Here is a transcript of the points raised in the interview with Sarah Bogard a partner at Furley Page LLP Solicitors. Please remember this is general guidance and you should consult the relevant professional before making any decisions on buying property.
To listen to the programme please click the play button at the foot of this page.
The Buying Process in France – hints and
tips
1. Introduction
1.1. The buying process is different from that in England and Wales. Not only do buyers
have to get to grips with a different language, but also a different legal system.
1.2. One key point to remember is that property in France is “sold as seen”. This
emphasises the importance of knowing exactly what you are buying, what state the
property is in, not to mention the area in which you are buying in.
2. The stages in the transaction
2.1. Viewing properties
2.2. Making the offer
2.3. The preliminary sales contract
2.4. Searches, getting a mortgage offer, and deciding on the ownership structure
2.5. Completion and handing over the keys
2.6. Another important aspect is budgeting for the purchase – what costs will be your
responsibility.
2.7. Following on from this, it is highly important that you review your Will and general
estate planning when your asset base changes significantly, such as buying abroad.
This is a whole topic in itself.
We can take each of these stages in turn.
3. Viewing properties
3.1. You should view a property with a careful eye. Getting a survey in France is
generally not the ‘norm’ but it is recommended. There is a concept of vice caché.
The French Civil Code says that “the seller of property is liable for all latent defects
in the thing sold which render it unsuitable for the purpose for which it was sold or
diminish such suitablility to such an extent that the buyer would not have bought it or
would have paid a lower price if he had been aware of them”. A latent defect must
affect one of the essential features of the property (be a construction defect), be
hidden such that the buyer could not find out for himself, and it must have existed at
the time of sale. Liability for a latent defect gives rise to a claim against the seller. A
buyer demand repayment of the price paid or a reduction in the price paid.
3.2. I would be here until tomorrow if I mentioned all of the points for consideration, so I
shall focus only on some here.
3.3. There are of course different types of property you could be viewing - very old ones,
properties ready for renovation, properties which have recently been renovated,
those in the middle of the countryside, in the mountains, in a town or city, near a
river, an apartment, or indeed a blank canvas of land ready for a new property
development.
3.4. If you decide to buy a property on plan – this is known as a vente en état futur
d’achèvement – the purchase process is very different. One key difference is that
you pay the purchase price in stages in accordance with the progression of the
building works, and the initial contract reserves one of the properties for you. I think
that this would be a good topic for another day.
3.5. Some pointers: –
3.5.1. walk round the boundary of the land and compare it with the plan – the best
plan to look at is the cadastral plan from the French Land Registry. Check the
area you want to buy reflects the area on the plan.
3.5.2. Ask if there are any rights of third parties over the land, for examples a right of
way or right of access to maintain a neighbouring property. If any neighbouring
properties are landlocked you may have to grant them a right of passage over
your land. Check how you access the land – is it direct from a main road or is it
over a neighbour’s property.
3.5.3. Take a trip around the surrounding area. Are there any local factories which
might emit unwanted smells or noises, are there local canals or rivers which
may cause a flooding problem, could the property be affected by avalanche, is
there any development going on in the local area which might affect the
property (eg a neighbour starting a gite business next door).
3.5.4. Visit your local mairie to get any information you can about the area. Areas are
designated, for example as being urban, rural, or even within an area where a
protected building exists. For example, if the property is close to an historic
building or monument (such as a church) you may find that you are restricted in
what building works can be carried out at the property, particularly external
works.
3.5.5. Ask questions and take a look at the services to the property. Is the drainage
served by mains drainage or an individual system by way of a fosse septique;
are the electrical and gas installations at the property in good working order; as
far as you can tell, are there visible signs of any problems with the property for
example damp, dry rot, wood boring insects. I will come back to these points in
a little bit.
3.5.6. Ask for an idea of the approximate annual costs to run the property – the cost of
heating etc, the local tax charges. This will help you budget and decide whether
the property as a whole package is within your price range.
3.5.7. We have a comprehensive set of questions in the form of a questionnaire that
our clients can take with them when they view a property. It helps to point out a
few issues that they might not otherwise think of checking.
4. Making the offer
4.1. Article 1583 of the French Civil Code states that a sale “is complete as between the
parties and property passes in law to the purchaser from the seller as soon as both
the thing and price have been agreed upon notwithstanding that the thing has to be
delivered or the price paid”. Therefore, it is possible to have a binding verbal
agreement. As such you should be careful when making an offer. You may want to
sign an offer to buy - offre d’achat – and if you do you should be very careful of the
wording. It should be made clear at least that the offer is subject to completion of a
bilateral contract.
4.2. Once an offer is accepted then, if marketed through an estate agency, it is likely that
the estate agent will draw up the preliminary sales contract. Some Notaires also act
as agents. If it is a private sale a Notaire will be instructed to draw up the contract.
4.3. A quick point about the Notaire. The seller usually instructs him. You should be
aware that you are free to appoint your own Notaire, at no additional cost, and this is
something that should be given thought to. It is important that you appoint someone
who is going to act for you in your best interests, who can explain the process and
the law to you in a language you will understand, and to think of the wider picture. A
Notaire may not advise you on the most suitable ownership structure unless you ask
the right questions, or suggest you make a Will or revise an existing Will. In more
cases than not he will not have the expertise to consider your position from the
perspective of both English and French law. This is where a UK adviser can become
invaluable.
5. The Preliminary Sales Contract
5.1. There are a number of different types of preliminary sales contract. There are
unilateral contracts, such as the promesse de vente but probably the most used is
the bilateral contract – the promesse synallagmatique or compromis de vente.
5.2. Here are a number of clauses you should find in the contract, and which differ from
an English contract for sale:
5.2.1. Your civil status – this is known as your état civil. You will find that the person
drafting the contract will ask you for a lot of personal information, such as your
date and place of birth, marital status, whether you have been divorced or
widowed etc. This information is included in the contract.
5.2.2. The contract will be subject to various conditions. The order of events for a
French transaction is different to an English transaction. The Notaire will not
carry out his searches until the preliminary sales contract has been signed.
Indeed, it is often the case that the Notaire is not instructed until he receives a
copy of the signed contract. The conditions set out in the contract are known as
conditions suspensives. Some of the most common conditions suspensives are
in respect of obtaining satisfactory search results, and obtaining a mortgage
offer (because you don’t get a mortgage offer until after signing the first
contract). You may best protect your interests by requesting other conditions to
be included. For example if you want to develop the property or you want to
carry on a business from the property, and either of these is a key reason for
you buying the property, a condition making the contract conditional on
receiving relevant permissions would be advisable.
5.2.3. The dossier diagnostique technique – France has its own type of home
information pack, although the documents it contains are very different to those
here in England and Wales. The dossier is a set of reports produced by an
expert on various aspects of the property. For example there are reports on the
presence or absence of asbestos or termites at the property, and there are
reports on the gas and electrical installations. Don’t expect to see all reports –
the requirement for each report depends on issues such as the age of the
property, the age of the gas or electrical installation, and whether the property is
located in an area susceptible to termites. You should check which reports are
obligatory and make sure you see copies. You should also check the reports
are still valid. It is better to see the documents before the day you are due to
sign the contract because if they show up something which concerns you, you
may decide to back out of the purchase or use the information as a negotiating
tool to reduce the purchase price. For example, if you find out that there are
problems with the electrical installation, which is going to cost, you to put right
you might decide to raise this with the seller and negotiate a price reduction.
5.2.4. If the property has an individual drainage system at the moment a seller is not
obliged to provide an expert’s report. It will be obligatory for sales from 2013.
Inspections of all individual systems are currently being carried out to ensure
that systems conform to current regulations. If a system is not conform it will
need to be brought up to standard. If you buy a property which has a non-
conform drainage system it will be at your cost to make good any problems.
You should get as much information as possible about the system and ask if it
has been the subject of an inspection yet.
5.2.5. Swimming pools – if the property has a swimming pool you should make sure
that it conforms to the law in terms of the security measures installed. If one of
the specified types of security measures is not present a fine could be levied on
the owner of the pool – and this could be as much as Euro 45,000.
5.2.6. Compulsory purchase rights – certain persons or organisations may have
compulsory purchase rights over the property. Those concerned will be notified
of the seller’s intention to sell to you and they will either decide to exercise their
rights or waive those rights. The notification is sent after the preliminary sales
contract has been signed and it is one of the conditions precedent in the
contract.
5.2.7. Substitution of parties – if between this contract and completion you decide to
restructure the ownership – for example you decide to buy through a company
- e.g. an SCI – you should make sure the contract allows you to change the
purchaser prior to completion.
5.2.8. A cooling-off period – after you have signed the preliminary sales contract you
have an opportunity to back out without penalty if you change your mind. You
get a seven-day cooling-off period after you have signed the contract during
which you can notify the seller you have changed your mind. Whilst this is a
unique opportunity for you the time period is really short in which to give
notification. You should ask all your questions before signing the contract. Also,
there are some types of sale where you will not benefit from a cooling-off period
so you need to check this carefully. Where it is available it can prove to be a
real benefit. We have had some clients use it and it has saved them losing their
deposit.
6. Searches, mortgage offer and ownership structure
6.1. The Notaire will now carry out various searches. This includes checking the title to
the property to check the seller has the requisite title to the property to sell.
6.2. You will need to make your mortgage application. Once a mortgage offer is made
you cannot accept within a set period of time, which is another cooling-off period.
Once the mortgage is in place this condition precedent in the contract will be fulfilled.
6.3. You will also need to arrange your insurance policy to be in place from completion
day.
6.4. Liaise with the seller or estate agent to get contact details of the utility companies
serving the property ready to open your accounts with them.
6.5. You should decide now on how you wish to own the property if you will be buying
jointly with at least one other person. If you decide to own the property en tontine a
clause will need to be included in the sales deed prior to completion. Once you
complete the purchase you can’t change to this type of ownership. The ownership
structure of a property is extremely important, particularly for people who are not
accustomed to having the law dictate to them how at least part of their estate should
pass on death. Ignorance of French succession law could mean that you get caught
out later on. For example your wish to leave your property all to your wife or husband
might not happen because of how French law applies. I cannot stress enough how
important it is to get advice on the different ownership structures and how French
law will apply to your estate. I would like to dedicate a future programme to this issue
as it is so important.
7. Completion and handover of keys
7.1. The completion date is not set in stone in the preliminary sales contract. It could be
fixed a matter of days before, or if you are lucky you will have a couple of weeks.
You should ask to see the draft completion deed – the Acte de Vente – beforehand
to check the terms and make sure everything is in order. Whilst for the most it
repeats the preliminary sales contract, there are likely to be additional clauses, for
example verifying the ownership history of the property.
7.2. You should ask the Notaire for a completion statement confirming the amount of
funds you will need to transfer. This is the time when you will find out the exact costs
in respect of Notaire’s fees and disbursements. You will need to give enough time for
the funds to be cleared in the Notaire’s account.
7.3. Prior to completion it is highly recommended that you arrange a final inspection of
the property to check that everything is as you expect it at the property – remember
the property is sold as seen. If anything is not as you would expect you will need to
bring this up with the Notaire. For example, if the seller has, say, left a vehicle at the
property which he had promised he would remove, you will not want to suffer the
cost of removal and so you may wish for the Notaire to hold back some of the sale
proceeds pending him removing the vehicle.
7.4. On completion day you will meet with the Notaire to go through the sales deed and
annexed documents (the various reports etc) and once signed the keys will be
handed over.
7.5. After completion the Notaire will deal with registering you as the new owner at the
land registry and pay registration taxes and charges due on your behalf. It could be
some months before you receive the document confirming the registration process is
complete and you may have to remind the Notaire to send the paperwork to you.
8. Costs
8.1. As you would any purchase, you should carefully budget for all likely costs. Here are
the most common ones, other than the purchase price of course!
8.1.1. The cost of any items not included in the purchase price. In addition make sure
they are specifically mentioned in the contract.
8.1.2. You may be responsible for payment of the estate agent’s commission.
8.1.3. The Notaire’s fees are the buyer’s responsibility. His fees are set by a national
scale and are subject to French VAT at the rate of 19.6%. If you have appointed
your own Notaire he will share the fees with the seller’s Notaire.
8.1.4. Registration charges and taxes. The tax equivalent to our stamp duty land tax is
5.09% of the purchase price, although there is a reduced rate for younger
properties.
8.1.5. If you are buying a new property, you will also have to pay French VAT on the
purchase price.
8.1.6. The Notaire will incur various disbursements when he carries out his searches.
Theses costs could be in the region of euros 500-1,000 for older properties.
8.1.7. If you are buying a co-ownership property (for example an apartment) you will
be responsible for paying a service charge each year and any costs associated
with the development.
8.1.8. As previously mentioned, you will need to insure the property from completion.
8.1.9. You will also be responsible for local taxes which can be equated to our council
tax. The main ones are the taxe d’habitation and the taxe foncière. The first is
payable by the person in occupation of the property on 1 January each year
and the second is apportioned between the buyer and seller in the year of sale.
9. Related Matters
One key point to investigate is the application of French succession law. French law
attempts to ensure that family members - primarily children and descendants – are not
disinherited completely. The Civil Code sets out who is entitled by law to inherit part of
your estate on your death. If the terms of your Will don’t follow French law, they will be
overridden. We have assisted a number of clients with the administration of a French
estate of a loved one where either the deceased person did not have a Will or his or her
Will simply did not take French law into account. Beneficiaries have been
disappointed/shocked by the outcome. It really is important that you take advice on how
French law will apply to distribute your assets on death, what assets it will apply to (it may
only be the property in France), and how you should structure your Will (whether it is an
English or a French Will). This point is very important if you have children from a previous
relationship.
10. Conclusion
By no means have I covered all of the points to be aware of in a purchase. The purchase
system in France is not straightforward and for many it is made even more difficult by all
paperwork being in a foreign language, and a foreign legal language at that. Getting
professional advice on your purchase will help you to understand what you are signing
and point out the things you should consider and know about.
To speak to Sarah please visit the Furley Page website at www.furleypage.co.uk
