There are different rules which apply depending on whether you are considering acquiring a property for personal or business use, on whether the property is old or new or is a listed building, on whether you are buying on your own or in joint ownership or even as a time share.

This leaflet deals with the purchase of a residential property. 

1 How do you find a property: real estate, notaire, your own search

Properties are usually purchased through an estate agent (“agent immobilier”) or a local lawyer (“notaire”). 

The agent’s commission will be between 5% and 10% of the value of the property.  The amount can be negotiated

2 Before signing the contract

It is prudent to get an architect’s report on the condition of the property. 

It is important to remember not to sign anything unless and until all the details are agreed.

Do not forget to make full enquiries.

Legal audit: We strongly recommend to carry out a legal audit by lawyer (avocat or notaire)

This process is very similar to the enquiries before contracts in a purchase in the UK and you should take advice from your own lawyer before signing. 

Once you have signed the contract you will not be able to make changes.

Under French law it is possible (and usual in certain cases) to include into the contract what are called: “conditions suspensives”, such as getting a loan, which, if they are not realized, will result in both parties being released from the contract.

3 A four stage procedure

As in an English property transaction, there are several stages in the process.

3.1 Stage 1: A first binding agreement

This is similar to the exchange of contract stage under English law. 

In most cases, the first contract is

-           a bilateral contract: “compromis de vente” (the most frequent) where there is a binding agreement to buy on the part of the buyer and to sell on the part of the vendor.

-           ask for a draft before signing

-           take advice from your own notaire or avocat. 

It is in this contract that you will need to have any appropriate “conditions suspensives” added. 

On signature of the contract you will generally be asked to pay a deposit of 5% to 10% of the purchase price. The deposit will be returned to you if the “conditions suspensives” are not met but will be lost if you withdraw from the purchase for any other reason. 

You are entitled to cancel this first binding agreement within a 7 days delay after the signature.

3.2 Stage 2 : The Loan (if necessary)

           

A loan to purchase a property can be obtained in relation to all or part of the purchase price depending on the guarantees and/or security offered.  Loans are generally for 15 years and interest rates vary between 3 % and 5 % (2004).

Generally, banks require a mortgage on the property by way of security (“hypothèque”).

3.3 Stage 3: Who can purchase property?

A property can be purchased by one individual or by several jointly or through a property based limited company (a “Société Civile Immobilière” or “SCI” for short)

Buying through a SCI has a number of advantages but they also have drawbacks.

A prior legal opinion is necessary.

3.4 Stage 4 : Deeds of conveyancing

Completion will usually take place 2 to 3 months after the contract has been signed.  The transfer (“acte de vente”) will be signed in front of the notaire handling the sale.  You should be represented by your own lawyer who will be able to give useful advice.  The basic legal fees for dealing with the transfer will be shared between the two lawyers. (notaries)

You will need your passport as evidence of your identity on the day.  Alternatively, it is possible to appoint an attorney to sign the documents on your behalf.  A power of attorney is called a “procuration”. You should take advice on this at an early stage if you are likely to need to deal with the purchase in this way as the formalities to appoint an attorney can take a little while. 

Before signing the transfer, you should have received a draft (“projet d’acte de vente”) and a statement of the costs involved detailing:

-           the agent’s fees (5% to 10% of the purchase price)

-           the fees for your own lawyer  (which will depend on the level of advice you have requested)

-           the “basic” legal fees on the transfer which come to about 1% of the price and will be shared between the two lawyers involved if you have taken independent advice

-           other expenses and taxes which amount to about 5% of the price.

4 Reselling your property

If you make a gain when reselling your property, capital gains tax is payable in France at a rate of up to 26% depending on how long you have owned the property.  If the property is your main residence, you may benefit from some tax relief.

5 Inheritance

French law applies to real property in France and, if you are married or/and have children, they will inherit a substantial part of the property regardless of any dispositions you may have taken in a will.  If, however, you have bought the property through a SCI, you will be leaving the shares which can be disposed of under English law.

Inheritance tax will also be payable in France on real property.  The rate varies from 20% to 45% of the value of the property depending on whether it is left to a close relative (e.g. a child) or to someone outside the family.

For children, there is also a deduction of € 46,000 per child from the total inheritance tax they would otherwise have to pay.

For the surviving spouse, there is a deduction of € 76,000.

It is important for you to take this into consideration and to take advice before you sign the transfer.  It may be advisable for you to set up a SCI and to take other appropriate steps.

6 Living in France - some tax and costs considerations

If you live in France you may be taxed in respect of all of your income if you are considered as being domiciled in France, or if your main sources of income are located in France or if you stay there more than 183 days per year.

The top rate of income tax is 47 % for the year 2004 (plus 7.5 % “CGS” on working income and 2 % “CRDS” on capital income).

If your total assets exceed € 720,000 you will also be subject to a wealth tax (“Impôt sur la Fortune”)

-           Insurance between € 800 and € 3,000 a year, more if the contents and the property have a value in excess of € 450,000

-           Property tax € 1,000 to € 3,000 a year

-           Local tax € 1,000 to € 3,000 a year.

If you have brought a flat in a building which is co-owned (“co-propriété”), you will bear a share of all common expenses such as management fees, repairs, maintenance.

We have tried in this leaflet to answer some of the questions which are most often asked by first time buyers of property in France.  We hope that you will find it helpful.  It is however meant to be only an initial guide and you should take advice individually before buying any property.  If you have your own lawyers at home, we will be very happy to liaise with them to ensure that the acquisition of your property in France is as trouble free as possible.

USEFUL WORDS AND PHRASES

Acte de vente                                     transfer or completion of sale; also the name of the actual deed drawn-up

Agent immobilier                                estate agent

Cadastre                                             French land registry

Clause d’accroissement                     see tontine

Compromis de vente                          a bilateral contract

Conservateur des hypothèques         register of mortgages

Géomètre expert                                land surveyor - however in France, an architect will usually carry out the survey of a property for a potential buyer

Hypothèque                                        mortgage

Maire                                                  local mayor

Mairie                                                 council offices

Notaire                                               lawyer who is an officer of the state and has authority to deal with transactions relating to property.  Notaires also get involved in other non-contentious areas of the law such as dealing with estates and preparing wills

Promesse de vente                             simple unilateral contract or option to purchase

Sociétè Civile Immobilière                a form of company specifically geared to owning property and where the shareholders have unlimited liability

Taxe foncière                                     a land tax on property owners

Taxe d’habitation                               local tax on occupiers

Tontine                                               joint-tenancy clause