BUYING A PROPERTY IN FRANCE

Transcription

1 BUYING A PROPERTY IN FRANCE BUYING A PROPERTY IN FRANCE MAXWELL STORRIE BAYNES

2 INTRODUCTION The primary purpose of this document is to provide some guidance as to the property buying process in France. For those who have no experience, this can appear unfamiliar and daunting but with good guidance from the relevant experts the process is very straightforward. It is not intended to be a fully comprehensive explanation and of course some of the content could be subject to change. We have covered the following areas and subjects as noted below. 1. REAL ESTATE AGENCY 2. NEGOTIATION 3. SURVEY 4. THE BUYING PROCESS 5. NOTAIRE 6. TAXATION 7. COSTS 8. CONDITIONS SUSPENSIVES Page 2

3 1. REAL ESTATE AGENCY Buying real estate in a foreign country can be a challenge and knowing where to start is a key element in the process. Most buyers begin by searching the internet but how to get to the right place is often baffling and sifting through lots of unattractive or irrelevant listings only adds to the frustration. Below is a summary of the market players. We hope the tips will simplify your search. Licensed Agencies France is no different to other countries in that you have businesses providing a high quality service and many who don t. The basic agency models are explained below. The Value Model These are agencies that are very focussed on particular sectors or areas and the numbers of properties are likely to be more limited and selective. The premise is based on providing a service to buyers and sellers and as a result the quality of images and website content will tend to be noticeably better. The Volume Model There are many agencies that are in the volume business where the pressure of completing a sale can compete with customer service. The easy way to identify this type of business is to look at the portfolio. If they cover everything from the cheapest renovation project to higher end properties they will typically fit this category. In an effort to list a wide range they are also more likely to take properties that are overvalued, listing everything that comes their way with no discrimination. Find an agent/or agents who respond promptly and listen to what you say. Check whether they have a full Carte Professionnelle. Consider the affiliations they have. For example CIRE (Christie s International Real Estate) has a stringent affiliation qualification process. Take a look at the quality of the website content and imagery. Weak content and imagery is often a bad sign. Do they feature the types of property you are looking for? Do they have a local network of specialist professionals such as accountants, notaire and builders? Do they live in the area they are marketing? Are the properties you enquire about still available? If required, select three agents in the area and interview each one to determine who is best placed to deal with your requirements. Are they expert in the activity or sector that you are looking at? Page 3

4 Marketing Agents The French agency business is full of middlemen who quite often position themselves as being agents. The most prominent of these are marketing companies which are usually property portals gathering information and properties from licensed agents and are typically not based in France. There are a number of problems in working with marketing companies or portals but they can often provide a good cross section of properties available across multiple regions. The primary problem with this type of company is that they invariably don t have local knowledge and they will be unlikely to know the properties as they are typically based offshore. Appointments There are several key things to consider when you are at the point of visiting the area and setting up viewing appointments. (See Top Tips) Ensure that you have provided the agent with a very clear specification of what you are looking for or you run the risk of viewing properties that are not suitable. This will also ensure that your time is used wisely. Allow plenty of time for viewings, as there may be significant travel time between each. Don t try to do too many viewings in one day as it can be extremely confusing to process too many details. We recommend that four properties in any given day is optimal. Allow some time to reflect on viewings and to discuss openly with your agents your likes and dislikes. This will help the agent to perhaps identify other choices. Try to keep to the schedule as setting appointments and changing appointments can be complex and time consuming for the agency particularly where the property is empty and key holders are involved. Don t just arrive and expect to be able to organize visits at very short notice. Page 4

5 2. NEGOTIATION Once you have identified the property you like it is extremely important that you feel comfortable with the decision you are about to make. Rushing into decisions could cause a multitude of problems and you don t want to find that you are legally committed to something that you feel is a mistake. So it is important to ensure that you have had satisfactory answers to your questions before starting the negotiation process. Having visited other properties or conducted research on the internet, your agent should be in a position to provide validation of the property s value. You should discuss with your agent the best way to approach the negotiation and what price should be presented to the vendors. Our objective is always to ensure that both buyer and seller feel the transaction has been fair and has been handled professionally. Simply putting forward a much lower offer could create problems in concluding the deal as it can create entrenched positions that are then difficult to surmount. The other point to be mindful of is that the agent in France is normally mandated by the seller. However without a willing buyer there is no transaction and as a result most sensible agents will work to ensure a balanced position that both parties are comfortable with. Make sure that the property is the right choice and that you feel that you are in a position to make a well informed decision. Work with your agent to decide the best strategy for making a bid. Always declare if you are likely to need financing as this can have implications for the seller that we will cover later in this document. Don t be tempted to make over aggressive offers if your agent advises against it as it may work against you as negotiations proceed. Ensure that any conditions that you wish to include in the contract are stated clearly at the outset as they may change the seller s mind. Try to sign a compromis as soon as possible once you have made your decision to ensure that you can successfully secure the property. Page 5

6 3. SURVEYS The protocol for building or property surveys can have quite significant variations from country to country so we thought it might be helpful to outline what is normal in France. It is the seller s responsibility to provide up to date surveys (diagnostics) carried out by a registered professional before the first signing (compromis). There are a variety of areas covered in the mandatory surveys and these include the Diagnostic Performance Énergétique (DPE), which relates to the energy efficiency of the property s insulation and heating. It is also required to provide a survey on issues such as lead (normally found in the paintwork of old houses rather than water piping), asbestos and termites. These reports should highlight any issues relating to the property and must be made available to the notaire before the first signing (compromis). It is also a requirement to provide information on the condition of the electric, gas and drainage systems to ensure that they conform to current standards. Once these are seen and accepted there is no possibility of using them to renegotiate the price after the first signing has taken place. There is no cost to the buyer for these surveys. Make sure that you have seen the obligatory diagnostic reports and that you are comfortable to proceed. These reports will all be in French so make sure your agent can properly explain them to you. If you are concerned about the findings get professional advice on the degree of cost that might be involved in fixing the problem. If you would be more comfortable with a full building or structural survey please arrange this before signing or agreeing price and terms. This will be at the buyer s cost. If you find extensive costs that you are uncomfortable with then you should renegotiate or walk away. It should also be noted that in France there is no obligation to provide a building survey or structural survey, as it is not common practice. It is possible for the buyer to conduct this type of survey but it is important to understand that it must be done before signing the purchase contract, as again it cannot be used as a condition of sale or a means of renegotiation of price after signing. Page 6

7 4. THE BUYING PROCESS The conveyancing process in France normally takes around 12 weeks but can be accelerated if required. The normal course of events would be as follows. A. PHASE 1. (Week 1) Once the offer has been accepted and the terms have been agreed regarding timing, financing requirements etc. then the seller s notaire will be requested to draw up the contract of sale (Compromis de Vente) and will gather together all the necessary information relating to the contract from the vendors and agents. This will include full information on both seller and buyer, the requisite reports (noted above) together with any other conditions of sale such as financing. We have provided some additional guidance notes below on the French notaire. The buyer should arrange any structural or building surveys during this time. The buyer should also arrange for the deposit (normally 10% of the purchase price) to be placed with the notaire in advance of the signing. B. PHASE 2. (Week 2) This is normally when the Compromis de Vente is signed. This is usually signed at the notaire s office and it is important that you have your agent (and notaire if different to the vendors) with you to guide you through the process. The contract is read through and explained to each of the parties, the obligatory survey results are explained and the cadastral plan is studied to ensure that both buyer and seller understand the property and land that is being sold. Both buyer and seller will then sign the contract. Although it is possible to do this process without attending, we always recommend that the buyers attend this signing. It is important to note that the buyer has a cooling off period of 7 days. Don t be bullied into making quick decisions that you are uncomfortable with. Make sure that you have a notaire that is able to explain the process clearly. Make sure that you choose an agent that you trust to guide you through the process. Don t sign anything until you are comfortable and feel ready to make a well-informed decision. Try to attend the meeting in person if possible. If you are unable to attend, you can lodge a power of attorney with your notaire. If you do this make sure that you receive a copy of the purchase contract prior to the signing and that it is explained to you. Understand clearly what things you need to organise during this period. Don t pay any of the proceeds to anyone other than the notaire in the transaction. Do not be tempted to pay any element of the transaction in cash, as this is illegal. Page 7

8 C. PHASE 3. (Week 3-11) The notaire will undertake certain administrative tasks during this period and these will include the following: they will conduct a local search to establish if there are any matters that could have a materially adverse effect on the property (future plans for a motorway through the garden!). They will also check if there are any preemptive rights on the property, obtain any plans and documents relating to the sale and will check title for loans and liabilities. If any negative anomalies are unearthed they should be immediately brought to the attention of all parties. The vendor will be required to arrange for furniture and belongings to be removed from the property during this period. The buyer should also use this period to get things organised such as furniture removals etc. and arrange for the balance of payment to be placed with the notaire. If financing is required by the buyer, the conditions within the contract may also stipulate a date within this period for proof of financing to be provided. It is also essential during this phase that the buyers establish a local bank account and arrange buildings insurance cover for the date of completion. D. PHASE 4. (Week 12) This would typically be the week in which the final signing (Acte de Vente) takes place. This will also take place at the notaire s office and again it is best if all parties are present. The notaire will read through the contract and will explain the documents relating to the searches he has conducted and show that the accounts and funds are in place to conclude the transaction. When both buyer and seller are happy, the contract will be signed and the keys will be handed over. It is then quite common for both buyers and sellers to adjourn to the nearest restaurant to celebrate the transaction (although who pays is a bit less clear). Page 8

9 5. NOTAIRE It is quite normal in France for a notaire to represent both buyers and sellers in the same transaction as they have a legal and fiduciary responsibility to each party. The critical element in this decision is perhaps language capability and we would always advise using a notaire who has the capacity to explain things clearly in your own language. There is no financial penalty for using two separate notaires in the transaction but if not managed properly it can slow the process somewhat. A good agent will be able to recommend a suitable notaire used to working with international buyers. 6. TAXATION As in most countries, this can be an area that has a degree of complexity and again, is subject to regular change. We as agents, are very happy to provide broad guidelines but would advise in every case that a buyer seeks to establish professional guidance. We are well placed to recommend local tax and accounting expertise. The Capital Gains Tax position will very much depend on whether you are buying the property as a principal residence or as a secondary home but it is important to take guidance from your notaire on this matter. Income tax in France is slightly less complex in that if you live in France for more than 6 months per year you are tax resident in France. Setting up a business or renting your property needs to be discussed with a specialist. The other taxation issue that is very important for foreign buyers is the issue of Inheritance Tax. Although currently changing, this is very different in France than most Anglophone countries; it is governed by Napoleonic law. To enable the tax specialist to provide guidance and solutions, it is important to establish the following: Will you be living in France for more than six months per year? Are you planning to run a business while here? Will it be your principal or secondary residence? Page 9

10 7. COSTS There are various costs that a buyer should consider when acquiring property in France. The main cost to be considered is that buyers are responsible for the Sales Tax (Stamp Duty) and the notaire s fees. These fees are normally in the region of 6.5 to 7% of the purchase price depending on whether financing is required. It is usual (but always check with your agent) that the sales commission on any property transaction is included in the asking price. The only other cost that the buyers will incur aside from the usual removal costs are the cost of a building survey if required. Once you are the owner of a property you will then be responsible for the two different annual taxes known as taxe Foncière and taxe D habitation. The taxe Foncière is paid annually in October by whoever owned the property on 1st January of that year. So, for example, if you buy in July you would not be liable for that year. The taxe D habitation is paid annually in December by whoever was occupying the property on 1st January of that year. If you buy in July, however, you will pay on a pro rata basis, this is calculated by the notaire. Page 10

11 8. CONDITIONS SUSPENSIVES The important thing to recognize is that when you enter into a contract to purchase a property in France you are entering a legally binding contract. Conditions suspensives are clauses within that contract that may annul the contract if not satisfactorily met. It is the notaire s responsibility to ensure that the conditions are met. Perhaps the best example would be where the buyer will not be able to conclude the transaction without financing. If this is not included in the contract the buyer is legally bound to complete even if they can t get financing. Other examples of conditions might relate to planning permission, evidence of civil projects, or the death of one or more of the parties before completion. 9. PRE-EMPTIVE RIGHTS This is an expression you will encounter when buying a property in France but it is normal and should not necessarily be cause for concern. It is not uncommon for the local commune to have the first right of refusal should a property be available for sale. Perhaps a good example of this would be a house next to a school that the local commune would like to use to extend school facilities. They must however match the price that the buyer is prepared to pay in order to pre-empt the sale and in practice this rarely ever happens. It is the notaire s responsibility to purge any pre-emptive rights that may exist. Page 11