Buying guide
1) The cost of your property
2) General Considerations
3) Ownership
4) Financing
5) Property Inspection
6) Initial Contracts
7) Role of the Notary
8) Signature of the deed of sale by proxy
9) The deed of sale
| 1) The cost of your property |
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The fees and taxes payable by a buyer when acquiring a property in France are difficult to predict with total accuracy, but are based upon the price set out in the deed of sale. The notary will ask for payment of these sums before signing the deed of sale.
The cost of purchasing property in France includes:
- price of the property (including VAT);
- notary's fees;
- estate agents charges (included in the price of the property);
- land registry fee;
- mortgage costs (if applicable);
- surveyors fees, utility connections (if applicable).
In addition, property insurance and local taxes are paid on an annual basis – the first, 'taxe foncière' is paid by the owner irrespective of who occupies the property, and the second, 'taxe d'habitation' is paid by the occupier of a property.
| 2) General Considerations |
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A number of questions arise when choosing a property. Maybe your mind is made up on the type of property you're looking for, but it may help to reconsider the following factors.
An apartment may have great appeal in that it will be town centre situated and hence be among all the action. It is likely to require a fair amount less maintenance than a house, neighbours will at close proximity, however parking facilities may be a little more troublesome, and should you occasionally want total isolation, this may not be entirely possible. A house will certainly provide the space you may be dreaming of and that your budget will accommodate on the French territory.
New properties, generally classed as villas in the sector covered by JPF, may share common resources (e.g. pool) with neighbouring properties, and will provide modern insulation and heating facilities. Old houses will almost certainly have more character, more mature gardens and provide rental potential.
Apart from the choice of property, additional factors that should be given consideration in due course include:
- The rapidity of the property market – the French property market addresses both local and international markets;
- Ownership of the property (see BUYING GUIDE – Ownership);
- Mortgage financing, if necessary, and if so in which country.
For a number of reasons, establishing the right type of ownership for your circumstances should be given due consideration. Your options include sole or joint ownership, adding children to the title, or indeed putting only children on a title, and so on.
If a couple are purchasing a property together, the purchase would generally be in both their names, hence sharing ownership. The first of two ways of sharing ownership is 'en indivision', a rough equivalent to the status of joint tenants, and the second, 'en tontine'.
With the first of these, ownership is half yours and half your partner's. At death, your half will be disposed of in accordance with the rules laid out by French inheritance law.
In certain circumstances, buying 'en indivision' may be worthwhile at an ownership split other than half and half.
The term 'usufruit' is employed when ownership is given to your beneficiaries, but where the purchasers retain a life interest over the property. Only on their death would the property pass in full to the beneficiaries. This method can bring about considerable savings in inheritance tax and protect rights to use a property. Only given that ownership is passed down, if you wish to sell, you will require agreement of your beneficiaries who will be entitled to the proceeds of sale.
Using the second of these ownership sharing regimes, 'en tontine', your co-owner retrieves your half of the ownership on your death. The French inheritance rules are hence temporarily bypassed. One of the joint owners cannot normally insist on the sale of the property during the lifetime of the other joint owners.
Generally, French mortgages differ from UK mortgages in that they are for shorter repayment durations, loan and interest are both continually and gradually paid back, their proportion of the total property price is generally less, and in that fixed rate loans are more common.
Preliminary clearance on a mortgage application may be worthwhile before travelling to visit properties, and certainly prior to making an offer for one.
If financing is required to secure the purchase of a property, then taking out a mortgage in the UK may be the best option given that it should be cheap and convenient to set up, and that if earnings in the UK repay the mortgage, then the amount to pay back will not fluctuate.
A French mortgage may be for you a valid option if the interest rate is better, or when exchange rate fluctations risk impacting the amount to pay back. French mortgages are generally secured against French property and from a French lending institution or British Bank that is registered in France. When a mortgage is taken out to secure a purchase, French law ensures certain buyer-friendly conditions:
- The deed of sale (acte de vente) states that a mortgage or loan is being taken out to fund the purchase. The contract is subject to a get-out condition (clause suspensive) for at least one month to the effect that if the mortgage or loan is refused, the contract is null and void and deposits are returned;
- Mortgage offers must include full details of total costs, mechanisms for varying interest rates, penalties for early repayments etc.
In France there is no single profession of surveyor. Instead, different professionals may be called upon in different circumstances.
An architect will generally centre his survey on issues of design and construction, but will often cover most essential subjects. A valuer/surveyer (expert immobilier) will focus on measurement and valuation, but will also cover essential issues relating to the structure of the property. Needless to say these will generally be provided in French.
There are equally UK-qualified surveyors based in France that will provide, for a fee, a survey that may come closer to your expectations.
Also, in certain circumstances it may be appropriate to call upon the services of a builder, for instance when it is your intention to conduct fairly substantial renovation or rebuilding work, and estimates are required for potential work.
It may be useful to note that new properties in France are covered by a two year guarantee (responsabilité garantie biennale) running from the date of handover and a ten year structural guarantee (garantie décennale).
JPF can recommend regional architects, landscape gardeners and craftsmen.
All contracts to buy property are subject by law to the right to cancel the agreement within seven days of receiving the copy signed by the seller.
'Buyer offer' and 'Seller offer' contracts exist. However, the most common type of contract is the full one (compromis de vente) which is a joint promise of sale. This agreement commits both parties to a certain price and set of terms. Should you require safety clauses for pulling out of a deal, for example if a mortgage is not secured, it is here that they should be stipulated.
In general the contract will cover a considerable set of information, including the following:
- names of buyer and seller;
- complete descriptions of property with reference to its land registry details;
- a statement saying full details of the title will be included in the final deed of sale (acte de vente);
- a date for the signing of the deed of sale – usually 60 days afterwards;
- a statement as to when possession will take place;
- the price fixed;
- a receipt for any deposits;
- the notary designated to prepare the deed of sale;
- details of the agent involved;
- it will set out what is to happen if one or both of the parties breaks the contract;
- any clauses.
Under French Law, only deeds of sale (actes de vente) approved and witnessed by the notary can be registered at the French land registry.
The notary carries out certain checks on property sold and has duties as tax collector and validator of documents presented for registration. The property seller generally appoints a notary, but a buyer may appoint his own. In this instance the two share the same fee.
The notary should be considered as perfectly neutral, merely there to check the content of the paperwork to ensure they comply with the strict rules and will be accepted by the land registry for registration.
Buyers do not generally meet the notary before signing the deed of sale. This fact along with potentially the language barrier will necessarily inhibit a buyer seeking further advice from the notary prior to purchasing.
On a sale, the price of the property, together with taxes and fees payable are usually paid by the buyer into the notary's bank account, and then passed by him to the seller, the tax authorities etc. All money paid to the notary is bonded, and hence safe.
The notary, besides requiring a buyers details (the French term is 'état civil' – these include things like profession, maiden name etc.) will ask a buyer to specify his matrimonial regime. The two main options are common ownership of assets, or separate ownership of assets. The correct designation is important for taxation purposes.
| 8) Signature of the deed of sale by proxy |
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A last minute obstacle may prevent you from attending the signature of the deed of sale. The solution to this is the power of attorney, a document set out to authorise the person appointed (the mandataire) to do whatever the document authorises on behalf of the person granting the power (mandant).
This should largely be a repeat of the contract. The following resumes most of the information present on the deed:
- name and address of notary;
- identification of the parties;
- property designation
- ownership and possession;
- price;
- the vendor's situation with regard to capital gains tax;
- an administrative declaration for tax purposes;
- details of town planning and attached 'certificat d'urbanisme';
- history of the property;
- finance used to buy the property;
- a statement of sincerity.
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