Buying a Property in France
French formalities are bound up in "red tape", and a property transaction is no exception. However, the system is, in many ways, in my opinion, better and safer than in most other countries including England.
The French law concerning property is more like Scottish law than English. "Gazumping", for example, is not possible, and if you make a written offer on a property that is accepted by the proprietor, you will usually be expected to put down a deposit of 10% of the purchase price, which, unless for a bona fide reason, you will forfeit if you change your mind. All normal property transactions must pass through a "notaire" (notary) who is the only person who can make the searches and obtain certain legal documents necessary to make the transaction possible.
The choice of notary is in the hands of the purchaser, as indeed are the "notary fees", which depending on the selling price, can be as much as 7% on old properties, or as little as 1.5 to 2.5% on new ones. One should note that prices of property are advertised exclusive of these charges. The notary does not get all the fee. Most of it goes to the French state - surprise, surprise!
If an owner or agent tries to impose his notary, be aware that you have the right to choose your own notary who, if necessary, will work in collaboration with the owner's. In fact, it is quite common to have two notaries working on the same transaction. The overall cost is not greater than using only one as fees are shared. However, the delay may be a little longer due to the necessity for the two notaries to correspond with each other.
To make things clear, let us take a hypothetical example of a property transaction. Mr Brown has visited some properties with "Acme Immobilier". He decides to make an offer on a property listed at 2,000,000 francs and informs "Acme" that he is prepared to pay 1,900,000 francs. "Acme" will normally require a written offer backed up by a cheque for 10% in order to be able to convince the proprietor to accept the offer.
This step should not be taken lightly. Remember that what you sign becomes binding if your offer is accepted. Therefore Mr Brown should be sure that he definitely wants the property and is aware of the contents of the offer he is making. He could insist on showing the proposed text to a notary or at least have it explained to him, line by line, in English before signing it. Conditions, if any, should be included at this stage, for example: obtaining finance, subject to survey etc.....
The cheque will normally be made out to a notary and although some agencies with the correct insurance have the right to put the cheque into their own escrow account, it is probably wiser to insist on making the payment to the notary who you wish to act for you. Mr Dupont the owner of the property in our example, countersigns the offer. From this moment Mr Brown has seven days in which to change his mind. At the end of this period, if Mr Brown confirms his intention to purchase, Acme gives the agreement and the cheque to the assigned notary who registers them. The cheque is cashed and put into the Notary's escrow account.
The transaction is now under "compromis" or in other words "compromised". The owner cannot sell to anyone else, nor change the price. The purchaser can only pull out if one of the clauses he inserted in the offer has not been fulfilled. Alternatively, he loses his deposit. The notary will then require two or three months in order to prepare all the necessary paperwork before getting the parties together to sign the title deed (acte finale). At this stage when all the parties have signed and Mr Brown has paid over the remaining 90% of the price plus the notary fees, the notary dispatches all monies owed by the proprietor to the bank and others, then pays Acme Immobilier their commission and gives the balance to the proprietor. As of the final signature, Mr.Brown becomes the legal owner of the property and receives the keys.
Generally, buying a property abroad is a good way of reducing the cost of living, but buying a property in France is not necessarily and easy way to make a quick buck: property prices are much more stable compared to the English property market, with prices really only rising in line with inflation and not adding much value to the property in real terms. There are also the taxes and costs associated with buying property in France to consider when planning your investment. Looking for property abroad is therefore more often associated with investing in your future life - somewhere to spend your holidays or somewhere to retire when the time comes.
When you buy property in France bear in mind that the costs are different to those in the UK. There are more taxes for a start, including income, wealth, property, capital gains, and residential taxes. This can add up to quite a hefty sum. Even though the government has pledged to reduce income tax by a third in the coming years, tax in France is still quite high. Late payment of taxes incurs a charge of around 10%, so make sure you pay your dues on time! If you rent out your property in France, whether this is to a friend for a few weeks' holiday or 52 weeks of commercial rent, you will have to declare and pay income tax on the rental income (revenu foncier) even if you live abroad. Property tax covers your contributions to local services like rubbish removal and street lighting and varies greatly depending on the region: oddly enough, the Paris area has some of the lowest rates in the country. You pay wealth tax if your annual income exceeds €720,000. Residential tax applies to properties with a rental value over €4,600 on 1 st January. Even if you rent or sell the property from 2nd January onwards, you have to pay the full year, not the new tenant or owner. Capital gains tax (CGT) is rather more complicated: suffice to say that the sale of second residences incurs CGT and the EU tax authorities are working together to track anyone who tries to dodge paying it!
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