Interview with Maitre Kergueno, solicitor

Interview with Maitre Kergueno, solicitor

Interview with Maitre Kergueno, solicitor

legal-advice-buying-property-france

Today we meet Maitre Benjamin Kergueno, real estate specialist and Managing Director of Attorney Counsel, a Law firm based in Nice, Cannes and London. Attorney Counsel specializes in Law and provide professional advice to English or Russian speaking customers interested in buying a property in France.

Fully qualified in French real estate Law, Benjamin Kergueno and his firm will be able to answer all your questions regarding the French property buying process as well as other topics such as inheritance or cross-border taxation. Today, Benjamin Kergueno answers some of our questions.

Hello Benjamin, can you introduce yourself, what do you do, tell us about your career?

For more than 15 years I have been advising local and international clients for a variety of French real estate and construction matters, ranging from the practical property management and signature of acquisition agreements, up to representation in judicial disputes before French courts.

Actually, I am a Managing Director of French Law office, Attorney/Counsel, which is an independent unique French Law firm specialised in legal practice for English and Russian speaking clients. Today we benefit from three addresses in Nice, in Cannes and in London to better meet client expectations and goals and succeeded in gaining trust from demanding clients and build a worldwide renown.

We provide professional legal advice and efficient legal assistance in the various areas of French Law, specialises in the legal aspects of French property Law including buying a property in France, tax Law ,immigration Law, in different fields of business and contract Law and litigation.

Our team, made up of multilingual professionals with longstanding experience, dynamic, reactive, proactive and have developed market-leading know-how in their areas of expertise. Our principal feature is focusing on clients’ projects through the understanding of the French market to offer the best legal solution, helping our clients to achieve their real estate projects.

What issues non-residents wishing to real estate in France approach you about?

Today clients come to see us so we can usefully advise them when acquiring property in France and especially exceptional properties, including draft the preliminary contract and deed of sale accompanied by a financial statement. Their main questions are the cost of such an investment, because when you buy a property in France you have to pay registration fees.

Moreover, buying a property in France may be the subject to heavy tax consequences, you can become a French tax resident, therefore such risk should be evaluated. We also advise our clients on the various taxes they may be subject to (property tax, housing tax, IFI “Impôt sur la Fortune Immobilière).

In addition, we advise on how to acquire this property (through a SCI, a family LLC) according to the expectations of clients.

What are the advantages, as a foreigner, of being supported by a French real estate lawyer when you want to buy real estate?

Before considering any real estate project in France, a foreign national should contact a French real estate lawyer to determine the conditions under which this investment will be submitted.

Firstly, consideration will be given to the nationality of the purchaser and its marital status, if married. Knowing that the Law of the location of the property applies to real estate matters, French Law will therefore be enforced. The consequences of the purchase will be very important as to the ownership of the property as well as its eventual resale or onward transmission. Buyers should know that the members of the European Union, as well as foreign nationals who have signed a special agreement with France, will benefit from special legal regimes (bilateral agreement, The Hague Convention).

Secondly, the acquisition of a property in France will sometimes require significant funds transfers which are subjected to verification by intermediaries (banks and credit institutions). Attorneys should also verify the source of funds to prevent money laundering operations and may be called upon to make official statements to the authorities if they have a serious doubt as to the source of funds used, ensure the security of the transactions which they are responsible for toward non-resident buyers and sellers. Again, they will both check the transfer sent to them itself and the seriousness of the banks which have operated the transfer.

Thirdly, the tax regime applicable to a property purchased in France will also have to be explained to the non-resident buyer, including the costs, various taxes and fees as well the taxes that should be paid if the property is used as a primary residence or for rental investment purposes.

Taxation rules which will apply to the detention of the property and to its subsequent resale mostly depends on the choices made at the time of the purchase (as per the VAT, the capital gains, or the intervention of an accredited representative). Again, very different schemes exist ranging from exemption to heavy taxation.

To study all these aspects, the non-resident buyers of a property in France, whoever they are, should consult an attorney who will, before any commitment, counsel and secure their investment and Attorney/Counsel thanks to its unique and global service, supports the non-residents in all their projects by offering the services essential to conducting a perfect acquisition.

What are the benefits for foreigners of buying a French property through a SCI (Property Investment Company)?

Firstly, by transferring shares of an SCI (“Société Civile Immobilière”), the owners of a real estate property located in France enjoy several tax benefits. The SCI allows to transmit the property at a lower value and therefore enables its partners to pay less taxes than if the building had been transmitted directly. Indeed, when they are given, donated or transferred by inheritance, the shares of an SCI generally support less expensive taxes than the taxes applied to properties transmitted directly from individuals to individuals.

The reason is because the value of the shares is reduced by the amount of the accounting liabilities of the company. And the amount of the loan contracted for the acquisition of the property is included in accounting liabilities of the SCI.
Example, for a property worth € 500,000 funded by a bank loan for which an amount € 200,000 is still due, the inheritance taxes and levies are calculated on the basis of € 500,000 for a directly owned property, while the taxes and levies applied to the transfer of SCI shares will be calculated on a base € 300,000.

Secondly, certainly, the loan may also be taken into account for directly owned properties, but only under the condition that the beneficiaries of the transfer effectively become the new borrowers. Nevertheless, french Law allows this under several restrictive conditions:

– The loan must have been contracted in the interest of the property transferred (this will most often be the case) – The loan must have been contracted with a bank (this proves to be more problematic and offers less options than with an SCI, where lenders can be individuals, or another SCI, or a trust)

– The transfer of the loan must be included in the deed of transfer and must be notified to the bank (more possibilities are often opened to the SCI’s partners, as the SCI is the borrower, not the partners). And, last but not least, the practice shows that the transferees, or one of them, proves to be insolvent. Therefore, it is basically impossible to proceed to the transfer the loan when the property is held directly.

Thirdly, the SCI benefits from large advantages in matter of inheritance taxes and levies. It remains a tax and not least to consider: the IFI “Impôt sur la Fortune Immobilière”, the Tax on real estate, it replaces the ISF “Impôt Solidarité sur la Fortune” since January 2018. It should be noted that non-residents will be subject to the IFI because of the property and rights they own (directly or indirectly) in France, we are not going to make a development on the IFI but know that if his net taxable wealth is greater than 1.3 million, he will be subject to it. Please note it is possible to deduct a lot of debts to reduce the taxable amount.

For large heritage note that when the market value of taxable wealth is greater than 5 million euros and that the amount of the debts exceeds 60% of this value, the portion of the debts exceeding this limit is only deductible for 50% of this excess.

Fourthly, for civil reasons as well, and not for tax reasons, the SCI also appears to be very useful to non-resident owners of immovable property situated in France, when they want to transfer the property, as the SCI allows them to circumvent the effect of the french so-called hereditary reserve rule (“réserve héréditaire”).

Under this rule, which is specifically French, a large part of an individual’s estate must compulsory be transmitted to the so-called “presumptive” heirs (“héritiers réservataires”) : children, grandchildren, parents, or in the absence of descendants and parents , the surviving spouse.
Fifthly, under certain conditions it is possible to deduce the expenses of maintenance and repair, serving to maintain the property in the state. Also, it is possible to deduce improvement expenses if these expenses do not change the structure of the property.

Moreover, administrative and management expenses are also deductible (ex: security guard, supervisory agent, accountant’s fees which deals with the management of the property).

Finally, it is possible to deduce the property tax, which is one of the big advantages of the SCI subjected to the income tax! However, the owner will still have to pay the fee or the tax for household waste.

In terms of real estate taxation, what rules apply for non-residents?

We draw your attention that upon the acquisition of the real estate in France, the buyer should pay some fees and taxes (collected by the State and the various local authorities of the place of establishment of the property):

– Transfer taxes, which corresponding amount reaches 5.8% of the purchase value of the property or taking into account the increase in the departmental tax.

Once an individual or a household becomes the owner of a property in France, whether built or not, they also become is subject to:

– The property tax once per year which is equal to the cadastral income multiplied by the rates fixed by the local authorities.
– A housing tax, then concerning second homes the regime varies and based on the cadastral rental value of the dwelling and its outbuildings. In addition to the housing tax, the owner has to pay at the same time the public audiovisual contribution if he has one or more televisions.
– Moreover, some municipalities, provides a fee or additional fee for the collection of household waste.

Finally, since 1st January 2018, the ISF (Impôt de Solidarité sur la Fortune) has been replaced by the new annual real estate wealth tax, known as IFI (Impôt sur la Fortune Immobilière), which is a tax on immovable property whose taxable base is limited to non-business related real estate assets.

The premises used for the taxpayer’s main professional activity and property used for furnished rental activity (provided the landlord is a registered professional landlord) are also exempt from the new wealth tax.

IFI is based on the wealth of the household, including spouse and children. Unmarried couples living together are treated as one household for wealth tax purposes. Non-residents will only be liable for this tax based on real estate located in France. The tax threshold remains the same in 2019: €1.3 million (net asset value).

Negotiation

Negotiation

Negotiation

Be aware that in France, 88% of properties are sold for less than the price originally requested by the seller. Based on these statistics, it would be a shame not to start a negotiation! A discount of at least 6% is in most cases possible. There are, however, no predefined rules and any potential discount depends greatly on the initial price assessment made by the seller. It can happen that some sellers set a fixed price and refused to reduce it. Nevertheless, this scenario is quite rare. If you present strong arguments, you will usually force the seller to revise his price down. However, do not be completely taken in by the actual discount percentage. This indicator is in fact unreliable. What would you prefer? Getting a 1% discount on a property initially marketed below the current market price or negotiating 15% off the price of a property initially offered 30% over the market price?

Choosing the first option makes sense! For us, the aim is to allow you to buy at the fair market price. If possible, we obviously try to purchase below it. This mainly depends on the context (situation of the seller, urgency to sell, initial marketing date of the property)

To save money at this stage, it is better to know how to drive a negotiation. You need to present strong arguments to make the seller cave in and turn the negotiation in your favour. Do you know how to put in place a strategic negotiation plan to buy at the best possible price? Ours enables a large majority of foreign buyers collaborating with us to obtain a significant price reduction. Of course, we are not magicians! A property in a good condition, priced below the market price and new on the market is not easily negotiable. On the other hand, you can get a reduction on an overpriced property that has been marketed for years!

In this article, we are going to talk about the action levers we use. They enable us to successfully negotiate on behalf of foreigners working with us as French property finders. A word for people who have chosen to undertake the legal acquisition of their property on their own. This article will really help you to buy at a better price. Feel free to use our action levers! 100% guaranteed results!

Action levers used during the negotiation

You must put in place a strategic negotiation plan to buy at a lower price. You also need to understand that if the property is correctly priced and new on the market, it would be at risk to negotiate the price. Indeed, you could lose the property you are interested in. You will rarely be the only interested party on such a good deal. It is essential to negotiate cleverly, by fully preparing the negotiation. You will need to present solid arguments that the seller cannot turn down. This is where our action levers come in.

Analysis of properties on offer in the same segment

This action is always the starting point of the negotiation plan. We consolidate and analyse the properties on the market similar to the property you are interested in. By similar, we mean of the same type (type of property, area and features) and similar surface.

The market defines the fair price of a product. This saying is not only valid for real estate. Indeed, it is in fact valid for most sectors of activity. This is the best way to get an idea of the value of the property. It allows us to obtain a basis to undertake a negotiation. Thanks to this action, we get an idea of the value of the property on the market at the time.

Date when the property went on the market

As previously mentioned, a property on the market for many months or even years will be easily negotiable. As time passes, a seller becomes more and more impatient and ready to make concessions. Do not hesitate to offer an amount much lower than expected by the seller if the property has been for sale for more than 6 months. Be more restrained for a property newly for sale. Indeed, the seller could potentially not take you seriously and may no longer want to negotiate with you.

Offers to purchase history

Third key point of interest, the history of the offers to buy previously sent to the seller by potential buyers. This point will allow you to know the seller’s capacity to negotiate. A seller who has received multiple offers close to the asking price (less than 5% below the asking price) and turned them all down is clearly not opened to negotiations. It may be dangerous to start negotiating too hard. But the situation two months ago may be different from the situation now. Time always eventually beats the seller!

Highlighting the defects of the property

Let’s be honest about something: it is unlikely that the property you will buy in France is defect-free. And this is precisely what will allow you to purchase it at a better price! Paradoxically, while you really want to acquire this property in France, you are going to put together a list of its faults to negotiate its cost down. Listing the defects of the property and presenting them to the seller has a clear goal. Indeed, you will place the seller in an awkward position. Importantly, make sure you also include the property faults which are not really bothering you. This may include the lack of a garage even though you do not have a car. It may also include the distance from public transport even though you do not plan to use them.

A seller holds his property in high esteem because he has probably lived in it for many years. He will certainly have forgotten all the defects in the property. We have to force him to look at his property from an outsider’s point of view. By acting this way, we will force him to rethink. The seller will convince himself that ultimately his property may not be worth the amount he is asking for. He may lower the price, which may bring on an agreement on the sale.

Analyse the personal situation of the seller

Information is priceless but often difficult to obtain! Use your interpersonal skills, talk and use your charm! Use anything to get the seller to confide. You need this information at all costs to judge the negotiation margin. When undertaking this action, you will find out if the seller is in a hurry to sell or not. 

Some vendors will be smarter than others. Indeed, some will not easily divulge the reason for the sale while some will be more talkative! So, take the time to analyse the situation and act accordingly if you are in a position of strength. Whatever it is, adapt your offer using this criterion.

Negotiating the agency fees

These fees, worth between 5 and 10% of the property value. The ads for the property generally include these additional costs. The estate agency will receive these fees as reward in the event of the sale of a property.

Sellers and agencies sign a sales mandate stipulating the remuneration of the estate agent in case of success. On this basis, why is it up to you to pay these charges? Indeed, it is the seller who chooses the estate agency! We have always been against this system. We will consistently fight against it, particularly because you also have the Notaire fees to pay. These purchase costs will represent between 8 and 9% of the amount of the property.

Consequently, we successfully use this action lever to negotiate the price of a property. In recent years, estate agencies have been facing new threats (real estate portals online, low cost online real estate agencies, direct sales between individuals). They are no longer in a strong position. Most of them prefer to reduce their commission and “win” the business rather than stand firm and see you drop your interest in a property. Indeed, the completion of a transaction increases their rate of conversion and their reputation in an ultra-competitive marketplace. Start by asking for a total exemption from the agency fees. If not possible, ask for a fair split of the fees.

Play agencies against each other

Careful! This action lever is only valid in the case of a simple sales agreement between the seller and the agency. A simple sales mandate allows the seller to engage several real estate agencies to increase the exposure of his property. On the other hand, an exclusive mandate is completely different. The seller entrusts only one agency for the sale of his property and sign a mandate with it. You need to obtain this information. If several real estate agents are marketing the property, find them all and list them. This is the way to break down the pricing on the ad:

Price displayed = net amount wished by the seller + agency fees

Each agency will present a different price because their commissions will not all be the same. All you must do is play the competition between the agencies and turn the negotiation to your advantage!

Put forward your financial position

A cash purchase is always a huge advantage to turn the negotiation to your benefit. Indeed, a seller will consistently prefer to sell his property for less for a cash-paying customer rather than to wait for a buyer to reach a financial agreement with the French banks. In most cases, buyers will actually need finance. Sellers may sometimes sound distrustful. Actually, it is often due to repeated unsuccessful negotiations and particularly due to buyers who did not obtain the finance necessary to purchase.

You have to show that you are serious. Make sure to have spoken with your bank to know your borrowing capacity. Also, do not hesitate to show figures illustrating the calculations for your potential borrowing. You can also use online tools to simulate mortgage figures. The objective is simply to prove that you are a serious buyer and build confidence with the seller. Try to demonstrate a strong financial position and show good faith. You will see that the seller will not hesitate to wait until you get your funding in place to continue the efforts to finalise the transaction with you.

These are the keys to turn the negotiation to your advantage. By using these action levers, we can guarantee that you will get a significant reduction in the price of the property. Even more so if this property has initially been priced above the market price. Once again, do not just rely on the actual percentage reduction that you obtain. Indeed, this indicator is not reliable. Once you have reached an agreement with the seller, you must confirm your commitment in writing and send an offer to purchase.

Offer to buy

Offer to buy

Offer to buy

The negotiation of the purchase price of the property allowed you to find a verbal agreement with the seller. However, this verbal agreement has no legal value! You now need to confirm your intention to buy by sending a written offer to purchase to the seller. This offer, on the other hand, is legally binding. It demonstrates your willingness to buy a property in France at an agreed price.

The objective of this document is to create a link between both parties. That link will remain until the signing of the deed of sale at the Notaire. To ensure that your offer is legal, it must contain specific elements. We will now present the key elements you must include, the possible outcomes once the seller receives the document, both parties’ commitments and your rights to withdraw.

Elements to include in your offer to buy

You must include specific elements for your document to be valid. Be thorough, forgetting a single element can make your offer null and void. It may cost you the initiative on a quality property in France. By inserting all the following elements, you are sure that your purchase offer is perfectly legal and acceptable by the seller.

– first name and surname of both you and the seller

– location and full address of the property in France that you want to buy

– a precise description of the property to which your proposal refers to: type of property, surface, number of rooms

– the price you are willing to pay for the acquisition of this property

– the period of validity of your offer. Usually between 5 and 10 days. This period is the time that you give to the seller to give an answer to your proposal. Do not forget to mention that past this deadline, your document will no longer be valid

– how you are planning to finance the purchase (mortgage if applicable + personal deposit)

– the date and your signature

After the transmission of your offer to buy

Once you have sent this document in French to the seller, he has the time you mentioned in your proposal to give you an answer. Generally, the seller has 8 days to think about the offer. After this period, you are free to cancel your offer.

When your proposal matches the initial asking price, the seller is under obligation to immediately accept your offer. When your bid is below the initial asking price, there are three possible outcomes.

– the seller rejects your proposal. Unfortunately for you, the seller does not appear to be open to negotiation. You can increase your price to make him change his mind.

– the seller refuses your bid but makes a counteroffer. The seller indicates that he refuses to sell his property to you for the amount in your first written proposal. Nevertheless, he is not opposed to negotiations. Indeed, he has made you a counteroffer. It includes an amount between what he originally was looking for and the sum that you offered. The ball is now in your camp. If you accept, the transaction advances to the next step. If you refuse, you can also make another counteroffer. Otherwise, if you do not wish to meet the demands of the seller, the deal is off.

– the seller accepts your proposal. In this case, you have legally reached an agreement with the seller. You are both now legally. You can now search for and select a Notaire in France to draw up a preliminary sales contract.

The seller cannot ask you to pay a deposit at the time of the acceptance of your proposal. This practice is strictly prohibited by Law and may result in invalidating of the transaction. Only the establishment of the preliminary sales contract can result in the payment of a deposit. It represents usually 10% of the amount of the transaction and must go through the Notaire.

The commitments of both parties

Be careful, as a buyer, your commitments are quite high when you transmit a written offer to purchase. In fact, in France, this document constitutes a genuine legal act. It commits you to buy the property in France as soon as the seller accepts his proposal. In case of a change of mind, the buyer is exposed to the payment of substantial damages.

On the other hand, your offer to buy is unilateral. Therefore, it does not commit the seller if you make a proposal below the price he asked for. In fact, in this case, the seller has no obligations towards you. Nevertheless, if you send an offer matching the asking price, the seller has no other choice but to accept. In case of rejection, the seller is not respecting the Law. Therefore, he is exposing himself to being forced to sell his property to you by the French Justice. He may also have to pay damages and interest as compensation for the damage suffered.

Your rights of withdrawal

Once the seller has received your written offer to buy the property in France, you can withdraw under certain conditions. In the following cases, you are able to backtrack without having to pay financial compensation.

First case. The seller has not responded to your offer

Second case. The seller has not accepted your offer within the time limits that you have mentioned in your written proposal

Third case. The seller comes back to you with a counteroffer, the initial document that you sent him becomes obsolete

What happens if the seller has accepted your offer and, for whatever reason, you want to withdraw from this transaction? It is no longer possible to do so at this stage! However, do not worry! You will just have to wait a little longer. Indeed, you just need to hold on for the establishment of the preliminary sales contract. It usually happens under one month after the acceptance of the offer to buy transmitted to the seller. You will benefit at this stage from a legal cooling-off period of 10 days. This period will allow you to permanently withdraw from the transaction without any financial liability towards the seller.

Template of written offer to purchase

 

Dear Sir or Madam,

On the (indicate the date), we visited your property (specify the type of property) located at (indicate the full address of the property in France) which includes the following: (describe the property as precisely as possible (area, outbuildings, equipment sold with the property, number of rooms, floors, date of construction)).

We hereby inform you of our intention to purchase this property for the price of (specify the sale price that you offer) euros under standard conditions of sale. The price will be paid in full on the day of the signature of the authentic deed of sale at (optionally specify, if you already know, the name of the Notaire in charge of the sale).

I declare that I will finance this property using a loan(s) for a total amount of (indicate the amount in letters) euros, along with a personal deposit of (indicate the amount of your personal deposit in letters).

This offer is valid until (indicate the date of expiry) included. Should the seller not accept the terms and the dates agreed, this present offer will be null and void. In case of acceptance by the seller, a preliminary contract will be signed in a reasonable period of time, i.e. not later than one month after acceptance of this offer by the seller.

Yours faithfully

(Signatures)

French property deed of sale

French property deed of sale

French property deed of sale

deed-of-sale-france-buying-property

Final step of the property buying process in France, the signature of the deed of sale must take place at the Notaire’s office. Once you receive your mortgage, and roughly within three months, the Notaire will invite you in writing to attend the signature of this deed. There is no obligation for you to accept to use the seller’s Notaire. You can choose your own professional to represent you. In this case, the meeting will take place at your Notaire’s office. The two French Notaires will attend, along with the seller and yourself. The real estate agent in charge of the transaction may also attend the meeting. These signatures will legally formalise the transfer of ownership between the seller and you.

You then become, at this point, the sole and official owner of the property. Let’s go over this meeting that, ultimately, makes you the proud owner of a property in France!

The signature of the deed of sale – what happens?

Very often, the Notaire will not personally attend this meeting. Indeed, a clerk often replaces him. This clerk acts on behalf of the Notaire. He receives both parties and collects their signatures. In principle, the signing of this deed constitutes a mere formality. The Notaire has already carried out all the necessary checks. Also, the important issues have been resolved as soon as the preliminary sales contract was established. Nevertheless, the Notaire or the clerk must read the deed of sale to the parties. Also, he must highlight and insist on the important sections.

You can obviously ask him for clarification on any point which is still unclear. Do not hesitate to ask questions to the Notaire or to the clerk representing him. You must particularly be aware of the scope and the consequences of your commitment. The parties must then initial each page of the document and sign at the end of the deed. The Notaire or the authorised clerk must then carefully check the presence of all signatures. Indeed, a single missing signature renders the deed null and void. The registration of the deed becomes impossible and the Notaire would then become liable for costs and damages.

Power of attorney for the signature of the deed of sale

A power of attorney is a legal act. It allows you to give a trusted third party the power to act on your behalf. For example, you can designate someone else to sign it on your behalf if:

– you cannot be present at the time of the signing of the deed

– you do not want to travel to France just to sign this act

This person acts as your agent. The Notaire will send you a power of attorney under a private agreement. Then, you will need to return it completed and signed. The implementation of a power of attorney under a private agreement is free. French Property Connection is legally allowed to take on this role on your behalf. 

          Lyon, Rhone-Alps

Your French property title deed

At the end of this meeting, you become the owner of the property. However, you do not immediately receive your title deeds. The Notaire must now publish the act with the Bureau des Hypothèques (registry of mortgages). The registry of mortgages also called land registry service is an administrative body of the national directorate of public finances. Its role is to collect the registration duties and taxes for signed deeds of sale.

Once these formalities have been completed, the Notaire will send you your French property title deed. The document that you will receive will not be the actual original act, but a “certified” copy. Indeed, the Notaire must retain the original at his office. It can take quite a long time for you to receive this title deed. Usually, it takes between two and three months to receive this document. In order for you to complete the necessary administrative processes, following your purchase, the Notaire will provide several certificates. These documents confirm that you are the new owner. It will enable you to set up all the necessary utilities related to the proper functioning of your property.

Formalities after the signature of the deed of sale

Once the deed of sale signed, the transfer of ownership is carried out. The seller must give you the keys. In return, you must pay the sale price. Obviously, the mortgage you have obtained has to be available at the latest on the day of the sale. Usually, the necessary funds have been previously deposited in the Notaire’s bank account. You will therefore not have to make any additional bank transfers. The Notaire’s office will organise the bank transfer to the seller’s account.

Then, he will arrange the registration of the sale within a month following the date of the sale. The Notaire will also transfer a large part of the fees he has collected to pay these following taxes:

– the registration fees

– the tax on the registration of the sale

– the tax on any profits made on the sale by the seller

If the payments you have made to the Notaire are higher than the actual costs generated by the signature of the deed, you will receive a cheque from the Notaire.

Rights and withdrawal rights of both parties

The seller might not present to sign the transfer of ownership. It may also happen that he refuses to sign off the sale without a valid reason. In these cases, as a buyer, you can summon him to sign the act. There are two possible ways to force him to sign the deed:

– writing a letter giving a deadline of fifteen days to sign. You will have to send the document to the seller by recorded letter with acknowledgement of receipt

– you can use a bailiff to force him to sign the deed

In the absence of a response, the Notaire will prepare a certificate of deficiency. With this document, we can then, with the help of a French property lawyer, seize the Tribunal de Grande Instance (District Court). This institution will condemn the seller, under obligation, to sign off the sale. The tribunal can directly declare the sale as completed. In both cases, you will also be able to claim damages and interests.

As for you, you will no longer be able to withdraw from the transaction without facing penalties. If you refuse to sign the document, few sellers would take you to Court to force the completion of the sale. Indeed, in this case, they would then not be able to sell their property until the end of a trial. On the other hand, they would take you to Court to claim for the non-returning of your deposit (usually 10% of the amount of the property).

As explained earlier, the signature of the deed of sale usually constitutes a mere formality. Indeed, all the points to be considered will have been dealt with by the Notaire during the establishment of the preliminary sales contract. Allow approximately one hour for this meeting at the Notaire’s office. As a foreigner, feel free to ask for a power or attorney if you do not want to travel for this very quick meeting to sign the act.

If you have chosen to work with us, keep in mind that we are legally allowed to be your agent and therefore sign on your behalf. Your French property title deed will be sent to you within 3 months after the signature of the document, but this does not prevent you from going through the administrative procedures with different suppliers.

Notaire’s fees in France

Notaire’s fees in France

Notaire’s fees in France

After the acceptance of your written offer to purchase, you are going to have to get in touch with a Notary (or Notaire in French) to continue to move forward through the buying process.

As a foreigner buying a property in France, you probably know the word Notaire or Notary. You are already aware that the buyer must pay the Notaire’s fees for every French real estate transaction. You have probably already browsed the official website of Notaires in France to get further information. Collaborating with a Notaire is compulsory to formalise any real estate transaction in France.

However, the role and the duties of this professional are often a source of curiosity for foreigners. Indeed, there are very few countries where using a Notary is compulsory to purchase a French property. In France, there are 5,000 Notarial offices and around 8,000 Notaires all over France. These Law professionals are under the “authority” of the French Ministry of Justice. They can intervene in transactions carried out anywhere in the country, regardless of their location.

For example, you can hire a Notary based in the south of France to buy an apartment in Paris. The Notaires do not cover specific geographic areas. Thanks to this article, you will learn everything about the Notaire. We will begin by detailing its role in the different steps of the real estate transaction. Then, we will tell you about the fees associated with the transaction and their exact breakdown. Forget what you previously may have heard. In lieu of wages, the Notaire only receives a small share of the fees that you will pay. Finally, we will finish this article with our tips for choosing the right Notary depending on your situation.

The role of the Notaire in France

The Notaire intervenes at two key stages during the French property buying process. Firstly, he acts during the implementation of the preliminary sales contract. Secondly, he intervenes at the time of the signature of the deed of sale. It is not compulsory to hire a Notary to establish the preliminary contract. However, for various reasons, we strongly recommend that you do so. On the other hand, a Notaire must certify the signature of the deed of sale.

The role of the Notaire during the implementation of the preliminary contract

You should know that this document constitutes a genuine contract. Therefore, it creates obligations for both the seller and you. It specifies the conditions of the future sale and marks the agreement of the parties. To hire a Notary at this stage is not compulsory. However, it has several advantages. First, a notarial preliminary contract secures the purchase. Given the complexity of the legal terms and the multiplicity of existing laws, the drafting of this document cannot be improvised. Therefore, resorting to a Notaire is useful.

The Notary also collects information essential to the smooth running of the transaction. It will be essentially information relating to the property. Also, he identities the individuals concerned by the sale of the property and analyses their legal capacity. Moreover, the Notary’s office verifies that the seller is really the owner of the French property. This way, the Notaire checks that the seller is authorised to sell the property. At this stage, he is also tasked with the collection of the deposit mentioned in the contract. This down payment usually represents 10% of the amount of the transaction.

The role of the French Notaire when signing the deed of sale

Once the preliminary contract has been implemented and your mortgage is in place, you will be invited to the Notary’s office to sign the deed of sale. Notaires are the only individuals in France qualified to prepare this act. This deed legally marks the transfer of ownership. The use a Notary is therefore mandatory at this stage, even if the preliminary contract put in place has not been drafted by him.

During this signature, the Notaire will also read the complete act in the presence of the seller and yourself. He also ensures that both parties agree on all of their reciprocal commitments. He must ensure the clarity and the sincerity of the contract. Finally, the Notary carries out the payment of the balance of the transaction and the handing over of the keys.

          Lavender Field, Provence

Notaire’s fees in France (8 to 9% of the purchase price)

Any real estate acquisition carried out in France must be registered by a Notary. He will also ask you to pay the costs relating to the transaction. These expenses represent most of the costs added to the price of the property. These fees vary depending on the Department where you purchase in France. They are always between 8 and 9% for old properties and between 2 and 3% for the acquisition of a newly built property.

The name “Notaire’s fees” is misleading. Indeed, even if the Notary collects all of these fees, he only receives a small share by way of remuneration. Indeed, he will pass on the bulk of the fees to the tax office. The State and the local authorities will then split these fees.

Notaire’s fees = registration fees + Notary’s earning + disbursements

The registration fees define the tax levied for the performance of a legal act called registration. These registration fees concern all notarial acts during a transfer of property. They represent the costs incurred by an officer belonging to the specialised services of the tax administration to carry out the formality of registration. They represent between 5.6 and 6% of the value of the property, and approximately 80% of the total fees.

The remuneration of the Notary will eventually represent (only) 10% of the fees that you are going to have to pay.

The disbursements are the sums paid by the Notary on your behalf. They represent the remaining 10% of the total amount of the fees that you are going to have to pay.

French property sales contract

French property sales contract

French property sales contract

contract-buying-property-france

Key stage in the legal process when buying a property in France, the signing of the sales contract (or purchase contract) allows sellers and buyers to demonstrate their respective commitments. Although legally this step is not compulsory, it is in practice implemented nearly automatically. There are few sellers who will be willing to continue to deal with you without this contract. Indeed, a preliminary sales contract clearly secures the transaction. This key document summaries everything previously agreed. Signed by both parties, this contract must forecast, in as much detail as possible, what will be the final deed of sale.

Two types of property purchase contract can be put in place in France. You can set up a unilateral promise to sell or a preliminary sales agreement. Both commit you and the seller in different ways. The signature of the sales contract is actually part of the list of pitfalls to be avoided by foreigners. Indeed, many sellers attempt to put in place a contract that better protects their interests than yours.

The role of the sales contract

When buying a property in France, the seller and you must progress through multiple agreements and acts. After negotiating the terms of the sale, the agreement must be set in a preliminary contract. The role of this document is to establish a genuine legal link between the two parties. Therefore, it must contain all the necessary information which will be included in the final act.

The aim of a preliminary sales contract is to conclusively link the two parties. It also allows the three parties involved (the seller, the Notaire and you) to take the time to perform the respective tasks they must fulfil to permanently seal the transfer of ownership. The Notaire must collect the many documents and information necessary for the transaction. On his side, the seller will organise his move from the property sold. For you, this period allows you to take the time to research and find a mortgage to buy the property.

The unilateral promise to sell

The seller commits to sell you his property at the price indicated at the time of the acceptance of your offer to buy. He also undertakes to reserve the property for you for a set period called the “option period”. The contract must mention the length of this period. It usually varies between two and four months. During this period, the seller cannot sell his property to another person, even if he receives a more advantageous offer. As a buyer, you also sign this contract. However, your signature does not yet commit you. Indeed, you simply acknowledge the promise to sell.

Deposit to be paid by the buyer

In return for reserving the property for this option period, you must pay a deposit, called “holding fee”. This amount generally equals 10% of the amount of the total transaction. However, it is possible to plan for a lower amount, especially when the price of the property is high. It is preferable to negotiate and lower this amount as you never know what may happen later.

This payment must be made upon the signing of this promise to sell. You will have to transfer the total amount of this fee to an account belonging to the Notaire. At this stage, the seller does not receive any money. If you decide to exercise the option, you are committing to the purchase. Otherwise, if you decide not to continue with the transaction, three options are available.

– You decide to give up for personal reasons within the legal withdrawal time-frame given to the buyer. This time-frame is 10 days. This delay starts from the day following the receipt of the registered letter notifying you of the signature of the contract. In this case, you get back the whole of your holding fee. You do not owe the seller anything.

– For personal reasons, you decide to give up after the legal withdrawal time-frame of 10 days. The holding fee remains with the seller. The French Law considers it as damages for the seller for reserving his property in France for you for a period of time.

– You give up on the purchase after the legal withdrawal period of 10 days. This cancellation results of the non-completion of one of the suspensive conditions. For example, you did not get the funding needed for the purchase. In this case, you recover the full holding fee. You are acting legally; the seller has no claim against you.

Commitments of both parties

You are slightly committed because of the mandatory payment of the holding fee. Nevertheless, you may withdraw within 10 days of receiving the registered letter notifying you of the signature. This withdrawal must be notified to the seller by signed-for registered letter. After the 10 days, only the non-completion of a suspensive clause will allow you to withdraw without facing financial penalties.

The seller, meanwhile, is fully committed. He cannot cancel the sale and he gives you an option on his property. It means that he is no longer allowed to offer his property to another buyer during the period mentioned in the contract.

 

The preliminary sales agreement

The preliminary sales agreement is a different contract from the unilateral promise to sell. Indeed, it commits the two parties. The seller agrees to sell his property in France at a set price. As the buyer, you commit to buy it. This compromise is a sale, but a clause in this contract delays the effects of the sale to the signature of the deed of sale.

Deposit to be paid by the buyer

Like for the unilateral promise to sell, the seller will ask you to pay a deposit to confirm your commitment. This deposit is generally between 5 and 10% of the value of the property. You will need to pay this amount after the signature of the contract. This signature will take place at the expiry of your legal withdrawal deadline of 10 days. As the buyer, you will have to transfer this sum directly to the Notaire and not to the seller.

You can also complete the preliminary sales agreement by private deed with the seller. In this case, choosing a Notaire to entrust him with the money is a wise decision. Indeed, it is better to transfer the money to the Notary rather than directly pay to the seller. This solution provides a guarantee for the seller and you. The seller is reassured that you are serious. On your side, you know that your deposit will be retained by the Notaire until the conclusion of the sale. At the time of the signature of the deed of sale, the seller will collect the deposit. It will, of course, be deducted from the remaining amount you must pay.

Commitments of both parties

You have a legal period of 10 days after signing the preliminary sales agreement to decide to cancel your purchase. Just notify the seller by signed-for registered letter. You do not have to justify your decision. The seller cannot claim any payment of compensation against you. Potentially, the deposit will not have been paid before the expiry of that time limit. But if it was the case, you recover your down-payment in full.

Your situation is different if you decide to cancel the transaction after the expiry of your legal withdrawal period. You will be, in this case, contractually committed to the seller. A penal clause in the contract mentions that the seller has the right to keep your deposit.

The preliminary sales agreement often links the conclusion of the sale to certain conditions, called “suspensive conditions”. For example, obtaining a mortgage or the authorisation from the local Council to perform specific work. When the sales agreement mentions such conditions, their non-completion automatically renders the contract null and void. Both parties are therefore free of any commitment. The seller cannot claim against you. You retrieve your deposit in full.

On his side, the seller can no longer withdraw. He must sell you his property if you do not retract. The Cour de Cassation (Supreme Court) considers that by signing this contract, the seller consents to the sale. So, a withdrawal by the seller from his commitment results in the payment of damages and interest for you.

Elements to be included in the contract

The preliminary contract must include several elements to be legally valid. Regardless of the type of contract in place, the list of elements remains the same.

– The identity of the two parties, their details and their marital status

– The complete address of the property in France and its type

– The origin of the property (date of the previous deed of sale and name of the previous owner)

– The detailed description of the property, its equipment and its potential outbuildings

– The existence (or not) of a mortgage

– The complete file containing the property surveys

– The documents and information specific to the condominium (only for the apartments concerned)

– If the file related to the property surveys has not been provided, add a clause indicating that you will benefit from a new withdrawal period on receipt of these surveys

– You can also add a suspensive clause in the case of detection of a defect in the surveys

– The amount of the fees due to professional(s) in France linked with the sale (estate agent, Notaire)

– The selling price and the payment terms (with or without a mortgage)

– If applicable, the characteristics of the mortgage that you plan to put in place (duration, rate)

– The validity date of the preliminary contract and deadline for the signing of the final deed of sale

– The date of availability of the property

– The suspensive clauses

In fact, we previously mentioned suspensive clauses, but what are they? A suspensive clause suspends the execution of a contract until the completion of the event. If the expected event does not occur, you are legally free to cancel the contract. If the event occurs, nothing can stop the contract from going ahead. Among these conditions, the most important one relates to you obtaining a mortgage. If you buy with the help of a mortgage, you automatically benefit from this condition. It allows you to only buy if you find your mortgage within a certain period. Generally, a period of 60 days is granted to you to get a mortgage offer from a bank in France. In other words, you will have about two months to obtain your finance and inform the seller.

Property surveys related to the contract

A few years ago, to improve the transparency of the real estate transaction, the Government decided to modify the Law. Now, the seller is under obligation to provide you with various property surveys grouped together in a single file. You can then, before you fully commit to buy, be more informed on some aspects of the property. The preliminary contract must now include this file.

To provide these property surveys does not force the seller to carry out any work. If one of the documents reveals a problem, it is better to confirm in writing in the preliminary contract which one of the parties will assume the consequences.

Be aware that, in the event of a problem with one of these property survey, you will always have the option to withdraw without being accountable to the seller. The list of documents to be provided to a buyer by the seller gets longer every year. In 2019, there is a total of nine property surveys, ten if purchasing a condominium apartment!

– Report on the risk of lead exposure

– Status relating to the presence of asbestos

– Status relating to the presence of termites

– The condition regarding natural and technological risks

– The property survey relating to the energy performance of the French property

– The property survey relating to the presence or not of dry rot

– The condition of the interior gas installation

– The condition of the interior electricity installation

– A document relating to the private sanitisation

– The “Métrage Loi Carrez” property survey relating to the surface of a condominium apartment in France

A professional must carry out these property surveys. The seller risks a fine of €1,500 if he cannot provide you with these surveys. As said previously, the results of these property surveys do not force the seller to carry out any work. They are only there to provide you with better information, even if one of the property surveys indicates the gas or electric installation seems dangerous. Nevertheless, the Mayor or the local Prefect can force the seller to perform the necessary work in the case of lead or termites. This is the list and the validity of the property surveys that the seller will provide you. Do not forget to study each property survey passed on to you. Also, insert additional withdrawal clauses in the preliminary contract if you have any doubts.