Buying Process
- Information about the property before purchase
- Title Deed and Land Registry
- Plan Cadastral
- Local structural plan (POS or PLU)
- Building Permit (Permis de Construire)
- What legal form should I use?
- Ownership Structure
- Property Company (SCI = Société Civile Immobilière)
- Buying Process
- Costs and Fees
- Preliminary Agreement (Promesse de Vente)
- French Notary
- Deposit (Dépôt de Garantie)
- The 10 Days Law
- Suspensive Conditions (Clauses Supensives)
- Funding a Property
- Mandatory Property Survey
- Pre-emptive Rigths
- Deed of Conveyance (Acte de Vente)
- Taxes before buying
- Property Taxes (Taxe Foncière)
- Council Taxes (Taxe d’Habitation)
- Maintenance Charges
- Taxes on resale
- Inheritance Tax
- Capital Gain Tax (Impôt sur la plus value)
- Wealth Tax (ISF = Impôt de Solidarité sur la Fortune)
1. Information about the property before purchase
1.1 Title Deed and Land Registry
The seller proves that he owns French realty by his title deed (titre) which must be registered at the Land and Charges Registry (conservation des hypothèques) to be enforceable against third parties. The registered title deed can also provide information about mortgages, easements (servitudes) such as rights of way and other matters which affect French realty.
1.2 Plan cadastral
French realty is divided into units known as lots or parcels, each of which is given a cadastral number (reference cadastrale) which appear on a registered plan (plan cadastral) of the property. The plan does not guarantee the accuracy but helps understand land measurements or the site boundaries delineated in the plan.
1.3 Local structural plan (POS or PLU)
Most French local authorities produce a local structural plan (POS = Plan d’Occupation des Sols; PLU = Plan local d’Urbanisme) which tells you amongst other things what can or cannot be done to your land or neighbouring property.
1.4 Building permit (Permis de Construire)
No construction, demolition or change of use of the property may be undertaken in France without a building permit (permis de construire) or declaration (déclaration de travaux) for smaller project such as building a pool. Those in breach can face criminal, civil and administrative penalties.
2. What legal form should I use?
2.1 Ownership Structure
French real estate can be bought in various ways. These include a direct purchase by individuals in single, joint or multiple names, or by taking shares in a company which owns the French real estate. The right ownership structure depends largely on what suits your personal family circumstances. Legal and taxation advice should be sought in advance of any purchase.
2.2 Property Company (SCI = Société Civile Immobilière)
A SCI is a property company. Although it can be used to minimize succession tax by gifting shares to your children during your lifetime, they are also used by a group of unrelated people to purchase a property as co-owners. Taking professional advice is essential.
3. Buying Process
3.1 Costs and fees
When a property is presented by an estate agent in France, the price includes the agency commission and so the only purchasing costs you need to add on are the “Notary Fees and Taxes” (various government taxes such as stamp duty).
This fee amounts to an additional 7 – 8 % of the purchase price depending on several factors. It may be slightly less if you do not want to take out a loan to buy a property.
3.2 Preliminary Agreement (PROMESSE de Vente)
Once you have found your property and agreed upon the price, you will sign a document agreeing to purchase – the preliminary agreement (PROMESSE de vente). This document sets out the details of the purchase with information about the property, the people involved, price, loan if appropriate. It can include conditional clauses (clause suspensives) which enables you to withdraw from the purchase if a certain condition is not met (e.g., inability to get a loan agreement). It CAN be signed by the vendor and the purchaser AT THE OFFICE OF THE NOTARY.
The preliminary agreement can be prepared by an estate agent. We normally recommend that the notary draws up the agreement time and conditions permitting.
3.3 French Notary
The “Notaire” is an independent government official appointed under oath by the French Justice Department. He/she can act for both the buyer and the seller, although each party can appoint their own notary at no extra cost if they wish. The two notaries will then share their fee. French property transactions must be completed through a French notary practicing in France. We recommend normally that you have your “own” notary who speaks your language.
3.4 Deposit (Dépôt de Garantie)
When you sign the preliminary agreement you must usually pay a deposit of 10 per cent of the purchase price and the agency fee. The notary will withhold your deposit under your name at “La Caisse des Dépôts et Consignation” (secure Public Institution). Some agents provide this service as well. At Saint Tropez Home Finders we believe that the notary is the best person to withhold your deposit.
3.5 The 10 Days Law
Starting from the day after the preliminary agreement (promesse de vente) has been sent to you, you have a ten day “cooling off” period before the agreement becomes binding. During this time you can change your mind and withdraw from the purchase without penalties. If you have already sent your deposit, then this will be refunded to you in full. The same privilege does not apply to the vendor.
What happens if I withdraw from the preliminary agreement after the 10 days? You may lose your deposit. Depending on the wording of the preliminary agreement, other penalties may apply. What happens if the seller withdraws from the preliminary agreement? If the seller withdraws, he must refund your deposit and (if the preliminary agreement says so) must also pay you the same amount again in damages.
3.6 Suspensive Conditions (Clauses Suspensives)
In France, a buyer can insist on the preliminary agreement containing one or more suspensive conditions (clauses suspensives), which, if not met, allows him to withdraw from the agreement and recover his deposit. In a well-drawn agreement, conditions precedent will typically cover things such as the right to withdraw if a loan is required but not obtained, rights of way or planning restrictions affecting the property, that the planning search made against the property is positive (i.e. permitting building, renovation or other works) and that the local authority or others do not exercise a right of first refusal (droit de préemption) to buy the property.
3.7 Funding a Property
Before you begin your property search, it is wise to have a loan agreed in principle, should you require one. This will ensure that when you finally find your property, you will know your budget more precisely and you can act quickly giving you the best chance of getting a good deal.
Under French Law, a preliminary agreement can be subordinated to obtaining the finance necessary to complete the overall operation. To this effect your preliminary agreement must stipulate what proportion of the contract price is available to you from your own resources and what proportion you seek to borrow. In addition, you may stipulate other loan criteria such as a maximum term, a maximum rate of interest and a maximum monthly payment.
Commencing from the date of signing your preliminary agreement you have 30 to 45 days to obtain a loan. Should an offer of finance not be forthcoming within the required period, the borrower is entitled to a refund of all deposits.
3.8 Mandatory Property Survey
Properties will automatically be inspected as part of the process and the survey will be paid by the vendor. The surveyor will search for termites, asbestos, inspect electrical and gas system, estimate consumption, and identify natural and technical risks. Usually this survey is done before you sign the preliminary agreement.
The French system does not enforce a survey on construction, but if you are worried about such matters as for example the lagging, false ceilings and so on, we can find a suitable surveyor for you in France.
3.9 Pre-emptive Rights
The notary checks if other parties have a pre-emptive right (droit de pre-emption) against the property. For instance, if the seller lets the property, his tenants may have a right of first refusal to buy the property from him, even though the seller has contracted to sell the property to you. If the property is in rural France neighboring farmers may have similar rights. The property is, for example, needed for road-widening schemes or similar infrastructure projects. In urban areas the municipality has a right of pre-emption on the sale of property in zones the municipality has designated.
3.10 Deed of Conveyance (Acte de Vente)
The notary will carry out various elementary local authority and land registry searches, draft the deed of conveyance, and the mortgage deed if appropriate. The notary checks that each party has full capacity or the right to either sell the property or purchase it. He/she is also responsible for all searches relating to the current title of the property. He/she checks the position with regard to planning and confirms that the search does not reveal anything likely to reduce the value of the property. No specific time limits are imposed but it usually takes 2 to 3 month to complete.
The sales price has to be credited on the notary account by bank transfer before the deed of conveyance can be signed. In addition, the day of signature you have to provide proof of a property insurance contract.
If the actual completion date may not be convenient to you, we can arrange for a Power of Attorney (procuration) in favour of one of the notary’s clerks so that the formalities can be completed without you having to attend in France in person. The Power of Attorney has to be witnessed by a notary public in your home country. It is wise to notify the notary as soon as possible if you do not intend to sign the deed of conveyance in person.
After completion you will obtain official evidence of your ownership (attestation d’acquisition) on the day of completion from your notary. Stamping and registration (enregistrement) of your deed of conveyance takes approximately six months after completion of your purchase. In due course your notary should supply you with a certified copy (expédition) of your registered deed of conveyance. It is a French legal requirement that your original title deeds remain in your notary’s archives, even if the property is mortgaged.
The notary confirmation of the transaction allows to make all the practical arrangements, such as signing with the electricity, water and other utility supply companies. You can pay your French bills from your country of residence but it is usual practice to settle all your French outgoings by direct debit via a French bank. As part of our service, we can help you to set up these arrangements.
4. Taxes before buying
Taxation is a complex subject and full independent advice on the particular facts of a case should be sought. The content of this page is of a general nature and no liability is accepted in connection with it.
There are two local property taxes payable by residents and non-residents. The amount of these taxes will vary from one place to another and according to the size of the property.
4.1 Property taxes
As the owner of a property, you are liable for paying this tax, which is due for payment by October/November, irrespective of who occupies it. If an owner sells halfway through the year the notary dealing with the sale will apportion the property tax.
4.2 Council tax
It is only due on a habitable building. The occupant of the property on the first day of January is liable for paying this tax. Even if you only use the property on occasional visits, you are liable for this tax. If you rent your property to someone else and they are living there on the first day of January of the year, they are liable for paying this tax. It is not apportioned if they later move or when you sell the property.
4.3 Maintenance Charges – Charges de copropriétaires
For those owning property such as an apartment or a villa within a complex there are maintenance and service charges to pay. You should consider these charges before signing the compromis de vente. The charges will vary according to the size and quality of the complex, whether there are lifts, swimming pool, caretaker, tennis courts and other facilities.
5. Taxes on resale
5.1 Inheritance Tax
Since August 2015, EU citizens have the possibility to specify in their last will, which EU inheritance law should be applied in case of succession. Therefore, the testator has the possibility to design the line of succession. Nevertheless, the successors are still subject to French inheritance taxation. If a double tax treaty exists between the two countries, the inheritance taxes paid in France will be taken into account.
Before signing the sales contract, please consult your notary for advice on determining the preferable form of ownership suitable for your personal situation. Especially with family circumstances like children from a previous marriage, it is advisable to check the French regulations.
5.2 Capital Gain Tax (Impôt sur la plus value)
Capital gains only apply if you are selling a secondary residence. There is no capital gains tax incurred if you sell your main home to buy another. Calculating any tax due on the re-sale of a property is complicated and professional advice should be sought.
In general, the tax is applied to the difference between the sale and purchase price minus improvement made on the house. Second homes in France are subject to a capital gain tax during 22 years of ownership (resp. 30 years to social charges) with the following yearly deduction schedule:
- 6 – 21 year: 6% on tax / 1,65% on social charges
- 22 year: 4% on tax / 1,6% on social charges
- 23 – 30 year: 9% on social charges
Building plots show approx. the same scale for social charges, but different tax implications. The scale envisages a yearly deduction of 2% from year 6 – 17, 4% from year 18 – 24 and 8% from year 24 – 30.
Tax Rates:
- French residents: 19% tax + 15,5% social charges
- EU, CH residents: 19% tax + 15,5% social charges
- Non EU residents: 34,5% tax + 15,5% social charges
A supplementary capital gain tax is due on gains over 50.000 EUR (from 2% to 6% above 250.000 EUR). In case the capital gain exceeds 150.000 EUR, a tax representative will be appointed for non-EU vendors (costs 0,7 – 1% of the sales price). The notary dealing with the sale is required to pay the money to the French Land Registry.
5.3 Wealth Tax (IFI = Impôt sur la fortune immobilière)
Individual resident in France and non-residents who have assets in France are taxed on their assets. Non-residents are only liable to wealth tax on their net French assets (property value less mortgage). These include any property or any rights over property situated in France. Wealth tax has to be paid if the net property value is higher than 1,3 Mio. EUR for the amount which exceeds 800.000 EUR.
Rate of taxes:
- 800.000 EUR – 1,31 Mio. EUR = 0,5%
- 1,31 Mio. EUR – 2,57 Mio. EUR = 0,7%
- 2,57 Mio. EUR – 5 Mio. EUR = 1%
- 5 Mio. EUR – 10 Mio. EUR = 1,25%
- over 10 Mio. EUR = 1,5%
