THE BUYING PROCESS
The Initial agreement to purchase a property
Having found a suitable property, you will negotiate and enter into
an initial agreement with the vendor. It is likely that you will
make and offer and for an offer to carry weight in France this will
invariably be in writing. This offer 'Offre d'Achat' would be
signed by you and presented to the vendor. The vendor will
normally have up to 5 days to 'reflect' upon it.
if the offer is accepted, the
vendor having signed the offer form to confirm his acceptance,
matters proceed towards the ‘Compromis de Vente’ or ‘Contrat de
réservation’ and is a binding contract between the buyer and seller
which sets out the terms and price of the sale.
The preliminary contract will include a full description of the
property, the latest date by which completion must take place, the
price, any escape or conditional clauses and the identity of both the
vendor and purchaser. The preliminary contract can be signed either
at the Notaire’s (Solicitor) office or at the estate agency.
If you are making a purchase with a mortgage, you must instruct the
estate agent to make your purchase conditional upon obtaining a
mortgage: a ‘condition suspensive’. This will offer you further
protection under French Consumer Law. Upon signing this preliminary
agreement the purchaser has to place a deposit with the Notaire,
which is normally 10% of the purchase price and will be deducted
from the sale price. The property is then taken off the market. It
is better to think of this deposit as a payment on account or a
penalty for breaking the contract. Having said this, a law passed on
1 June 2000 does grant you a seven-day cooling off period during
which time you can withdraw from the agreement.*
Stamp Duty and registration
fees will need to be paid at completion when the agreement will be
filed at the Notaire’s office. As a guideline, the Notaire’s fees,
Stamp Duty and Registration fees will add up to around 6% to 8% of
the purchase price for existing properties. For new properties they
will amount to around 2% to 4% of the purchase price. As the French
tax and succession regimes are different from many other countries,
to ensure tax efficiency and problem free transfers on death you may
wish to consider instructing a solicitor based in your home country
to advise you.
By law, the purchaser can insert clauses into the agreement. The
seller, of course, has to agree to these.
* Although the preliminary contract is binding on both the seller
and the purchaser after this cooling off period, you should note
that the sale will still be subject to the Notaire formally checking
the title to the property.
The role of a Notaire
A French Notaire is a publicly appointed official who is responsible
for ensuring the property has good title (i.e., no irregularities in
the ownership) and that the purchase or sale is correctly
transacted.
A Notaire represents neither the seller nor the buyer but the French
Government. They can also act for a client anywhere in France. The
same Notaire therefore can act for both the vendor and the
purchaser. This is not obligatory and you can appoint your own
Notaire if you wish. You may consider it to be better to have a
Notaire act for you who speaks English. The fees (paid by the purchaser) are fixed by
law and will be split between both Notaires if two are appointed.
You should be aware that the Notaire’s job is to finalise the
agreement he has been told has been recorded. He is not there to
advise or warn the purchaser of any inadequacies in it. His role is
therefore very different from that of a solicitor
Completion & Taxes
Completion is when the final deed of sale is signed and legal
ownership is transferred to the buyer. It is at this point that the
balance of the purchase price plus any extras such as the Notaire’s
fees, taxes and duties are due. The monies will be paid directly by
the bank to the Notaire. The final act is the signing of the deed of
sale (Acte de Vente) which will take place in the Notaire’s office.
It is normal for both parties to be present when the deed of sale is
read, signed and witnessed by the Notaire. It is good advice to
attend in person at the Notaire’s office for the signing and
witnessing of the deed of sale. However, if this is not possible you
may invoke a power of attorney. Each page has to be initialled by
both the seller and buyer and both must sign the last page after
writing in French ‘bon pour accord’ which means they have understood
and accept the terms. There are no title deeds as such in France and
proof of ownership is provided and guaranteed by registration of the
property at the Land Registry. The Land Registry’s stamp is put on
the deed of sale and the Notaire gives a certified copy to the buyer
around two months after completion of the sale.
Rates and Taxation
Taxe Fonciere
This is a land tax. The size of the property determines how much is
paid and owners of new properties are exempt for the first two
years. The tax is paid by the person owning the property on 1
January of each year, with payment due in the final quarter of the
year. However, if the property ownership changes then the purchasers
must usually reimburse the sellers for their share.
Taxe d’habitation
This is a local services tax. It covers the services and maintenance
provided by the local council and again is payable annually in the
last quarter of the year. The estate agent will advise you of the
taxes in relation to your own property and tell you how much you
will need to pay. The tax demands will be sent to the address of the
French property.
French Inheritance laws and Taxation
These are specialist areas and we strongly recommend that you seek
professional advice. French inheritance laws are particularly
different to those abroad. You are well advised to take legal advice
on these matters before completing the purchase. You may also be
liable to French tax if you derive any income from the property,
i.e., letting fees. You must register with the French Taxation
Centre for Non-Residents when you buy the property. France has
signed taxation treaties with most countries which means that you
avoid double taxation.
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