| The owner
of each property has first choice of which weeks to spend at the property,
and would be sent a form at the beginning of each year to request their
preferred weeks.
In order for
the rentals company to guarantee the rent for 9 years it is vital the development
is in a high demand location with good facilities - the same attributes
that tend to drive a good capital gain in a property.
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THE NOTAIRE’S
DUTIES
WHO IS THE
NOTAIRE?
As seven years
of law are necessary to graduate, the Notaire is the most qualified professional
of the French legal system. The Notaire is both a Public Official and counsel.
His qualifications allow him to efficiently advise his clients in specific
areas of law such as Real Estate Law, Family Law and Corporate Law. He
is able to counsel clients on matters all over France without any restrictions.
A Notaire from Paris can therefore equally deal with the acquisition of
a house on the French Riviera as well as supervise the purchase of a supermarket
in Strasbourg or control an industrial plant in Northern France. The French
State confers to the Notaire an authentic power to legalize certain agreements
such as Real Estate sales which cannot be enforced by any other means.
This monopoly prevents almost any subsequent litigation concerning these
contracts. However, the Notaire does not only draft and authenticate deeds.
As today's legal transactions are more and more complex, counselling clients
is also a major function of a modern Notaire.
HOW ARE
THE CONTRACTS SECURED?
The Notaire
is deemed a Public Official with powers delegated by the State to authenticate
the deeds he drafts and provide complete security to the contracts he supervises.
The authenticity of the deeds grants them an undisputable date and content
in Court. The law imposes a personal liability on the Notaire for his professional
acts which is more extensive than that of any other branch of the legal
profession. Not only would the professional mistake be penalized immediately
by a judge, but it would also mean that all of the Notaires would be held
liable as they have a common insurance, providing an immediate financial
guarantee to the client. The American investor is therefore facing a specialized
lawyer fully liable for his deeds. The Real Estate Registration system
in France is highly efficient. It takes two months for a sale to be registered,
and only the authentic deeds settled by the Notaire can be registered.
The content of the deeds are controlled by both the Notaire and the Registration
Authority. On one hand this procedure might seem long compared to an immediate
transaction occuring in some other countries, but on the other hand it
results in a lack of litigation concerning these agreements (0.5% per
year on Real Estate transactions). Thus the Notaire has the task to
both completely satisfy his clients and to impose some limits to their
queries according to his Public Official status.
HOW MUCH
ARE THE NOTAIRE’S FEES?
Notaire fees
vary from 5% for a new property (including mortgage fees) to 10%
for an old property, depending on the price of the property. American and
British clients undertaking a Real Estate transaction in France should
be aware that if there are two Notaires, the fees are shared, therefore,
retaining their own Notaire will not increase the professional fees, which
are then shared by the two Notaires supervising the contract.
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THE REAL
ESTATE PURCHASE PROCEEDINGS
An overseas
company wishing to buy land to construct a building for apartments, offices,
or shops will follow the same procedure as an overseas private individual
purchasing a property. First, the investor has to find the Real Estate
to buy. Many professional Real Estate offices exist in France, and some
of them do have international skills, allowing them to deal with English
speaking clients. Some Notaires also have a Real Estate department, and
might be able to be of assistance in finding a property. Once the Real
Estate has been found, completing the purchase involves the following steps:
THE PROMISE
OF SALE
This step is
the most important one, as all legal aspects of the sales agreement are
fixed at the time. At this stage of the contract, the Law does not stipulate
that the deed be authentic, meaning it does not need to be supervised by
a Notaire. Once the Promise of Sale is signed, the commitments of the parties
to a contract are final and may not be modified. It is at this stage of
a Real Estate purchase that the Notaire's advice is most useful for the
client because all future obligations of the parties rely on the Promise
of Sale.
Many forms
of contracts could be signed before closing the final sales agreement,
but only the Notaires use the Promise of Sale. The buyer usually places
a deposit of 5% of the property price in the hands of the Notaire. This
security deposit guarantees the buyer's commitment. The buyer pays the
remaining 95% of the property price on the day of the final purchase. Signing
a Promise of Sale with a Notaire provides another advantage to the buyer
if the purchaser happens to die during the proceedings, an insurance contracted
by the Notaires will enable his heirs to finalize the purchase or lose
the safety deposit, up to €70,000 under specific conditions.
THE FINAL
SALES AGREEMENT
Once the Promise
of Sale has been signed, all the commitments of the parties are fixed.
The Notaire must then collect various documents, such as property titles
and mortgage documents to verify that all the paper work is in order. Collecting
the documents and verifying them may take up to three months. This delay
may be shorter, but it may still seem long to many American or English
investors. This time period is extremely important because it serves as
insurance for the Final Sales Agreement.
After the Notaire
has collected all the documents, the Final Sales Agreement is signed. It
is an authentic contract and is almost undisputable in court. Litigations
on such contracts are very rare, unlike litigations concerning contracts
not prepared by a Notaire.
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The most relevant
points for a Notaire to verify during a transaction are the following:
The Entitlement
of the Parties
The Notaire
is liable for examining the identity and the entitlement of all the parties
involved in the contract. He would, for instance, be liable in the case
of a non-binding act of sale if one of the parties is incapable. The Notaire
verifies the capacity of the parties by requesting a legal copy of both
birth and marriage certificates from City Hall. Unlike other European Union
countries such as Italy or Greece, there are no restrictions for a foreign
citizen to buy Real Estate in France, according to article 11 of the French
Civil Code.
The Mortgage
Situation
A Notaire cannot
give the price of a transaction to the seller until he has checked the
mortgage situation of the Real Estate to be sold. Upon the Notaire's request,
the Mortgage Registry delivers a document detailing the complete mortgage
situation of the Estate. If any creditor secured by mortgage is recorded,
the Notaire is liable for paying him with the price of the transaction
before giving the balance to the seller. This document is valid for two
months after its delivery and binds the liability of the Mortgage Administration.
The delivery of this document may take up to two months. Because of this
kind of delay, Real Estate sales in France may take up to three months.
Nevertheless, it permits the transaction to be secured, by the combination
of the liabilities of both the Notaire and the Mortgage Registry Services.
The Town-Planning
The Notaire
must check the applicable Town-planning regulations on the Real Estate
to be sold, and inform the buyer of the consequences of these regulations.
He requests from a surveyor a complete report which he then encloses in
the final sales agreement. Among the rules to be verified, the Notaire
may, for instance, verify that there is no easement on a piece of the property.
The surveyor is liable for the content of the delivered document while
the Notaire is liable for controlling and reporting it to the buyer. In
addition to the mortgage document, the delivery of the above-mentioned
document requires a certain delay. Still, it provides the guarantee of
a secured transaction.
The Property
Verification
The Notaire
must verify the property title. He must search up to thirty years before
the transfer of title which is the limitation period for all Real Estate
transactions to be brought to court. The Notaires must also keep their
deeds for one hundred years after their execution. The property verification
is essential to prevent any type of litigation, and particularly when the
assets have been acquired through a deceased Estate. The above-mentioned
examinations by the Notaire are the predominant ones. However, others such
as clearing preemptive rights or balancing the account with the co-owner's
manager do exist. Generally three months are necessary for all the examinations
and allow any buyer to be fully secured during the transfer of title.
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In Whose
Name Should You Purchase Property?
There are a
number of ways to purchase Leaseback property in France, and the way that
is best for you will be determined by your particular standards. Your choices
include:
•
In Your Own Name
• Joint With
Your Spouse or Co-Purchaser
• In the Name
of Your Adult Children, or the Name of Your Heir
• As an SCI,
which is a special French company which exists mainly to own and manage
French properties
• As an Ordinary
Limited Company, whether foreign or French
Each method
has its own advantages and disadvantages. Everything depends on your
own personal circumstances. We shall be pleased to discuss the various
ways of buying with you and advise the most advantageous method to suit
your needs.
It is worth
paying careful attention to this point because of the potential tax and
other savings that can be made at a later stage. These tax savings arise
because of the French system of inheritance tax under which gifts upon
the event of a death can still attract very high rates of taxation. For
example, it is possible to pay up to 60% tax on inherited wealth.
The tax
savings also arise because of the way that each time a property changes
hands, certain taxes and fees become payable. If, therefore, you can
prevent the property being inherited and minimize the number of times it
changes hands, you can greatly reduce your tax liabilities.
As is always
the case with tax savings plans, there is a danger that the government
can come along and close the loopholes that allow these plans to operate
and, as always, there are disadvantages to them as well as advantages.
In each individual case, you will have to weigh up the advantages and disadvantages
to decide how you wish to deal with the transaction.
That’s what
why we’re here – to help you !!! Contact us if you want to know more about
it: newsletter@imoinvest.com |
