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Buying property in France
Ok so you have decided to move to France
and purchase or rent a property. What's the next thing you need to do? You may
well think I am teaching you how to suck eggs, but look at the number of fly on
the wall documentaries on the TV that show people who have fallen into trouble,
simply because they put themselves into a position that is out of control, and
could have been avoided.
First of all, I am not in this to try and
dissuade you from doing it, but first off, think long and hard, and then do a
lot of research. You only need to walk around the holiday resort of Cap d’Agde
to realise from the number of properties for sale, that, lots of people purchase
in haste, and then regret their decision, at leisure.
Frequently, people come on holiday, and
whilst they are relaxed, and think they are in paradise, they decide that to
purchase a holiday property is the answer to their many dreams, without thinking
of all the implications.
- How are you going
to pay for it? These days, for the British, it is very difficult to obtain a
second mortgage on their property in the UK, and then use that money to buy
abroad. For those who have done so in the past, the credit crisis, and the
fall of the value of the pound, has brought about huge difficulties in
repayments. The Credit crisis is not just a British problem, and the resale
of properties in France has also slowed down. Many Brits are in the position
of not being able to afford the repayments, and also not being able to re
sell their holiday property to get out of their financial problems. If you
are having to send money from the UK the exchange rate on currency is the
biggest problem. It can make a difference of hundreds of pounds over a very
short time. The repayment you need to make in France however, will always
remain the same amount.
- If you purchase abroad, at a long
distance from where you live, the property will need to be maintained. Have
you got a plan for those things that do go wrong, i.e. water leaks. It is
difficult to find a plumber, or a roofer under normal circumstances, but
when you are trying to do it, and are separated by a 1000 miles, it is even
more difficult. Who is going to supervise any repairs, or keep an eye on
your property in the intervening times between your visits. If you intend
renting out your property, have you arranged for the cleaning and changing
of bedding. Many people manage to find someone who promises to do it, and
then the reality is their work ethic is less than they promised.
- If you intend keeping your
property as an investment to pass on to your children, remember that you are
governed by French law, and you can’t arrange things in the same way that
perhaps you would have wished for in the UK. French inheritance law is quite
complicated, and totally different to the UK so make enquiries in advance.
- If you are
buying to move to France on a permanent basis remember to make enquiries
about your taxation status. Government pensions are taxed in the UK but all
other pensions will be taxed in France. A quirky situation arises when you
are in receipt of a government pension and also the OAP. The government
pension is taxable in the UK but the OAP is taxable in France.
Remember that it is no use rushing into a
non reversible situation, and then start complaining that “we don’t do it like
that in the UK”
YOU ARE NOT IN THE UK. YOU HAVE PURCHASED
IN FRANCE AND MUST ABIDE BY THEIR REGULATIONS.
An initial
contract is signed, called a Compromis de Vente. This is a legal document
binding on both parties, and should not be taken lightly.
At the same time,
the buyer pays a deposit, which remains `blocked' in a special account at the notaires office, until completion takes place.
If you seek a
survey of the property, this should be carried out before you sign.
Home inspection reports and
Energy Rating on all Property Ads
When selling (or letting) properties there are a number of reports that must be
available to a purchaser (or tenant).
From 1st January 2011 all properties in France
for sale or to rent must be advertised with an energy performance rating.
The rule applies equally to properties, advertised privately or through an
estate agent.
An energy efficiency report (le
diagnostic de performance énergétique, DPE) and a lead report (le
constat de risque d’exposition au plomb, CREP), has been amended with
effect from 1 January 2012.
The
requirement to carry out an energy rating has been in existence since 2007, but
only at the point of contract, not when the property is advertised for sale or
rent.
The DPE report provides an estimate of the energy
consumption of a building and its energy efficiency by classifying it in a
comparative table. It also indicates the quantity of greenhouse gases emitted,
with advice on how to improve the energy efficiency.
The energy rating survey is only one of several
diagnostics that owners need to undertake as part of any sale.
Depending on the age, location and type of property the others include asbestos,
lead, natural risks, electrical wiring, size and gas. It will also soon include
septic tanks.
The cost of these surveys is anything from between a few hundred and a few
thousand euros for the largest properties, although not all the surveys are
required in all cases.
The duration of validity of the energy survey (DPE) is ten years, it is a lot
less for a number of the others, notably the termites survey and risks report,
both of which are valid for only six months.
The new rules are no idle gesture by the government, the penalties for breach of
the rules are severe - with the possibility of the sale being annulled, as well
as heavy damages, and even a prison sentence in the worst cases.
The CREP is required where the building was
constructed before 1 January 1947). The report, which must not be more than 12
months old at the time of the sale, identifies the presence of lead in water
pipes, paint etc. If the report finds lead in concentrations exceeding 1mg/cm²
the owner must commence work without delay to remove the risk of exposure to
lead. This obligation is transferred to the purchaser after the sale.
On 1 January 2012 it became a
requirement for all persons undertaking CREPs to have a certificate from the
manufacturer of the testing equipment used in the analysis, stating the maximum
life span of the radioactive source in the equipment, beyond which the
equipment cannot be used.
A contract under the SRU law (which gives every
purchaser of property a seven day 'cooling-off' period starting from the day
after the purchaser has received a copy of the purchase contract) has been
given. It has always been thought that a copy of the contract could be handed to
the purchaser by the agent or notaire. However the Supreme French Court of
Appeal held in a recent decision that
the practise of handing a copy of
the contract to the purchaser does not comply with the requirements of the law
(article L271-1 of the Code de Construction et de l’Habitation. It would appear
therefore that sending a copy of the contract by recorded delivery (with
acknowledgement of receipt by the recipient) should be adopted universally as it
is the only mechanism which provides certainty as to the start date of the
cooling-off period.
Once the Compromis de Vente
has been signed, there follows up to three months, in which searches are
carried out on the property, and allows time for the purchaser to obtain any
financing for the purchase. These searches are carried out by the notaire. The
notaire is unlike UK solicitors, as he is not appointed to act for either party
in the transaction, but as a public official whose duty is to the State. Their
function is to ensure that the transaction is carried out legally, and all
necessary taxes are collected.
If you need a
mortgage, then this should be declared at the time of the agreement, and a
substantive clause inserted in the contract to protect the purchaser's interests
in the event that a loan is not made available, when the sale would be cancelled,
and the already paid deposit, returned.
By French law the total of all of your mortgage payments
worldwide cannot be more than 30 per cent of your total income.
At the end of this
period, the conveyance, called the acte de vente, is signed at the
notaire's office, and the property passes to the buyer, who must pay the balance
of the purchase price to the notaire for payment to the seller.
As with most major
purchases in France, it will also be necessary to provide to the notaire a copy
of your birth certificate and, if applicable, a copy of your marriage
certificate.
Don’t be surprised
when you arrive in your newly bought property, and find that all fittings have
been removed, generally, properties are sold with an empty kitchen - four walls
and a water outlet.
French inheritance law
Advice should be
sought in order to understand fully, the complexities of French inheritance law.
This does not allow you to leave your share of the property to whom you wish -
even if you have an existing will in the UK.
France has very specific inheritance laws, which ensures that
on your death, your property is divided equally between your spouse, and your
surviving children. There are some steps you can take to ensure that the
surviving spouse can continue to live in the house or flat.
There are ways of
softening the impact of these laws, about which you should take advice from the Notaire, before you sign the sale contract.
This is an extremely complicated subject with many amateur "experts"
SEEK PROFFESSIONAL ADVICE IF IN ANY DOUBT!!
Fees and Commission
Estate Agents
Commission & fees
It may come as a
bit of a shock to those used to the UK property market that the buyer may be
responsible for paying the agency fees and is responsible for all the legal fees
– this can make your French house up to 20% more expensive than the anticipated
price.
You need to find
out exactly what is included in the asking price, as well as any other costs
that will be incurred.
Ask your French
estate agent ‘Does the price include commission’? Many French estate agents (immobiliers)
include the agent’s commission in the displayed price.
In any Estate
Agent’s advertisement look out for ‘FAI’ means ‘frais d’agence inclus’ (agent’s
fees included) ‘TTC’ means toutes taxes comprises (all taxes included).
Agent’s fees vary
between 5% and 10%. The advertised fees rarely include the legal fees (notaire’s
fees).
If the agent’s fees
are included in the price then the vendor is obviously going to take the hit. If
they are not included in the price then it is the purchaser who is going to pay
them.
Notaire’s fees
Some notaire’s also
act as estate agents, and you may see properties advertised in their windows.
When looking for a house for sale, it is often a good idea to ask a Notaire if
there are any house for sale in the area. They are often aware of such
properties that are not necessarily advertised. The level of commission charged
by notaire’s, is often lower than estate agents. Expect to pay between 5-6% in
most cases.
Notaire’s fees are
calculated on a sliding scale, which is fixed under French law. The percentage
paid is more for lower value properties. For example:
Property price of €150,000, - notaire’s fees
7.12%
Property price of €300,000 - notaire’s fees
6.76%
If you are using a
French mortgage on the property, you will have to pay a loan registration fee,
which can be up to 3% of the value of the loan.
The largest
proportion of the notaire’s fee, is for the ‘droits d’enregistrment’ the
equivalent of stamp duty. This amounts to approximately 5% of the value of the
property. The rest of the fee is made up of, registration at the land registry
as well as payment for the notaire’s work.
These fees are paid to the notaire on the day of signature of the acte de vente,
together with the balance of the purchase price.
The notaire is
legally obliged to advise you in advance of all fees payable. They are not
permitted to bill you for extra fees without prior notice.
If
in doubt about, then ask!
Home insurance
Unlike in
the UK, in France it is a legal requirement that you have buildings insurance on
your property, whether you rent or own it. You will need to have this in place
before you buy a property or take on a lease. The Notaire may well ask to see
proof of this.
Contents insurance is not a legal requirement but it is wise to take it.
An
Insurance agent who has served me well over many years is
Agence Gazel - Rambaut
- Soulignac
7 rue Promenade
34260 St Chinian
tel 4 67 38 27 55
Whether you are planning to
make France your home, or simply have a holiday home, it is vital to ensure
that you are properly insured.
When you are insuring your property, make your insurer aware if it is not your
main residence. Some policies become invalid if the property is left for long
periods of time.
If you are
renting out your home, you must make it clear whether you are offering long-term
rentals or holiday lets, and check that you are insured appropriately.
If you
intend renting your home, you are obliged to notify the French tax authorities.
This regulation is being strictly enforced, and large fines could be inflicted if
you fail to do so.
French
contents insurance differs from many UK contents insurance policies, in that it
often does not cover your personal items (eg laptops, mobile phones or
jewellery) whilst they are away from your home.
Check with
your insurer that room size does not make a difference, when declaring the rooms
in your house. A room upwards of between 30 - 40sq metres for example, is often
counted as two rooms.
Ask what type of security measures you are expected to have in place – many
policies require all windows on the ground floor be protected with shutters or
grills. If you are burgled, and these are found not to be in place, it could
invalidate your policy. You will also be expected to have receipts for any
valuable items. Keep these in a safe place – ideally with photos of the items.
Civil liability
French law requires that every person must have a civil liability policy. This
protects you if you damage another person or their property. It is generally
included with house insurance, but check.
Insurance renewal
When French
insurance is due to expire, it will roll over automatically, unless you give your
insurer an average of three months’ written notice, sent by recorded delivery
(the amount of time varies from company to company).
Some major French insurance companies
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