ten things you need to know before buying a French
property
This month, we review ten key points to consider at the start of
the buying process to help manage your expectations and avoid
the pitfalls arising out of the process of buying French
property.
1. estate agent/offer
Properties in France are mainly marketed by estate agents. They
are professionals who are registered and hold a professional
certificate to practise. It is likely that the purchasers will be
requested to sign a document called 'bon de visite' to prove that
the property was viewed with the estate agent.
Notaires in France also have the right to market properties on
behalf of their clients. Not all Notarial offices have a sales
department.
An offer can be made verbally or in writing. It is difficult to
accept an oral offer because it is not necessarily binding and it
could be complicated for the other party to prove that his
contracting party wished to proceed. It is for this reason that
written offers are always requested by the estate agent or
vendors.
The offer must be detailed and the terms of the contract set out
ie description of the property, proposed price and any conditions
for the purchase. If there is any reserve it is likely that the
offer will be re-considered as an intention for the party to
continue the negotiation.
2. signing of the initial contract
This is the most important part of the transaction; getting the
parties to agree a contract to set the terms and conditions of the
sale that will enable the instructed Notaire to conduct the
searches before completion. Two contracts are used in France.
Firstly, a 'promesse unilaterale de vente', when the vendor will
only be committed to sell to the purchaser who without being
committed to purchase will benefit from the fixed period to decide
as to whether or not he wishes to proceed. This type of contract is
mainly used by Paris based Notaires.
The second contract named 'promesse synallagmatique de vente' or
'compromis de vente' commits the parties to sell and purchase. This
contract will bind both the parties to the transaction.
At this stage of the transaction the vendor will have to
disclose any information regarding the property ie lease agreement
rural or residential, any renovation or extension, which may
require the obtaining of a guarantee similar to the British NHBC
insurance. As far as the purchaser is concerned, indication of any
mortgage to be obtained and its conditions will be stated in the
contract.
3. cooling off period
In England it is the practice not to enter into a binding
contract until you or your solicitor are satisfied about searches
and enquiries, any survey and any necessary mortgage offer. In
France, on the other hand, it is usual to enter into the 'compromis
de vente', which will immediately bind the parties to the
transaction, at a much earlier stage. However, a favour was
introduced for buyers allowing them to withdraw from the contract
and change their minds within a fixed short period. The legislation
was introduced in June 2001 as a result of the Loi SRU dated 13
December 2000.
The law allows a non-professional purchaser to withdraw from the
contract once both parties have signed it. This cooling off period
will last for a fixed period of seven days, which will start the
day after the identification is received by the purchaser.
4. appointment of Notaire
Notaires in France are Public Officials appointed by the
Ministry of Justice and have their own system and practice that is
distinctive from the other profession of avocat or even
solicitors.
They are empowered to place the French State Seal on the deeds
that they prepare. These deeds fall into a category of public
documentation and are difficult to challenge.
The Notaire also has a duty of care towards his clients and
cannot restrict his duty as a solicitor would do when agreeing the
terms of his retainer with a client.
A Notaire can act for both parties in a transaction and his duty
of care obliges him to be impartial or never favour one party.
The purchasers will have to decide if they wish to get another
Notaire involved in this transaction or rely on the Notaire
appointed by the estate agent.
5. searches
A minimum of two months from the signing of the initial contract
is to be expected. This is to allow enough time for the Notaire to
carry out his searches and obtain the results from the various
institutions involved.
The Notaire will first notify the relevant public bodies who
might be the beneficiaries of a preemption right ie a first option
to buy the property, such as the town hall (Mairie) or the local
Famers Committee called SAFER when the property is in a rural
area.
Furthermore, the Notaire will request from the Mairie a Town
Planning Certificate ('note de renseignement d'urbanisme'), which
will reveal the rules applicable to the property.
The land registry will deliver a document called 'état
hypothécaire', which will indicate who the owner of the property
is, and whether there are any charges or easements registered. The
Notaire will have the duty to discharge the property for the new
buyers at the vendors' costs.
6. structure of ownership
This is one of the most important phases of the transaction for
the purchasers. They will have to decide how to purchase the
property. English and French inheritance law will be taken into
consideration to minimise tax liabilities and also to provide the
buyers with the best vehicle.
Any regular reader will be familiar with the classic structure
of ownership in France:
- purchase 'en indivision'. Similar to the English tenancy in
common, each co-owner's share will be governed by the 'intestate'
succession law in France. Bequeathing the deceased's share to the
surviving spouse by Will will be limited upon the presence of
reserved heirs
- purchase with 'clause tontine'. This is the french 'joint
tenancy'. Under this vehicle the property will pass to the
surviving spouse/partner and overcome French inheritance law. On
the second death the property will be inherited by the survivor's
heirs only. This clause is often used for couples who have children
from previous relationships and may not wish them to inherit any of
the French property. Please be aware that the clause must be
inserted into the final deed and cannot be added after
completion
- opting for the French matrimonial regime of community of
property (Communauté Universelle).
Alternatively, married couples can sign a French marriage
contract in order to vary their marital regime and choose a French
regime of 'community of property with attribution to the survivor'
('La communauté universelle avec attribution au survivant').
This is a form of postnuptial agreement under French law.
The property will automatically pass to the surviving spouse, as
with the Tontine. However, unlike with a Tontine, children from a
previous relationship retain a five-year claim against the
surviving spouse to claim their statutory rights.
Indeed the three structures are probably the most recommended to
buy a property in France but there are number of other structures
such as companies that can also match the purchasers' tax planning
requirements.
7. finance
Another very important phase in a property transaction. Before
signing any binding contract the purchasers should assess whether
or not they will have the finance in place to buy the property. As
a cash buyer, the only consideration will be the exchange between
the signing of the binding contract and the final contract. For
those who will need a mortgage to complete their personal funds,
they will lodge an application with their bank. Once the bank has
accepted the finance the purchasers will receive an offer that will
be bound by the legislation dated 13 July 1979. In accordance with
this law the borrower will benefit from a cooling off period of 10
days before returning the offer duly accepted.
As far as the release of the funds, it is always the Notaire's
responsibility to request the funds to the bank when completion
takes place.
8. payment of price
The purchase price and Notaire's fees are paid onto the
Notaire's bank account. Whether the purchasers transfer their funds
from England or France, the Notaire should check the origin of the
funds to comply with their money laundering legislation.
Solicitors are regulated by the Money Laundering Regulations
2007, which came into force on 15 December 2007. As far as Notaires
are concerned, the Financial and Monetary Act regulates French
money laundering.
Both professions have to deal with the requirements relating to
customer due diligence.
The main concern for Notaires will be dealing with funds and
transfer through their clients' accounts. Money laundereres will
find it difficult to pass money through banks without providing a
valid reason. Passing money through a Notaire's client account with
repayment on a clean client account cheque or electronic transfer
is a useful laundering transaction. This is for this reason that
Notaires now take particular care with property transactions.
9. completion
Completion is when the transfer deed is signed at the Notaire's
office. He has the responsibility to draft the contract and read it
to the parties to make sure that they understand the terms of the
contract and reply to any of their queries.
The original deed is kept by the Notaire and a certified copy
will be addressed to the purchasers after being registered at the
Land Registry.
Before completing the Notaire will send a breakdown of costs to
the purchasers and ensure that he has received all the
formalities.
10. post completion
After completion, the purchasers will have to transfer the
utilities into their names and insure the property. The local taxes
will automatically be transferred in their names during the
registration process at the Land Registry.
As far as the local taxes are concerned the purchasers will
reimburse on a pro rata basis the 'taxe fonciere' to the vendors
from completion until 31 December. The 'taxe d'habitation' being
paid entirely by the vendors without any prorate.
