in the contract has not been fulfilled. Otherwise he
may be able to pull out but will almost certainly loose the
deposit.
It then takes a further 2 / 3 months for the notiare to prepare
all the necessary paperwork before getting the parties together
to sign the title deed "acte definitive". When both the
parties have signed and the purchaser paid the remaining 90%
or 95% of the purchase price as well as the notary fees the
purchaser becomes the legal owner of the property and receives
the keys.
Gas
checks:
Since
1st November 2007 all properties offered for sale in France
with natural - mains gas services installed more than 15 years
ago must include a Diagnostic Gaz in the Dossier de Diagnostic
Technique (This is rather like the HIP - Home information pack
in England and Wales). It costs around 100 - 150
for the test that includes supply pipes, boiler, water heater
and radiators. The certificate will be valid for three years
and the seller has to organise and pay for this before a compris
de vente can be signed.
There
are also new rules for surveys from November 2007 all the technicans
carrying out these tests must be accredited by COFRAC Comité
d’accreditation français (Similar to Corgi in the UK). The new
rules could effect around 10 million properties when they go
on the sales market. If a property has bottled - cylinder gas
(like calor gas) this is not covered by the new test.
Capital
Gains Tax Non-residents of France and French owners of secondary
homes are liable for capital gains tax when they sell; after
various deductions, this amounts to 16% of the profit for EUROPEAN
residents, and 33% for residents of non EU countries. French
owners of secondary homes are liable for 16% + 12%(28% total).
Inheritence-
Wills It is important to know that French inheritance law
is very different from that in England… the children cannot
be disinherited. You should be aware that FRENCH law applies
to any property you own in France, even if you are not a French
resident. It is possible to leave your share of the property
to the surviving spouse, but this will require a specific document
to be drawn up, preferably at the time of purchase. Your notary
or lawyer can best advise you how to do this. Look into making
a will in France as well as your country of residence.
Holiday
rental income is subject to VAT (TVA) at 19.6 per cent.
For furnished lettings up to an annual value of €76,000 there
is a 72 per cent rate deduction in respect of expenses under
the 'Micro-Bic' regime. The remaining 25% net profit is taxed
at 25%. If the investor has assets with a value in excess of
€720,000 the owner will be subject to an annual wealth tax of
between 0.55 per cent and 1.8 per cent. If you dispose of your
property after less than two years you will be subject to income
tax at 16 per cent and after that up to 47 per cent.
FNAIM -Fédération Nationale de l'Immobilier - France
FNAIM
is the 1st professional organisation of estate agents.Set up
in 1946, FNAIM (French national real estate federation) is recognisable
by the famous Yellow Cube logo, it brings together, over 11,000
real estate agencies. In becoming FNAIM members, professionals
undertake to abide by the quality charter developed by the Federation.
The charter underlines the ethics, integrity and professionalism
required of all FNAIM members.
As
a professional trade association, FNAIM is concerned with representing
and defending the interests of real estate professionals and
their clients, the consumers. Its mission has encouraged it
to maintain privileged ties with public authorities and to participate
actively in the preparation of statutory and regulatory provisions
for all topics likely to have decisive implications for exercising
a real estate profession, in particular, and the housing policy,
in general.
With
a number of analytical tools at its disposal, FNAIM is unquestionably
a leading reference in the provision of information and economic
studies on the real estate market. Every quarter, it puts out
business updates presenting the position of old housing on the
property transaction market and once a year, that of the income-producing
real estate market. It also publishes studies on the real estate
industry and statistics worth knowing. FNAIM can thus focus
its lobbying action on viewpoints based on fact and supported
by reliable economic data.
FNAIM is also backed by a Legal Department that keeps an on-going
legislative and regulatory watch on the industry and allows
the Federation to be a source of analyses and proposals in its
dealings at Parliament level. It also meets the needs of members
by being available for consultation by telephone or post.
N.B.
The above information is given in good faith by jml Property
Services and the website it is being displayed on. It should
not be relied on for accuracy and property owners should consult
tax experts / accountants in the country their property is in
and also their home country. ©jml property Services ©jml
property Services 07-05
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