1. TABLE OF CONTENTS
- About this Guide
- Information you’ll need when buying a second-hand property in France
- What if it is a new property rather than second-hand?
- Vendors' legal and financial obligations towards buyers
- The Preliminary sale-purchase contract
- The Réitération de la vente or Property Deeds
- On what basis may a contract for purchase be legally withdrawn?
- What fees, taxes and charges do I pay when buying a property in France?
- Property Management Fees
- Checks on the Land Registry
- The Public Notary
- Inscription of your New Title on the Land Registry
- Removal of the Previous Mortgage from the Registry
2. ABOUT THE LEGAL GUIDE TO BUYING A HOUSE IN FRANCE
Welcome to the Advocate Abroad® guide to purchasing a property in France! This property guide will give you an overview of the conveyancing process in France, including information on both your and the seller's legal rights and obligations as well as pitfalls to avoid.
Of course, no guide can take the place of independent legal advice. Throughout this guide you will find customer reviews of the Advocate Abroad English-speaking lawyers in your area of France.
Advocate Abroad® is a unique network of independent English-speaking lawyers, accountants, architects, translators and financial service companies in France. You are guaranteed that all of the officially registered and regulated professional members of the network conform to strict protocols and standards for legal services, which are overseen by a legal professional in the UK and member of the Chartered Institute of Legal Executives.
There are many ways to buy a property in France. You can buy off-plan, you can buy a plot of land to build a detached house, you can buy an already built house. In this Guide for Buying a House in France we will give you some hints and tips on buying off-plan and an already built house (second hand). Now, on with the guide!
3. WHAT INFORMATION DO I NEED BEFORE BUYING A SECOND-HAND PROPERTY IN FRANCE?
There are a number of legal issues that need to be considered when buying a property in France. In particular, the vendor is legally obliged to provide the following documentation:
- Registry information regarding the property
- Identity of the seller, he has to proof that he is the right owner of the house.
- Receipt of payment of the most recent property and housing tax
- Certification by the Community of Owners of the building or complex, signed by the Secretary on behalf of the President, confirming that the community payments relating to the property are up to date
- Copy of the co-ownership by-laws and the last three minutes of the general meeting.
- Indication of any easements.
- Indication of the value of the charges.
- Plans to be provided.
- Copy of all the technical diagnostics.
- A certificate of work damage insurance if the property was built less than 10 years before the sale or if it has been subject of major work within this period.
- Proof that there are no disputes relating to the property in question.
In addition, the buyer should be careful to confirm the following:
- Name of the current owner of the property
- If there is any mortgage or other charge over the property
- The physical property conforms to the description
- That the land is correctly zoned for building
- The buyer should also make sure there are no sitting tenants in the property
- Indication of possible projects deposited in the City hall relating to the concerned building
4. AND WHAT IF IT IS A NEW PROPERTY?
The new property can be sold in “VEFA” (as a sale before completion transaction (VEFA). Before buying a new property it is advisable to confirm the following (off-plan sale): The regulation of this kind of contract is very protective of the purchaser.
- The existence of a project license in which the relevant technical department confirms that the building project has been carried-out in accordance with the original approval originally issued by the town hall.
- That the license of first occupation has been issued.
- The certificate of habitability of the properties should be available, that all rules, standards, laws, directives have been respected, particularly in terms of town planning, the environment...
- Inscription in the property registry of the urbanization along with the necessary insurance for purposes of dealing with any defects in the building work.
- That any sums advanced (via instalments) for the purpose of purchasing a property ‘off-plan’ are protected by bank guarantee.
In addition, the reservation contract must contain the following elements:
- A detailed description of the property,
- A summary technical note describing the situation of the dwelling in the building or the location of the house on the land, the construction materials used, the collective equipment,
- The sales price and the conditions for price revision,
- The date of signature of the final deed of sale,
- The estimated time for completion of the work,
- The amount of the security deposit: 5% of the sale price if the sale contract is to be signed within one year, 2% if the time limit for completion of the sale does not exceed two years and no deposit if this time limit is more than two years.
5. WHAT LEGAL AND FINANCIAL OBLIGATIONS DO SELLERS HAVE TOWARDS THE BUYER?
The vendor of the property has the following legal obligations:
- To conserve the property until it is handed over to the purchaser.
- Transfer the property.
- Declare any apparent and hidden defects that they are aware of.
- To pay certain costs and taxes.
If there are any defects in the property known to the seller and which may have not been communicated to the buyer, the buyer may possibly rescind the contract or claim damages instead. There is a general 5 years’ time limit, from the date of purchase, in which to exercise this right.
However, this period may be different depending on the type of defect, whether it is a construction defect/disorder/nonconformity which may fall within the scope of statutory construction guarantees or a surface area defect for which the rules are special.
Unless there is agreement to the contrary, the purchaser is obliged to pay the costs relating to the drawing up of the deeds of transfer as well as those costs necessary to effect the transfer of the property - this would include notary costs and, depending on what is agreed, the agency costs. Any capital gains tax that is due will be payable by the vendor.
6. WHAT IS A PRELIMINARY CONTRACT?
In France, the « Promesse de vente » (undertaking to sell) is the commitment to conclude the sale if the conditions laid down by the parties are fulfilled, and of course assuming that the property continues to exist. The promise to sell is preceded by an offer from the potential buyer to the seller, who has to accept the offer in order for the contract to be concluded and to proceed to the promise to sell.
Assuming that all of the preliminary checks determine that the property is as stated and can be purchased safely, the purchaser may need some time to put together the funds necessary to complete the purchase. Other conditions precedent may also have to be fulfilled by the buyer or even the seller before the sale is finalized.
The French property purchasing process provides for this by use of a ‘preliminary’ or ‘deposit / guarantee’ contract. Effectively this is a contract-to-contract and normally stipulates that before a stated future date, the property will have passed from the seller to the buyer. In the case of a VEFA (Buying on plan: an agreement to sell when property completed), the pre-contract will be a reservation contract. In the undertaking to sell the owner commits to the potential buyer (named the beneficiary) to sell the property to them at a specified price.
In the pre-contract the seller and the buyer both undertake to conclude the sale at a commonly specified price. Although the payment of a security deposit or a capital allowance is not mandatory, the seller will usually require it. The amount is not legally fixed, but it usually is 5 or 10% of the sale price.
The buyer will have to hold enough cash and make it available before the signature of the preliminary contract (promise / compromise of sale). The buyer will have to pay this amount to his notary by means of a bank transfer or a bank cheque. This sum will be kept by the notary designated in the deed as the “escrow “ for the duration of the promise to sell. If the sale is successful, this sum will be used as a deposit, or may be paid as compensation to the seller if the buyer does not want to sign the deed of sale even though all conditions precedent have been lifted, particularly if he has obtained his loan and has not withdrawn within the legal deadline.
If need be, article L 271-1 of the French Construction and Housing Code will allow the purchaser to retract at the end of the signature of the preliminary contract. Besides, the municipality might benefit from a right of urban pre-emption which will enable it to have priority to acquire the property, in order to carry out a project of general interest. In such cases, the notary will have to send the City hall a declaration of intention to alienate informing it of the sale project.
7. WHAT IS AN REITERATION DE LA VENTE?
The final contract or reiteration de la vente as it is known in French is when the title of the property passes and the buyer’s new title may be registered in the local property register. The signing takes place in the office of the public notary who is a type of official registrar who must witness the contract signing in order for it to be legally binding.
On the day of the signing all interested parties meet in the office of the notary - this may include a representative of the bank if a mortgage is required. The deed is read aloud by the notary and the parties then present their identification after which the deeds are signed by the vendor, the purchaser and the notary.
At this point the monies for the purchase are handed over in the form of a bank-guaranteed cheque given to the notary whom will forward it to the seller. If the property is sold with a sitting-tenant, the buyer will not receive keys at the time of the sale, and rather must be returned by the tenant at the conclusion of the lease.
Instead, the purchase must obtain from the seller the originals of any documents held in relation to the tenancy: a copy of the lease, lease inventory of fixtures and fittings, deed of guarantee. The seller will reimburse the amount of the security deposit paid by the tenant upon signing the lease on the date of the signature of the deed of sale. Any running or periodic charges or costs borne in relation to the property are payable by the seller and the buyer in proportion to the amount of time in the current year that they may be deemed to own the property.
Note however, that it must be specified that any works agreed upon in the general meeting of the co-owners before the day of the sale will be charged to the seller.
8. WHEN MAY A CONTRACT FOR PURCHASE BE LEGALLY WITHDRAWN?
The reasons for which a contract may be rescinded are normally included in the contract itself in order to protect the parties to the contract. The following would however be the main reasons for rescinding a contract for the purchase of property:
- Failure to fulfil obligations under the contract.
- Loss of the property.
- Failure to pay (but this can also lead to the forced sale of the house).
- Hidden charges (over the property) or defects.
9. WHAT FEES, TAXES AND CHARGES DO I PAY WHEN BUYING A PROPERTY?
Whether you are buying or selling a property in France there are a number of costs associated with the process. A number of these you will expect if you have been through the process in another country, but some you will not. Here, the main charges will be covered and the party that is usually responsible is the buyer (unless otherwise indicated).
However, it should be borne in mind always that the concept of freedom to contract is a cornerstone of French law and the parties may always assume whatever responsibilities they wish with regard to payment of the costs and taxes incurred when transferring property in France.
Nonetheless, there are rules that cannot be derogated from. If the buyer buys a new property from a private individual, he will be asked to pay:
- Notary fees.
- Transfer duties for valuable consideration at the rate of 5.81% (in the majority of departments). These duties are broken down into:
- A variable departmental duty of between 1.20% and 4.50% of the purchase price (in practice, the most common departmental duty is the rate of 4.50%);
- An additional tax collected for the benefit of the communes of 1.20% of the purchase price.
- An additional tax collected for the benefit of the State of 2.37% of the amount of the departmental duty;
- Consequently, the maximum overall tax rate is 5,81 % of the purchase price.
- The property security contribution of 0,10 % of the purchase price.
- The sale is not subject to VAT, but only to the land registration tax.
- If the buyer buys a new property from a professional, he will be asked to pay the following fees:
- Transfer duties at the reduced rate of 0.71%;
- The real estate security contribution at the rate of 0.1%.
- VAT, the rate of which is 20% in the majority of cases. However, the reduced rate of 5.5% may apply under certain conditions.
10. PROPERTY MANAGEMENT FEES
France, similar to other mainland European countries has a much higher proportion of apartment style properties than in the UK or Ireland.
When multiple proprietors share common parts of a property such as the lifts in the building, porter facilities, the building edifice, the car-park or swimming-pool there is a cost associated with the upkeep of such shared amenities.
Accordingly, each proprietor is required to contribute financially to the upkeep by way of a community charge, known in France as la copropriété. The amount payable varies from building to building or urbanization to urbanization but will also be determined by the property owned within the building (some proper- ties are larger than others and therefore should pay a larger share).
For purchasers of property, As indicated above, the seller and the buyer will have to pay the co-ownership charges in proportion to the actual time during which they will have had possession of the property, unless otherwise stipulated.
In the same way, all that will have been voted in the general meeting of the co-owners until the day of the reiteration of the sale will have to be borne by the seller, unless otherwise stipulated. For this reason the seller is required to present the purchaser with a certificate of proof of payment of the community charge unless the purchaser has expressly waived this requirement.
11. CHECKING THE LAND REGISTRY
To ensure that the particulars of the property are correct i.e. the identity of the current owner(s), the mortgage charges and any other encumbrances that currently exist on the property and the existence of any court judgments affecting the property etc it is necessary to check with the land registry at the local town hall where the property is located.
The notary will make all these researches between the promesse de vente and the reiteration de la vente, ie between the preliminary contract and the definitive sale. If you are buying land in France, you should be careful to ensure that you planning permission is available or possible to obtain for the project that you have in mind.
12. THE NOTARY
While strictly speaking it is legal to arrange for the transfer of a property in France via a private legal contract, this is not the typical, nor the recommended way of doing so. This is because for any new property title to be registered in the public Land Register it is necessary to complete the transfer of the property by public deed or ‘reiteration de la vente’.
Failure to register the title would permit an unscrupulous vendor to sell the property to a third party who, upon registration of their title would be entitled to retain the property, while you - the poor earlier purchaser - would be left chasing repayment from a (probably) long-gone seller.
Also, failure to register a purchaser’s new title on the Land Register and thereby remove a prior title would allow the possibility of embargos being place on the property due to debts relating to the prior owner. From a practical point of view, no financial institution will offer a mortgage to facilitate the purchase without a public deed.
The procedure involves the drawing-up of the deeds of transfer by a public notary. This is an independent official who oversees the process and ensures that the proceedings take place according to the law and that the documentation is verified. The amount charged by the notary is prescribed by law and varies in function to the price of the property.
13. INSCRIPTION OF NEW TITLE ON THE LAND REGISTRY
Once the property has been transferred it is advisable to register the new ownership details with the public property register. Apart from not being able to obtain a mortgage without doing so, failure to register can cause multiple problems in the future with regard to future property transfers, inheritances, defending title against third parties, etc.
14. REMOVAL OF THE PREVIOUS MORTGAGE FROM THE REGISTRY
While not a legal requirement, it is preferable to have the previous mortgage removed from the property register and the cost is normally attributable to the seller, who sells ‘free of encumbrance or charge’. It is best practice even though the mortgage has been paid off following the sale of the property.
The charge will still appear on the register and its removal incurs a number of charges, notably notary and registry charges. The process involves obtaining a certificate from the financial institution that issued the mortgage that the mortgage has been discharged. This certificate is then presented to the notary who draws up a public deed to that effect.
The deed is then presented to the registry for inscription on the property register which thereby removes the mortgage charge from the property.© Copyright 2020 Advocate Abroad SL.