One of the attractions of moving to France is the price of property which is generally lower than its equivalent in Britain and other parts of Western Europe. It is true that in many areas it is no longer possible to pick up a derelict cottage for less than €30,000 and there has been some price inflation since the introduction of the single European currency based on the euro in 2002. In addition the opening up of many previously inaccessible French regions due to the increase in low cost flights has led to price rises. However these have generally been in line with or less than other West European countries such as Spain or Italy. Only Britain, Ireland, Denmark and the newly emerging East European states have generally seen price increases in double figures, with one hundred per cent year-on-year property price inflation recorded in some former Communist countries (albeit starting from a low and uncertain base). 

French people generally do not buy property as a speculative investment but as a place in which they intend to live and settle down. Many homes remain in the family for generations and there is a high level of second home ownership, either a cottage in the country or a seaside villa or apartment. Even though such properties may be used infrequently and only for holidays, they often do not come onto the market until the death of parents and where the younger generations prefer to travel to cheaper holiday destinations outside France. Capital gains tax is payable on the sale of a residential property unless it is your main home, and VAT (valued added taw) may apply to brand new properties that are re-sold in the early years, both reducing the scope for speculative profit. However, it is still possible to make money from property and there are a number of attractive buy-to-let schemes suitable for investors. It is also possible to make money through letting either long term or during the holiday season, provided that you choose your location with extreme care.

The French property buying process is extremely safe and secure, with various in-built mechanisms designed to protect the buyer. The main sources of properties include estate agents, whose activities are strictly controlled by French law. French estate agents are licensed by the Departmental Prefecture and must carry professional liability insurance, usually provided by one of their membership associations FNAIM or SNPI (you will recognise the distinctive signs in the agent’s window). Every property transaction is supervised by a notaire. The notaire is both an independent property lawyer and a quasi public official acting for the state. His role is to ensure that the procedure is fair to both buyer and seller, transparent and strictly in accordance with French law. Some notaires are also authorised to act as estate agents and handle property sales; and you can of course buy directly from a private vendor if you are confident of your negotiating abilities or are well advised. Although it is possible to secure a domestic property loan from banks and other specialist sources, intending buyers should ideally have their finances organised before even viewing French property with the intention of purchasing. This means either having cash available or a mortgage or loan agreed in principle by a bank or other lender. This is particularly important if you are buying business premises or a going concern, as banks are generally unwilling to invest in new and untried enterprises. A formal letter from the bank is normally required as evidence when making an offer on a property, and will certainly help avoid delays and the risk of losing the property of your choice to another (cash) buyer. 

Estate agents and property finders
Searching for property generally means visiting estate agents or using the services of a specialist property finder. You need to have a reasonably clear idea of what you are looking for – apartment, villa, cottage, estate – and roughly where you wish to live. The more information you can provide at this stage will help the agent or property finder and save cost and unnecessary visits. The last five years have seen an explosion of property websites offering literally thousands of properties in all parts of France. The sheer weight of numbers can be confusing and the problem is compounded by the fact that French vendors tend to list their property with more than one agent.

An agent or notaire offering a property for sale must hold a ‘mandate of sale’ from the owner/vendor. The mandate will specify the sale price of the property, the percentage and amount of the agent’s commission, and the amount the vendor will receive after deduction of the agent’s commission (known as the prix net vendeur). The property is then advertised at the sale price stated in the mandate. An agent cannot suddenly decide to offer the property at a higher price than stated in the mandate, because he encounters someone he thinks is a gullible foreign buyer! This is a fairly common myth which needs to be countered. The mandate can be either exclusive, or alternatively the vendor may decide to instruct a number of agencies, and also reserve the right to conclude a private deal. However if the vendor tries to conclude a private sale with a client who has been introduced by the agency, under French law the agent can sue for his commission (as he has fulfilled his part of the contract with the vendor to find and present a willing buyer of his property). This is why when being shown a property by an agent you may be asked to sign a bon de visite (acknowledgement of visit) which shows that you were introduced by the agent. 

Some vendors are in the habit of signing mandates with more than one agency, in the hope of a faster sale or a better price. This means that the same property can be featured in several estate agents’ shop windows or in advertising, sometimes at different prices. This is because agents can broadly set their own rates of commission, which may vary from one agency to another. 

Another potentially frustrating consequence of multiple mandates is that, in the competition to sell, some agents may not immediately inform their colleagues when a property is sold or under offer through another agent. They may indeed not even know which other agents have a mandate and of course the vendor may have also reserved the right to sell privately and bypass all the agents if he receives a good offer through his own efforts. This can be frustrating for potential buyers who may be taken to see the same property by different agents; and when you make an offer, it can sometimes be difficult for your agent to find out if the property has actually been sold or not. Vendors can be elusive when you need to contact them urgently, and in one recent (and fortunately rare) case involving a married couple in the throes of a divorce and unable to agree, he said Yes, she said No (or vice-versa), until in frustration my clients pulled out of the deal and bought something else!

Buyers can sometimes not understand why a property they liked and were told had been sold can sometimes reappear on the market at a later date. This can be yet another consequence of multiple mandates described above, or simply that potential buyers change their mind – maybe they cannot raise the necessary finance or they take advantage of the seven-day cooling-off period and pull out of the deal. So the property comes back onto the market.

Many of these complications can be avoided by using a specialist adviser to help with your property search and negotiation, ideally someone with fluent French and an understanding of the law. It is also useful to understand the different stages in the buying process and what protection you have if you decide to change your mind. 

The buying process
There are three main stages in the buying process which are described below. They are the Offer, the Compromis de Vente or pre-contract, and the Acte Finale or final contract. 

If you see a property that you wish to buy, the first step is to make a written offer. This can be either at or below the asking price for the property. The offer should state whether you are intending to pay cash or are seeking a bank loan or mortgage. In the latter case, the amount involved and the name of the bank or financial institution are included in the offer document. This is usually a standard form provided by the estate agent. 

The estate agent handling the sale will contact the vendor with your offer. If the vendor accepts, he will be asked to sign a written confirmation. The property is then withdrawn from the market. If the vendor refuses your offer and you do not wish to make a higher offer, the matter ends there. If you wish to make a higher offer, the preceding steps are repeated until agreement is reached, or your final offer is rejected and the transaction lapses. 

Note that a vendor is normally obliged to accept an offer at the full sale price. This means that if he is presented with two offers simultaneously, one of which is at the full price, then the vendor is obliged to accept this offer. The sale price is the price at which the property is offered for sale by the agent, who by law must hold a written mandate from the vendor to negotiate the sale of the property. You cannot be gazumped by someone offering more than the stated sale price. 

At this stage you will normally be asked to transfer a deposit (usually 10 per cent of the sale price) to the agent’s special sequestered account - provided that the agent is authorised and insured to receive such funds (a sign in the agent’s office will mention the maximum sum involved and the name of insurer). If this is not the case, the deposit will be sent to the notaire appointed to handle the transaction. The buyer is also asked to supply his/her personal details (name, address, marriage date etc) required for preparation of the compromis de vente. 

The compromis de vente or pre-contract is then prepared by the appointed notaire (sometimes by the agency handling the transaction). This document sets out the terms under which the transaction will be completed. If the purchase is subject to the buyer obtaining a loan or mortgage, this is again stated in the compromis as additional time is allowed to the buyer to secure the necessary funds (not less than 30 days). You are obliged to report progress on your loan application during this period, otherwise you can be at risk of losing any deposit paid.

Other ‘suspensive clauses’ may be written into the compromis, with the agreement of the vendor, such as ‘subject to satisfactory survey’ and again the buyer must demonstrate due diligence in organising a survey of the property. Note however that a clause stating that the purchase is ‘subject to the buyer selling another property’ would not normally be acceptable to the vendor as the element of uncertainty means that the transaction could be delayed for weeks or even months due to the vagaries of the property market. 

The compromis de vente is sent by registered mail to the buyer’s home address (even if it is has already been signed by the buyer in the agent’s or notaire’s office). This is because, under French consumer protection law, the buyer is allowed a seven day ‘cooling off’ period at this stage. If as a buyer you wish to exercise this option, you must notify the agent and/or notaire within the seven-day period of their intention not to proceed with the purchase. If a deposit has been paid, it will be refunded. 

If the buyer does not wish to exercise this option (to withdraw within seven days) the transaction will proceed, taking about two months to completion and signature of the acte finale (described below). Note that the vendor does not have a seven day cooling off period. 

The acte finale or final sales act will be prepared by the notaire appointed to handle the transaction. As part of the process, the notaire will conduct the usual searches (title, no right of pre-emption by the State, no outstanding mortgage or charge on the property etc) and the obligatory expertises will be undertaken. These are expert surveys to check the property for lead, asbestos, termites, state of gas and electrical installation, and to certify the dimensions in the case of properties situated within a condominium (such as apartments), as well as matters such as the copropriété (building management) agreement. An expert will also prepare a report on the thermal efficiency of the property in line with recent legislation. Some areas of France are also subject to risks from flooding and there are regulations defining the minimum level of new residential buildings above the ground. 

Should any problems be encountered at this stage, the notaire will contact buyer and seller, and it may well be that the sale lapses at this point or some kind of agreement is arrived at between the parties. However, reputable agents will normally have made a number of checks before taking a property onto their books, and most sales proceed smoothly to completion and signature of the acte finale. 

A few days ahead of the signature of the acte finale the notaire will contact the buyer advising him/her of the amount of the final payment to be transferred to his special sequestered account (ie. purchase price – deposit paid + transaction fees and costs). These funds must be in the notaire’s account at the time of signing the acte finale. 

Buyer and seller attend at the notaire’s office for the final signature, though either or both can give a power of attorney (procuration) to the notaire if they do not wish to attend in person. This must be arranged beforehand. At the signature, keys are handed over to the buyer who takes possession of the property at this point. The buyer also becomes responsible for insuring the property, and paying utilities, taxes etc. The agent normally notifies the utility companies of the change of ownership. 

The notaire will give the buyer an attestation confirming that he/she is now the owner of the property as it takes some months before the title deeds are received. Some 4 to 6 months after completion, the notaire will send the new owner a copy of the title deeds (titre de propriété) together with his final itemised account and possibly a small refund of any fees/costs overpaid. 

Costs and taxes
Buying a French property involves some extra costs in addition to the purchase price. They include transaction costs – commonly referred to as notaire’s fees – which are on a fixed scale, and add between 7 – 8 per cent to the cost of buying the property. They include the notaire’s emoluments (about 30 per cent) plus government taxes and filing/land registration fees (about 70 per cent). However, unless otherwise stated, agency fees are included in the sale price of the property and are paid by the vendor out of the proceeds of the sale. 

The notaire will normally charge an additional fee for extra work such as preparing a power of attorney, and advising and preparing the documentation needed for special purchase arrangements, such as creating a property holding company (for example, an SCI), unmarried or same-sex partnerships etc or advising on French succession laws or a change of marriage regime, if required. These are best discussed in advance of preparing any documentation. 

It is customary to use a single notaire to handle the transaction and act for both parties. The notaire is an independent professional as well as a semi-public official whose role is to ensure that government taxes (such as capital gains) are correctly paid over, and that the transaction is legal and transparent, and fair to both parties. You should seek independent professional advice on such matters as taxation, inheritance issues etc particularly where these are subject to specific laws in your own country or in France. 

The principle property taxes in France are local authority and central government property tax (taxe habitation, taxe foncière) details of which should be included in the agent’s property description where known. They may not be precisely calculated in the case, for example, of a newly built property or a property that has been converted or renovated, until the French tax authorities have received full information on the property and can set the appropriate rate. 

Capital gains tax is payable on the sale of second homes in France, at a fixed rate during the first five years, with tapered relief applying from years 6 to 15, after which no CGT is payable. CGT is not payable on sale of your main or principal home and this will normally be the case for those who move to France with the intention of staying and making it their principal place of residence.

The author Peter-Danton de Rouffignac is an Englishman of French descent. After working for nearly thirty years as a consultant and university lecturer in London, he moved to France’s Mediterranean coast in December 2001. He now works in the property business as an advisor and consultant, helping non-French buyers wanting to live and work in France. He has a degree in HRM from Coventry University and a degree in law from the University of Warwick. He is the author of more than 20 business books and reports. www.francemediterraneanproperty.com

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