Buying property in France


Since the global financial crash of 2008, and the resulting devaluation of real estate in most Western countries, property prices and the number of sales in France had in relative terms dropped, despite a small revival in the middle of 2011. However, from the second half of 2015 there has been a small growth in the market and renewed activity is beginning to move property prices gently upwards. Coupled with low interest rates, there has not been a better time in the past decade for buying property in France. However as many surveys have shown, property purchase is one of life’s most stressful activities alongside divorce, bankruptcy and bereavement. Many fear the complications and confusion over the paperwork involved and the need to deal with bank officials, real estate agents and legal representatives. The best way to conquer any fear and overcome anxieties is to learn and understand what is involved and thus be better educated about the process. Buying property in France, like any country, can be stressful at the best of times so preparation and up to date information is key. Below we outline the key areas to consider, the roles of each of the participants and explain the processes involved.


The process involved in buying property in France


The key participants: who is involved in buying property in France?
– Vendor
– Estate Agent
– Buyer
– Notaire
– Diagnostics surveyor

 

Your budget

The most important factor to realise before heading out to find your dream home in France is to know your budget. Do you have the funds to purchase outright, will you need to borrow and if so how much do you want to borrow or, are eligible to borrow? Will you need to sell your current property before you can invest in a house in France? A thorough personal financial appraisal will not only save you time and money but also the other participants who may be involved during your search.

Once you know your budget you need to make provisions for all the costs involved in your French property purchase

 

The property search

With the ever increasing popularity of the internet in the past decade, more and more potential buyers are using estate agent websites and dedicated property portals to research and find their dream home in France. Knowledge of the area you are interested in is vital as location mistakes are costly but once you’ve narrowed it down you can start your search.

Contacting owners direct is one possibility but always make sure you visit properties accompanied, giving details of your schedule to a third party.

The most common route is through a registered French estate agent, known as an Agent Immobilier.


The role of the French estate agent and their fees
A French real estate agent is a regulated professional and as such will carry a professional registration card and be in possession of professional liability insurance. His role with respect to a potential buyer is to ascertain their search criteria, understand their financial position with regard to funding a purchase and, determine the time scale in which they want to purchase a French property. The agent can then match their criteria with property listings in their portfolio, make arrangements and accompany the buyer on any visits to properties. Once the client is serious about a property the agent will negotiate with the vendor until an agreement is reached. Estate agents are allowed to write the initial sales contract but most refer directly to a Notaire (who is the only person allowed under French law to conclude a real estate contract of sale). Any future questions regarding the property should be dealt with through the estate agent.
The estate agent’s fees are calculated as a percentage of the sale price and are theoretically paid by the vendor. The advertised price of a property, unless advertised privately, should always show the price of the property and the estate agent’s fees, as mentioned in Article 4 of the Decree of 29th June 1990. However, it is more the norm nowadays to show the price of the property Frais d’Agence Inclus (FAI), agency fees included.

 

Before visiting any properties with an estate agent you will need to visit their office first. Finding out your property criteria is essential as the agent will know the majority of the properties in their portfolio so not only will they save time dismissing some as not suitable but also be able to suggest others that fit or come close to your search criteria. The agent should also ask about your financial arrangements, how you are going to fund a purchase, are your funds available now, will you need to sell your current property etc. The agent is more likely to be enthusiastic about showing you a selection of properties if he knows you can fund the purchase. And lastly, in order to visit a property, you first need to sign a ‘bon de visite’.


What is a bon de visite and what should it say?
A bon de visite is a form issued by a French estate agent certifying that the property you are about view was first presented to you by them, in the first instance, thereby assuring the agency their commission should the potential buyer proceed to purchase the property. The signed form forbids the potential buyers to negotiate and conclude a sale directly with the vendors.
A good bon de visite will fit on one page. It should present the potential buyer with the address, a description and price of the property, as stated in the Mandat, as well as a space for you and the visiting agent to sign, including the time and date. A bon de visite is only a permission to visit a property, it does not in any manner constitute the beginnings of a contract of sale. However, make sure you always read and understand the form before signing.


Understanding the reason why you need to sign a bon de visite
One important factor to bear in mind when viewing property through a French estate agent is that selling contracts (Mandat) between the estate agent and vendor are predominantly non-exclusive, whereas in the UK for example, it is the reverse. The result is vendors tend to place their property for sale with as many estate agents as they can to maximise exposure. The consequence is that it is rare to see ‘For Sale’ signs outside French property for sale as each of the estate agents involved do not want to inform other agencies that the property is for sale as they would obviously prefer to sell it themselves. Only when an agency has an exclusive contract to sell will you see a ‘For Sale’ sign outside a property. Therefore, when you visit an estate agent in France you will be required to sign a bon de visite, a single-sided form saying that you first visited that particular property with that particular agency. The bon de visite therefore binds you, the property and the agency together so that should you eventually purchase the property, you have to buy it through that agency. It also means that an agency will never advertise the exact location of a property for sale to avoid the potential buyers either going to another agent to purchase the property or dealing direct with the vendors, cutting the agent out.

 

Many hours and days can be spent driving around the French countryside as estate agencies in France tend to have a portfolio of property listings spread over a wide geographical area. Hence why prospective buyers need to be honest about what they are looking for and their financial situation. When you visit a property understand what is for sale, the boundaries of the land, any restrictions, rights of way, servitudes, and ask to see a Plan de Cadastre outlining the plot for sale. Once a property sparks an interest don’t be coy about asking to visit again. When you are ready to make an offer, talk to the estate agent, write down your offer and any clauses or conditions, sign and date it, then the agent will present it to the vendor. If the vendor accepts your offer the next step is the creation of the initial contract. At some point between the acceptance and the final signing, it is essential to open a French bank account as most utilities and taxes will only take direct transfers from your bank account. For more info on how to open a French bank account

 

The sales contract

There are many types of sales contracts that can be drawn up by either Notaire or estate agent that tend to favour one party or the other. However, there are two commonly used property sales contracts in France that are very similar, have the same end goal but with subtle differences.

  • Promesse de Vente
  • Compromis de Vente

Although the Compromis de Vente can be drawn up by both Notaire and estate agent, only a Notaire is authorised to use the Promesse de Vente. More often than not, the Compromis is the preferred contract as it promotes equal responsibilities and obligations for both vendor and buyer. The initial contract is sometimes referred to as an Avant-Contract, a pre-contract, the full and final version (l’Acte Authentique de Vente) is signed when all searches and paperwork has been obtained. In both types, a deposit of between 5 – 10% is given and held in the Notaire’s secure bank account and once the signed contract has been posted (registered) and received by the buyer, a 7 day cooling off period is observed (reserved for private buyers, not applicable to business buyers) after which you are legally bound to complete the purchase or forfeit the deposit.

Promesse de Vente

The Promess de Vente is as it says, a promise to sell, a contract where the Vendor grants permission to sell a described property for an agreed price and over a specified time period. A buyer whose Notaire uses this type of contract must make sure that it is written in the contract that the vendor is also unable to change their mind without being forced to complete on the contract. If there is no provision for this in the contract the buyer’s only course of action would be to sue for compensation.

Compromis de Vente

By far the most popular choice of sales contract as it makes equal obligations for both parties. In essence, the vendor agrees to sell the property to the buyer and equally the buyer agrees to buy the property from the vendor, subject to any clauses suspensives.


The role of the French Notaire and their fees
A French Notaire is a legal expert (lawyer) covering all areas of the law, with a mission of public authority, who prepares authenticated contracts on behalf of his clients. Although a Notaire is vested with prerogatives of official authority, acting on behalf of the State, he is paid by his clients as one who is self employed, and not by the French taxpayer. The fees for their services are however based on a rate fixed by the State.
Notaire’s fees for property conveyance: included in the Notaire’s global figure are; the actual Notaire’s fees (approx. 10%), set and regulated by a government defined rate; conveyance taxes, TVA and registration fees paid to the French Treasury (approx. 80%) and; expenses including town planning documentation, mortgage registry, surveyors, land registry etc. (the remaining 10%)

 

The sales contract can be drawn up by the estate agent you viewed the property with but as a Notaire has to process and conclude the deal it is prudent to let him deal with the matter from start to finish. The estate agent is effectively working for the vendor as they already have a contract (Mandat de Vente) between them so to be completely detached from any possible loyalty, it is best to seek your own Notaire. It is possible to use a single Notaire for both vendor and buyer as the Notaire is by law impartial and working under the guidance of the government. Only a Notaire can advise you on the type of ownership possible. French inheritance law is different from most countries of the world and in the first instance the law protects the immediate blood line decendents, i.e. children followed by parents, and not spouses. Note, joint property ownership is not possible in France (unless by inheritance) without either being married or in a civil partnership and even then the relationship type has to be confirmed in law, i.e.French marriage contract (which can respect the individual contributions brought into the partnership or the contract can state that the partnership is an equal 50/50 share). The only way more than one person can purchase a property is through a SCI (Société Civile Immobilière) a company set up for the express purpose of real estate ownership.

When the sales contract is drawn up you will be asked for many details including your personal details and you must mention at this point any conditions (clauses suspensives) that need to be included in the contract.

 


Clauses Suspensives
Clauses suspensives are conditions that are inserted in the sales contract that need to be honoured, within the time period of the contract, placed by either the vendor or buyer, allowing either party to withdraw from the sale if they are not, without penalty. An example would be if the buyer needed to apply for a mortgage to fund the purchase, this would be added to the contract as a clause suspensive. If the bank or lending institution refuses the loan, the contract can be cancelled and the deposit returned to the buyer.

 

When the vendor and buyer reach an agreement, they both sign a preliminary contract taking the form of a ‘promesse unilatérale de vente‘ (unilateral promise of sale), or compromis de vente (sales agreement). The contract states the commitments of both parties, the vendor’s to sell the property and the buyers to purchase. A time limit for the duration of the contract is set, all the relevant details of both parties attained and any clause suspensives added.

A deposit is, more often than not, required by the seller, agreed by both parties and is usually in the region of 5% – 10% of the sale price of the property. If either party withdraws without noted reason they forfeit the deposit, or a sum equal to the deposit. No payment is paid however until the cooling off period has expired. The sum given as deposit is retained by the Notaire (or estate agent, whichever draws up the preliminary contract) and is placed in a secure séquestre account. The deposit is deducted from the sale price when the contract is concluded.

Regardless of the type of sales contract drawn up, a mandatory 7 day cooling off period is given. This begins the day after the buyers receives a signed copy of the preliminary contract either by registered post or personally presented to them by the estate agent or Notaire. The deposit can be returned to the purchaser if he is forced to retract from the contract because of legal conditions (condition/clause suspensive) not being met within the time limit set.

The Notaire will now seek all the necessary diagnostic surveys and reports needed, for more info on French Diagnostic surveys.

Due process usually take around 2 months to gather all the necessary paperwork and carry out all the necessary surveys and searches. If there is more than 5000m² of land involved in the purchase then 2 months will be the minimum period needed as the property will have to be offered to SAFER (Sociétés d’aménagement foncier et d’établissement rural) for consideration and that requires a minimum of 2 months to process.

Important factors to bear in mind

  • If your French is not up to fully understanding all the negotiations and contract, make sure you either find a Notaire proficient in English (to which there are a growing number of now) or take someone along to translate for you.
  • Make sure you understand fully what you are buying and which parcels of land. Make sure that all your concerns are fully answered by your Notaire. Make sure you have inserted into the initial contract any necessary clause suspensives.
  • It is prudent to visit the property a day or two before the Acte, to make sure all is in order and that any fixtures and fittings that are included with the property are still in place. There was a case where a clause suspensive was included in the sales contract to make sure the vendor removed all their belonging from the house including a loft full of hay. A visit on the day before signing showed the vendors had not removed the hay so the final signing was delayed for a week until it had been. Also in the same example the vendor had removed 6 antique ceiling roses that were supposed to come with the property, so the Notaire held back 500 euros to compensate for them.
  • The Notaire will require the full payment for the property and their costs in advance of the final Acte.

 

l’Acte Authentique de Vente

For the final signing, l’Acte Authentique de Vente, both parties will be required to attend a meeting on a predetermined date. A proxy can be authorised if one or the other party is unable to attend the meeting but this must be done before the meeting takes place. Any adult (including a friend, the Notaire, estate agent etc.) can be nominated so long as the correct procedure is observed. The contract will be read again to make sure both parties agree to its content, and any amendments, and note all searches searches, clause suspensives and diagnostic surveys have been carried out. Both parties initial each page of the contract and sign their names where appropriate, under the guidance of the Notaire. If the property has been bought through an estate agent, the agent is likely to attend the meeting as well.

Once you have agreed to the contents of the Acte, signed all the paperwork, you are the owner of a French property. The vendor is paid once all costs and taxes have been deducted and the buyer walks away with a new set of keys.