PROPERTY BUYERS ADVISORY GUIDE TO FRANCE
WHY BUY A LUXURY VILLA OR APARTMENT IN FRANCE?
France is the perfect choice if you are looking to buy a property abroad for so many reasons. If you are a skier, the obvious attractions are the year round activities to be found in the Alps. Enjoy a healthy, outdoors lifestyle, superb food and incredibly easy access from the UK. It is perfectly feasible to arrive on a Friday evening, after a hard week at work, and hit the slopes first thing Saturday morning.
For those seeking an alternative to a typical sun and sea type resort, there can be no better destination especially for families as there is something to cater to every age group.
Alternatively, if you aspire to be close to the sun and the sea, the French Riviera coastline is hard to beat. Offering a perfect mix of beach and countryside, both of which offer some of the best cuisine to be found in the world, there are so many locations to choose from within the hugely varied landscape. Once you have a base, it is very easy to travel around and get to enjoy at least some of the surrounding areas. In addition to the many expats you will encounter, many of the indigenous population speak English too so communication is never an issue.
France, possibly more than any other country in the world, is very much about buying a lifestyle as demonstrated by the number of people who rent out their holiday homes to tourists who, if they can’t own their own piece of paradise are more than willing to borrow someone else’s for a while.
FINANCIAL PLANNING WHEN BUYING A PROPERTY IN FRANCE
Once you have made the decision to buy a residential property in France, we would recommend you review your numbers, ideally even before you start looking at properties. It may be that you can afford to spend more than you had thought with some thorough financial planning.
We think it is extremely important to sit down and meet with all our clients at the very start of the process to assist with lifestyle planning.
OBTAINING A RESIDENTIAL MORTGAGES IN FRANCE
Even if you have sufficient capital to buy property in France outright, you may wish to consider using a mortgage to fund the purchase for various reasons: Fiscal: You may be eligible for tax allowances deductions. Financial: You may earn a higher rate of return on capital invested than you would pay to service a loan. Security: A bank will carry out its own due diligence and only lend against a property that meets its criteria
Mortgages in France are widely available and the terms are similar to those in the UK including 2% on a variable rate basis, circa 2.55% on 15 year fixed rates and circa 2.75% on 20 years fixed rates. Mortgages available include variable rates, capped and fixed rates mortgages. You must beware as some rates carry an early repayment / redemption penalty. We recommend you explore all your financial and mortgage options.
THE RESIDENTIAL PROPERTY PURCHASE PROCESS IN FRANCE
Once you have found a property, you will be expected to make a written offer to the vendor. If the offer isn’t acceptable they will provide you with a counter offer and you will then work to find common ground with our assistance. Once the price is agreed a formal ‘offer letter’ is produced for signature by yourself and the seller.
The offer letter usually includes a date of signature of the Comprimis de Vente (Preliminary contract). This means that both parties are working towards this date when conducting initial due diligence on the property. You might also want to consider other suspensive clauses at this stage for complete transparency, for example, subject to mortgage. Unique Living can advise on other important considerations at this stage to protect yourselves.
We recommend giving yourself enough time for signature of the preliminary contract some estate agents are known to rush this process, it is very difficult to do everything within 4 weeks from signature of the offer letter.
At this point you will need to appoint a Notary, which is a legal requirement in France. Their role is to conduct searches of the property, including the land registry, ownership rights, boundaries including rights of way and general nuisances, We would always advise you to find a notary with knowledge of the local market, for example good contacts at the local town hall, a strong understanding of local planning laws and consents. We have found that notaries from other parts of France have very different skill sets. Some estate agents will recommend using the same notary for buyer and seller to save on cost, we would strongly advise against this, as while a notary is considered neutral, it is still better to have someone who is representing you solely in our opinion and experience.
On signature of the Compromis de Vente (CDV) you will be expected to pay a holding deposit, usually between 5-10%, which in theory secures the property for you. The deposit is paid during the cooling off period, which in France is 10 days from signature. If the deposit is not recieved in this period the sale is voided or an extension must be granted by your notary.
As part of the Comprimis de Vente a completion date is set, you can have your suspensive clauses included in the contract, which means that if you have included a clause stating ‘subject to mortgage’ if you are unable to obtain the mortgage you still have the ability to walk away from the purchase. You will find it extremely difficult to apply for the mortgage on a residential property until you present the CDV to your mortgage provider.
COMPLETING ON YOUR RESIDENTIAL PROPERTY PURCHASE
It usually takes around 2-3 months to finalise a purchase so always set a realistic completion date, mortgage providers can be slow, so it is important you take this into account. In addition obtaining a life insurance policy is an obligation of a mortgage and this can take a few weeks to organise.
A notary will also need to get the purchase registered with a local town hall and obtain all the relevant licenses and transfer into your name. This can be a very onerous task so always consider this part of the process when agreeing dates. Once your notary is happy he will present you with the acte de vente, deed of sale, this should also be provided in your native tongue, we advise you check this thoroughly before signature, as will the seller.
Once the contract has been negotiated between notaries and is agreeable to both parties this can be signed in front of the Notaire in order to become the legal owner of your new property. You can also provide your notary with Power of Attorney. Prior to signature your notary should be in receipt of the he full balance of purchase via your mortgage provider and yourself.
Should you require a delay to completion we advise that you do this in good time to prevent issues on completion, it has been known for sellers to refuse which would mean forfeiting your deposit. You can do this by asking your notary to request an extension which will need to be acknowledged and approved by the seller. The sooner this is done the better for full transparency.
FRENCH RESIDENTIAL PROPERTY PURCHASE TAXES
It is important to incorporate purchasing costs into your budget when finding an international luxury property. On average, you will be looking at paying an additional 7 to 8% of the purchase price in associated property costs, taxes and fees.
If you already live or own a property here, you will be eligible to pay one or two local property taxes every year: Taxe foncière is a land tax, and is paid by the owner of the property. Taxe d’habitation is a residence tax. You have to pay this tax if you own a property and live in it yourself (or have it available for your use, or rent it out on short-term lets). Where properties are rented out long-term, the tenant pays. Both these taxes apply to non-residents as well as residents, and are often higher on second homes than on the main residence.
Demands for both taxes are sent annually. The amount must be paid by a specified date, usually in October (Taxe foncière) and November (Taxe d’habitation) but varies from place to place. Failure to pay on time incurs a 10% penalty. Payments can be made by cheque, interbank payments, bank transfers or online.
NOTAIRE FEES IN FRANCE
Notaire fees vary according to the purchase price of the property, 7 to 8%, including about 1% to be split by Notaires for their own personal fees and the rest collected by the Notaires on behalf of the French government as “purchasing taxes” of various sorts.
ESTATE AGENCY FEES IN FRANCE
On average 5 to 6%, including 20% of TVA (VAT)t. The percentage can be set freely by each Estate Agency, but the average is 5% of the total selling price. Remember the fees are on top of the price agreed by the seller. For example a seller might agree 1 million € net, that equates to an agreed price including 5% (including VAT) which equals 1,050 million €. Always ask for confirmation of the commission, while the seller pays the commision it is your money funding the fees.
RESIDENTIAL STRUCTURE AND DIAGNOSTIC SURVEYS IN FRANCE
French law states a certain number of mandatory surveys called “Diagnostics” which cover: energy efficiency, environment protection, asbestos, lead paint, termites, electrical system, gas system (when applicable), natural risks (flooding, landslides, earthquakes, fires). The Notaire will check these in addition to other matters including rights of way, zoning laws etc. We always recommend you request details on any building permits granted on nearby properties (ongoing or potential future ones), we don’t want your sea view being blocked. As a rule, very strict building laws do not allow for the building of a tall tower in a residential area with houses for example, but still it is necessary to be careful. A good notary will mean that you will not require a lawyer.
The only thing a notary will not do is check the current structure of the property, this is why we always recommend a structural survey of the property and obtaining a full survey. Some owners will be able to supply reports, however, always check the dates the reports were generated.
CURRENCY TRANSFERS IN FRANCE
Currency prices fluctuate all the time so it is a good idea to fix your rate via a specialist foreign exchange company. You can literally lose or save thousands of Euros depending on the currency provider you use. In most situations, a specialist FSA regulated currency broker can offer you a much better exchange rate than your bank.
COSTS OF OWNERSHIP OF RESIDENTIAL PROPERTY IN FRANCE
Once you own a property in France, it is important to understand the associated expenses. These include: Taxe Foncière and Taxe d’Habitation (see above), capitals gains taxes on net profit upon resale (decreases in time to totally disappear after 20 or 30 years, since there are 2 different taxes), inheritance taxes for the heirs (a proper strategy between CVD and closing can optimise that in favour of the heirs as a good Notary or lawyer can advise). Finally there is Wealth Tax for properties over 1,3 M€, please discuss this matter with your financial advisor.
In addition to the above costs please also consider Insurance, Internet, phone and TV services, which are lower than many countries. Other utilities include water and electricity.
Co-ownership fees for apartments can be pretty substantial for high end buildings with permanent caretakers and requiring maintenance in addition to serviced gardens, security, pools, tennis courts and communal areas. The more prestigious the development the higher the service charge.
You will also need to consider basic maintenance or renovation and upgrading costs as well as general garden upkeep annually. This is very important when a client requests a sizeable plot, which requires constant maintenance, as has been known to be overlooked at a substantial expense to the new owner. However, a well maintained garden and pool area does add significant value to a property so it can be well worth the upkeep. Pool maintenance is recommended at least once a week in Spring and Summer and once a month in Autumn and winter.
I hope you have found this brief guide to buying a luxury residential property in France helpful, to benefit from our complete knowledge base lets schedule an introductory meeting today.
Managing Director and Founder