How to buy property in France

by E-NewsCast Team
September 2nd, 2010

The information is based on our understanding of French propertylaw and practice at the date of publication. We cannot guaranteeits accuracy. Specific advice applicable to your owncircumstances should be obtained from a French Notary and/orrelevant professional bodies.Finding the right propertyYou may have already decided on a specific area or you may havea French region in mind, having been there on holiday forexample. Finding a property in France is a similar process tothat in other countries. There are many estate agents in France(agents immobiliers) who will put you in touch with peopleselling property. Alternatively, there are estate agents in theUK, for example, who have details on French properties. Thereare also many specialist magazines available for peopleinterested in the French way of life. These publications offeruseful contacts and property advertisements.Many home buyers are attracted by the fact that property pricesin France appear to be lower than abroad. There are reasons forthis and before you start you should be aware of the followingpoints: • French domestic property is not usually bought as aninvestment. Apart from some very fashionable or highly soughtafter areas, prices usually rise in line with inflation.Therefore, you would need to own a home for at least three yearsto recover the high fees associated with buying, even beforeconsidering maintenance or improvement costs. • France has asimilar population to the UK but is three times the size. Thereis therefore less pressure on land and hence lower prices. •That isolated farm cottage set between vineyards and a streammay require major renovation. It might not have the same appealto a French family, hence the lower price and you shouldconsider possible difficulties of resale in the years to come.Initial agreement to purchase a propertyHaving found a suitable property, you will negotiate and enterinto an initial agreement with the vendor. This agreement iscalled a ‘Compromis de Vente’ or ‘Contrat de réservation’ and isa binding contract between the buyer and seller which sets outthe terms and price of the sale.For new properties being built the most common contract is a‘contract de reservation’ (a reservation contract). There arevarious other contracts such as a promise to purchase (promessed’achat), an exchange of letters (l’échange de lettres) and anoffer of sale (l’offre de vente), all of which offer littleprotection to the buyer, and generally should be avoided. Thepreliminary contract will include a full description of theproperty, the latest date by which completion must take place,the price, any escape clauses and the identity of both thevendor and purchaser. The preliminary contract can be signedeither at the notaire’s office or at the estate agency.If you are making a purchase with a mortgage, you should atleast instruct the notaire/estate agent to make your purchaseconditional upon obtaining a mortgage: ‘conditions suspensives’.This will offer you further protection under French ConsumerLaw. Upon signing this preliminary agreement the purchaser hasto place a deposit with the notaire, which is normally 10% ofthe purchase price and will be deducted from the sale price. Theproperty is then taken off the market. It is better to think ofthis deposit as a payment on account or a penalty for breakingthe contract. Having said this, a law passed on 1 June 2000 doesgrant you a seven-day cooling off period during which time youcan withdraw from the agreement. * Stamp Duty and registrationfees will need to be paid at completion when the agreement willbe filed at the notaire’s office. As a guideline, the notaire’sfees, Stamp Duty and Registration fees will add up to around 6%to 8% of the purchase price for existing properties. For newproperties they will amount to around 2% to 4% of the purchaseprice. As the French tax and succession regimes are differentfrom many other countries, to ensure tax efficiency and problemfree transfers on death you may wish to consider instructing asolicitor based in your home country to advise you. By law, the purchaser can insert clauses into the agreement. Theseller, of course, has to agree to these.* Although the preliminary contract is binding on both theseller and the purchaser after this cooling off period, youshould note that the sale will still be subject to the notaireformally checking the title to the property.The Notaire A French notaire is a publicly appointed officialwho is responsible for ensuring the property has good title (ie,no irregularities in the ownership) and that the purchase orsale is correctly transacted. Because notaries are personallyresponsible for the contracts drawn up they must be objective inthe advice they give and be impartial in their dealings with theparties concerned. A notaire represents neither the seller northe buyer but the French Government. They can also act for aclient anywhere in France. The same notaire therefore usuallyacts for both the vendor and the purchaser. This is notobligatory and you can appoint your own notaire if you wish. Thefees (paid by the purchaser) are fixed by law and will be splitbetween both notaires if two are appointed. You should be awarethat the notaire’s job is to finalise the agreement he has beentold has been recorded. He is not there to advise or warn thepurchaser of any inadequacies in it. His role is therefore verydifferent from that of a solicitor. If you are making a purchasewith a mortgage, you should at least instruct the notaire/estateagent to make your purchase conditional upon obtaining amortgage: ‘conditions suspensives’. This will offer you furtherprotection under French Consumer Law. Upon signing thispreliminary agreement the purchaser has to place a deposit withthe notaire, which is normally 10% of the purchase price andwill be deducted from the sale price. Completion Completion iswhen the final deed of sale is signed and legal ownership istransferred to the buyer. It is at this point that the balanceof the purchase price plus any extras such as the notaire’sfees, taxes and duties are due. The monies will be paid directlyby the bank to the notaire. The final act is the signing of thedeed of sale (acte de vente) which will take place in thenotaire’s office. It is normal for both parties to be presentwhen the deed of sale is read, signed and witnessed by thenotaire. It is good advice to attend in person at the notaire’soffice for the signing and witnessing of the deed of sale.However, if this is not possible you may invoke a power ofattorney. Each page has to be initialled by both the seller andbuyer and both must sign the last page after writing in French‘bon pour accord’ which means they have understood and acceptthe terms. There are no title deeds as such in France and proofof ownership is provided and guaranteed by registration of theproperty at the Land Registry. The Land Registry’s stamp is puton the deed of sale and the notaire gives a certified copy tothe buyer around two months after completion of the sale. Ratesand Taxation Taxe Fonciere This is a land tax. The size of theproperty determines how much is paid and owners of newproperties are exempt for the first two years. The tax is paidby the person owning the property on 1 January of each year withpayment due in the final quarter of the year. However, if theproperty ownership changes then the purchasers must usuallyreimburse the sellers for their share. Taxe d’habitation This isa local services tax. It covers the services and maintenanceprovided by the local council and again is payable annually inthe last quarter of the year. The estate agent will advise youof the taxes in relation to your own property and tell you howmuch you will need to pay. The tax demands will be sent to theaddress of the French property. French Inheritance laws andTaxation These are specialist areas and we strongly recommendthat you seek professional advice. French inheritance laws areparticularly different to those abroad. You are well advised totake legal advice on these matters before completing thepurchase. You may also be liable to French tax if you derive anyincome from the property, ie, letting fees. You must registerwith the French Taxation Centre for Non-Residents when you buythe property. France has signed taxation treaties with mostcountries which means that you avoid double taxation.

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