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NEW PROPERTIES
IN FRANCE
By
Croft Baker & Co
Legal Procedures in France (By Croft Baker & Co)
(New Property)
Introduction
This summary is intended to give a broad outline to the first-time buyer of a residential
property in France. In the space available it is not possible to provide reasoned
recommendations nor do we seek to oust the functions of a legal adviser. We have
concentrated on the position of an individual purchaser of a freehold self-contained unit
(villa or flat) and specialist legal advice, outside the scope of this summary, is
required for the purchase of land for development, purchase with mortgage finance,
purchase of a leasehold property, mobile home or time-share accommodation and any type of
purchase by a company. Slightly different considerations apply in the case of a re-sale
property for which another leaflet is available.
Lawyers and Legal Advice
All aspects of conveyancing are carried out by a "Notaire" (Notary). The same
Notary commonly acts for both parties but purchasers can insist on appointing their own
Notary which will not increase the total fees payable. Relatively few Notaries speak
English.
Controls
There are no restrictions or special procedures on the transfer of capital imposed either
by UK or French regulations. The Deed of Conveyance must be executed before a Notary in
France but either or both parties can appoint an Attorney to act for them.
Procedural Stages
(a) General
All stages will involve understanding or signing documents in French. Ask for or obtain
written translations, particularly before signing any document.
A 2000 law specifies that all sales of residential properties are subject to a 7 day
cooling off period.
Sales of unfinished development properties (Ventes en future l'état d'achèvement) are
the subject of rigorous legislative provisions for the protection of purchasers. Only your
own independent legal adviser is likely to be able to ensure that a developer is complying
with the detailed regulations. All payments must be made to a Notaire or guarantor.
Development will usually be through the medium of a development company specific to the
development in question (usually a "Société Civile Immobilière"), involve
making stage payments and must involve one of various forms of completion guarantee. A
1979 law protects, interalia, purchasers of real property. Every purchaser must state
whether or not he requires finance and, if not, must waive his statutory protection by
handwritten statement. If he does require finance he must identify the amount needed and
the name of the intended lender. The loan application must be lodged within 10 days of the
date of the Reservation Contract. A resulting offer of advance from a French-based lender
cannot be accepted prior to 10 days from receipt and should be accepted within 45 days
from the date of the Reservation Contract. Copies of the application and the accepted
offer must be sent to the Vendor. A rejection of finance entitles the purchaser to
withdraw from the Contract and obtain the return of his deposit.
(b) From Decision to Buy to Legal Commitment
(i) Reservation
Developers require buyers to sign a Reservation Contract against the payment of a deposit
of 2% or 5% depending on the time-scale to completion. This deposit is returnable under
restricted circumstances. A Reservation Contract is not a binding commitment to purchase
but not proceeding to purchase, except on statutory grounds, will result in loss of the
deposit.
(ii) Legal completion (Acte
de Vente)
At any time after foundation stage a Developer may seek payment of up to 30% of the total
price. The demand for payment will come from a Notaire and will be accompanied by:
- a draft of the Deed
of Sale (Acte de Vente)
- a copy of the Co-ownership Regulations (Règlement de Copropriété) in the case of a
flat
- an abridged
specification and plans
- a demand for payment
of the Notaire's fees and costs.
You must make the payment within 30 days of receipt of the above set of documents. The
Co-ownership Regulations set out in full detail the legal basis of the Development as a
whole. They cannot be modified except by a formal resolution of the owners. The Deed of
Sale sets out in full detail the precise terms on which you are buying and recites,
interalia, the three essential guarantees, first, of completion, second, for patent
defects and, third, for latent defects.
The original Deed of Sale remains with the Notary. Title consists an official copy
(Expédition). Buyers must have their Official Copy registered at the relevant Land
Registry in order to be able to re-sell at a later date.
A Notary will normally do this as a matter of course. The time taken to complete
registration can be anything from 1 to 6 months.
(iii) Physical completion
The penultimate stage payment is always Practical Completion, as certified by the
Supervising Architect. You are strongly recommended to make a personal inspection to
satisfy yourself that the villa or apartment has been constructed and finished according
to specification following notification of this stage. Specification defects must be
notified to the Developer in writing within one month of hand-over and patent defects
within six months of handover.
Legally, you are not entitled to withhold any funds to cover patent or latent defects,
although it is lawful to lodge funds with a third party.
Latest defects liability lasts for 10 years and the developer must provide insurance cover
for this.
(c) Incidental Costs
These are payable wholly by the buyer and amount to about 3% of the purchase price. They
include:
(i) VAT usually included in the price of new property and involves
exemption from Stamp Duty (Droits d'enregistrement)
(ii)
Notarial fees
(iii)
Land Registry fees
Where translations are
obtained, incidental costs may be higher.
Ownership
You are legally bound by any condominium rules applicable to your property as set out in
the Règlement de Copropriété (Apartments) or Cahier des Charges (Villa Estate).
During your ownership you will have to pay for:
(a) Maintenance and repairs as and when they arise and, in the case of
an apartment or estate villa, service charges;
(b) all or some of gas, water, electricity and
telephone charges, domestic insurance;
(c) municipal taxes (rates) and income tax (if you
let your property).
Open a local bank account to be able to meet these payments promptly.
Re-Sale
If you use a French Agent (Agent immobilier) to find a buyer make sure he is properly
licensed. He is only allowed to act if he holds a written authority. If you re-sell a
property originally purchased before physical completion within 5 years after first
occupation you will suffer a deduction of 18.60% VAT on the gross proceeds of sale, but
off-settable against the VAT element in your original purchase price.
Most incidental expenses are payable by the buyer but a re-sale may give rise to French
Capital Gains Tax (Taxe de Plus-Value). The sale is only tax-free after 15 years of
ownership. This complex tax reduces to allow for the length of time the property is owned
(tapering relief). The notaire will calculate the tax due and, unless there is no tax due,
an approved tax representative will have to be appointed to deal with the Tax Office. Your
ultimate net capital profit on sale will also be liable for UK Capital Gains Tax if you
are a UK resident but a double tax treaty ensures that you are not taxed twice on the same
gain.
(c) Copyright K F C Baker 2004
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