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RESALE
PROPERTIES IN FRANCE
By Croft Baker &
Co
Legal Procedures in France (By Croft Baker & Co)
(Re-Sale properties)
Introduction
This summary is intended to give a broad outline to the first-time buyer of a re-sale
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. Different considerations apply in the case of a new 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.
A 1979 law protects, inter alia, 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 Preliminary 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 Preliminary 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
A "Compromis de Vente" (Agreement for Sale) or "Promesse Unilatérale de
Vente" ( Option to Purchase) will be prepared by the Vendor. The intervention of a
Notary is not yet required, but bear in mind that both forms of Agreement are legally
binding commitments, the "Compromis" to buy on the terms stated and the
"Promesse" an option exercisable only on the terms stated. These documents are
comprehensive and contain the names and description of the parties, a description of the
property, the price, the method of payments and any general or special conditions
negotiated by the parties. Not less than 10% of the purchase price will generally be
payable on signing either type of agreement. Conditions precedent are also commonly
inserted the satisfaction of which automatically leads to completion.
These conditions precedent usually relate to the usual title and planning searches but, if
not provided for, the following matters must be researched:
(i) a "Certifcat d'Urbanisme" which provides information on
planning, siting and zoning. It is not unusual to find a pre-emption right in favour of an
urban development body or an agricultural development authority. The authority rarely
exercises this right unless the property happens to be located in an area destined for
intensive re-development.
(ii) Title. All property must be registered. A property search is made
against the vendor's title.
(iii) Possible mortgages or other charges registered on the freehold
property. If the property is not "libre d'inscription" (free of charges) the
vendor must undertake effectively to discharge all liabilities.
(iv) Planning consents. Verify issue and compliance with consents and
building regulations.
(v) Good standing of the vendor in respect of the payment of municipal
taxes and, if applicable, service charges.
A structural survey should be done now, if desired.
(c) From Legal Commitment to Legal Title and
Completion
Completion of the purchase is likely to be a date and/or an event (e.g. within 2 months of
satisfying the conditions precedent stipulated in the "Compromis" or
"Promesse"). A formal document ("Acte de Vente") transferring
ownership from the vendor to the buyer is prepared and witnessed by a Notary, and then
registered in the Land Registry. A draft Acte de Vente is usually submitted to you in
advance.
The "Acte de Vente", a certified copy of which, known as the
"Expédition" (official copy), will be your Title Deed, is a fuller document
than the agreement for sale or option and will state the names and descriptions of the
parties, a full description of the unit, the title of the vendor (with Land Registry
references), the price, method of payment or receipt of the price, as the case may be, and
any special conditions. As a result of negotiations between private and public authorities
these deeds now follow a standardised format. In addition, it should contain a statement
(warranty) that:
(i) the vendor is the legal
owner of the property
(ii) the property is sold
with vacant possession
(iii) the property is not
subject to any charges.
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 and Notaries
are familiar with the time taken by the relevant Registry.
(d) Incidental Costs
These are traditionally payable wholly by the buyer and can amount to about 8% of the
purchase price. They include:
(i) Stamp Duty ("Droits d'Enregistrement") at rates varying
from department to department. VAT is only payable if the re-sale occurs within 5 years of
physical completion and the Vendor bought whilst the property was under construction. VAT
and Stamp Duty can never both be payable.
(ii) Notarial fees
(iii) Land Registry fees
Where translations are obtained, incidental
costs may be higher.
Ownership
You are legally bound by any condominium or estate 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.
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 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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