Buying a property in France

Buying a property in France has become very popular over the past few years by many Europeans, particularly the British. People buy for a number of reasons – holiday homes, investment property or moving to the country.

The French administrative formalities are bound up in "red tape", and a property transaction is no exception. However, the system is in many ways better and safer than that applying in most other countries, including England and Wales. The French law concerning property is more like Scottish law than English and Welsh and it is not possible to agree one price with one buyer and then agree a higher price with another one and "Gazump".

First of all you make a written offer on a property that is accepted by the owner, you will usually be expected to put down a deposit of 10% of the purchase price, which you may forfeit if you change your mind, unless there is a bona fide reason for doing so or if you having a mortgage and this is not accepted. The process of the purchase transaction must go through a "notaire" (notary) who is the only person who can make the title searches and obtain certain legal documents necessary to make the transaction possible.

The purchaser can choose the notary he wants to handle the transaction. The purchaser is responsible for the payment of the "notary fees", which depending on the selling price, can be as much as 8% on small old properties (though around 6.5% is more usual), or as little as 1.5 to 2.% on newly built properties, with an additional cost of around 1 - 1.5% if a mortgage is to be registered on the property. It should be noted that prices of property are generally advertised exclusive of these charges. The notary does not get the entire fee. His fees are determined by the French state (on a scale which is the same for all notaries), the state take a much larger part (similar to property taxes in Belgium, stamp duty in the UK etc)

If an owner wants to use his/her notary - which is allowed under French law - be aware that you have the right to choose your own notary who will work in collaboration with the owner's notary. It is quite common to have two notaries working on the same transaction, with no additional cost to the purchaser as fees are shared. However, the delay may be a little longer due to the necessity for the two notaries to correspond with each other. If you do not speak and understand French fluently it is advisable to use a notaire who understands your language.

Once the two parties have come to an agreement on the sale price, the terms and conditions of the sale are discussed with the notary who then prepares the preliminary contract or "compromis de vente". This contract is just as important as the final document transferring title as it must contain all the clauses and conditions precedent to the sale. These include clear title, easements, certificates stating whether the property conforms to current legislation on asbestos and other matters, and, most importantly, whether the purchase is subject to the condition of obtaining finance.

Once the compromis de vente has been signed It is usual at this stage to pay a deposit of 10% of the purchase price (5% when purchasing property "off plan"). This can be done by payment, by cheque, which must be drawn on a French bank, or bank transfer, will normally be made to a notary. The compromis de vente signed by both parties is sent to the purchaser and from the date of receiving it he/she has seven days in which to change his/her mind.

At the end of this period, the contract becomes binding and the transaction is now "under compromis". The owner cannot sell to anyone else, nor change the price, and if he refuses to sign the final document the purchaser can obtain a court order forcing him to sell. The purchaser can pull out of the deal without loosing the deposit if one of the clauses or conditions precedent inserted in the contract has not been fulfilled. Otherwise he may be able to pull out but will almost certainly loose the deposit.

It then takes a further 2 / 3 months for the notiare to prepare all the necessary paperwork before getting the parties together to sign the title deed "acte definitive". When both the parties have signed and the purchaser paid the remaining 90% or 95% of the purchase price as well as the notary fees the purchaser becomes the legal owner of the property and receives the keys.

Gas checks:

Since 1st November 2007 all properties offered for sale in France with natural - mains gas services installed more than 15 years ago must include a Diagnostic Gaz in the Dossier de Diagnostic Technique (This is rather like the HIP - Home information pack in England and Wales). It costs around  100 -  150 for the test that includes supply pipes, boiler, water heater and radiators. The certificate will be valid for three years and the seller has to organise and pay for this before a compris de vente can be signed.

There are also new rules for surveys from November 2007 all the technicans carrying out these tests must be accredited by COFRAC Comité d’accreditation français (Similar to Corgi in the UK). The new rules could effect around 10 million properties when they go on the sales market. If a property has bottled - cylinder gas (like calor gas) this is not covered by the new test.

Capital Gains Tax Non-residents of France and French owners of secondary homes are liable for capital gains tax when they sell; after various deductions, this amounts to 16% of the profit for EUROPEAN residents, and 33% for residents of non EU countries. French owners of secondary homes are liable for 16% + 12%(28% total).

Inheritence- Wills It is important to know that French inheritance law is very different from that in England… the children cannot be disinherited. You should be aware that FRENCH law applies to any property you own in France, even if you are not a French resident. It is possible to leave your share of the property to the surviving spouse, but this will require a specific document to be drawn up, preferably at the time of purchase. Your notary or lawyer can best advise you how to do this. Look into making a will in France as well as your country of residence.

Holiday rental income is subject to VAT (TVA) at 19.6 per cent. For furnished lettings up to an annual value of €76,000 there is a 72 per cent rate deduction in respect of expenses under the 'Micro-Bic' regime. The remaining 25% net profit is taxed at 25%. If the investor has assets with a value in excess of €720,000 the owner will be subject to an annual wealth tax of between 0.55 per cent and 1.8 per cent. If you dispose of your property after less than two years you will be subject to income tax at 16 per cent and after that up to 47 per cent.

N.B. The above information is given in good faith by jml Property Services and the website it is being displayed on. It should not be relied on for accuracy and property owners should consult tax experts / accountants in the country their property is in and also their home country. ©jml property Services ©jml property Services 07-05

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