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is then withdrawn from the market.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
There
are many reasons why people decide to move to France.
They include the attractions of what is seen as a gentler pace of life,
the sheer size of the country and the wide choice of potential areas in
which to live, the varied scenery and favourable climate especially in
the south, opportunities for sport and recreation that are available and
easily accessible, France's excellent health and education systems, the
choice between the countryside or Paris and many other vibrant medium sized
French towns, and in many cases the availability of attractive properties
that cost less than their equivalents in other parts of the world. Some
people choose to buy a second home in France for holidays and occasional
visits, some to retire, while others bring their families and plan to settle
in France as their chosen country in which to live and work.
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 agent's
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.
