The law of the land
The legalities of the French property buying process explained
Purchasing a property in France remains an attractive option for many of us. Whether as a holiday home, an investment or as somewhere to live permanently, the dream of owning a place in France is still popular, despite the current political and economic climate.
However, if the ambition to buy a part of France remains the same, the understanding of the purchase process is still largely misunderstood. Many of our clients are well able to understand the typical process of buying and selling a house in the UK – they will have done this several times. Yet they will probably only ever come to buy one home south of the English Channel, so there is no surprise that the whole process of buying a French property may not be as well understood.
In this article I will set out a very brief overview of the main issues that arise when buying a property in France. Inevitably, though, every specific set of circumstances is different and so there is every interest in instructing an independent firm of solicitors with a specialism in French law to advise.
ROLE OF THE NOTAIRE
One of the main differences between English and French property transactions is the role of the lawyer involved. In the UK, each party will instruct its own solicitor to advise on the process; acting therefore with their own client’s interests as a paramount concern.
In France that is not necessarily the case: a notaire’s primary role is to ensure that a transaction is registered and that all relevant taxes are paid.
And while notaires will indeed be responsible for finalising the process, they are not necessarily involved at the start – the first contract is often prepared by the selling agent. Some buyers are concerned that the initial contract might not be prepared by a notaire, although there is nothing necessarily wrong in this.
The contract must adhere to certain requirements, such as the need to incorporate all relevant pre-contract diagnostic inspection reports; to identify suitably the parties, the property and the price; and to be submitted to a cooling-off period in favour of the buyer.
CONTRACTUAL REQUIREMENTS DIAGNOSTIC REPORTS
Of these various points, the pre-contract diagnostic inspections are of particular note. Before looking at these, it is important to understand that these do not directly replicate what one would expect from a full, independent structural survey. If you would have a survey carried out when buying a house in the UK, then why not do the same in France? While it may generate an extra expense, you will be able to value the peace of mind it should offer.
Depending upon the location, the type and the age of the property, different inspections must be carried out, the results being incorporated into the initial purchase contract for information. Properties built before 1948 will be checked for the presence of lead paint; if built before 2008 they will be assessed for the presence of asbestos; in most areas of the south, as well as Paris, there will be an inspection for the presence of termites. If the property is an apartment, the internal habitable surface area will be measured, as this
should be a metric for the price.
A notaire’s primary role is to ensure that a transaction is registered and that all relevant taxes are paid
Where electrical and gas systems are more than 15 years old, these will be checked.
An energy efficiency report is produced and the inspector will make an estimate of the likely annual energy consumption, suggesting ways in which improvements may be made. Such suggestions would also come with a likely costs/benefits comparison, on the basis that some steps may be relatively cheap, some less so, and that relative improvements may differ. In addition, energy efficiency improvements grants may occasionally be available, which would also be noted by the diagnostic inspector.
On top of these property-specific diagnostics, a report summarising any noted natural risks (for example flooding, forest fire, avalanche, seismic activity) known to affect the area is produced. This relates to the general area, rather than to the property in particular. While the entire riverside area of a village may well have been flooded in the past, for example, if the property to be bought is at the top of a hill overlooking the village it is unlikely to have been affected in the same way.
It may be important, therefore, to consider the terms of the contract to establish if this includes an express declaration by the seller that any specific problems affecting the area have not affected the property itself.
Most buyers are aware that a French purchase contract will be subject to various conditions ( conditions suspensives) that need to be satisfied before the sale can complete. Typical conditions will include confirmation that the seller has good title, that there are no charges or restrictions registered against the property that would not be cleared on completion, and confirmation that a buyer would receive a mortgage offer if required.
However, the condition suspensive that there will be no administrative restrictions registered at the local authority does not equate to the Local Authority Search that would be produced on a property purchase in the UK. It is much narrower. Thus if a buyer has concerns about planning matters, such as whether a neighbour may be able to develop their land, then these should be raised separately. Similarly, if the buyer needs to obtain planning permission for works to be carried out on site, then this should be negotiated in advance of signing the contract.
Once the contract is signed, the buyer is offered a 10-day period in which they can withdraw, should they so choose. This right is exercised only rarely by buyers, but it does offer an important ‘get out’ if circumstances change.
Presuming the various conditions are satisfied, and the buyer has not withdrawn from the purchase, the notaire will prepare a draft of the final completion deed. This is likely to be some two months after the first contract is signed. At that time, the parties will be invited to attend a completion meeting at the notaire’s office.
The buyer will send the balance of the purchase price to the notaire, taking into account any deposit already paid. The buyer will pay the notaire’s fees, which will include stamp duty and other register charges. In general the fees are about 7%-8% of the price; there is a reduction for new-build property; an extra charge if a mortgage is required.
The notaire will read through the deed with the parties, which may occasionally give rise to the need for a translator to be present. We would expect to obtain a copy of the draft in advance of the completion meeting, to ensure it is all in order.
It is generally worthwhile attending the completion meeting, although where that is not possible, the parties can be represented by a power of attorney. This would allow a third party – possibly one of the notaire’s staff – to sign the purchase deed on their behalf. On occasion, a power of attorney can be used to sign the first contract as well.
It is evident that a power of attorney can confer substantial powers on another party, and therefore as a protection the document should be completed in accordance with strict formalities. It should be scrutinised along with the draft sale deed, to ensure it is in order.
Inevitably, this brief summary can only really touch on the most common points arising in relation to a purchase in France, and many other aspects may be relevant. If the property is currently under construction, an entirely different form of contract, with many other guarantees and obligations, might be produced.
Buyers should also give detailed consideration to inheritance tax and legal matters as well – just because the EU Succession Regulation is now in force, potentially giving buyers more scope for their inheritance planning, it does not follow that detailed advice on this topic is no longer suitable. Other taxation issues are important too. Will wealth tax apply, for example? Will any business or other activity generate any liability to income tax (and, if so, in which jurisdiction)?
On first glance, the whole process of buying a house in France looks quite clear. There are lots of similarities with the standard conveyancing process in the UK, after all. However there are a number of potential complications, even where language is not a barrier, and commissioning independent specialist solicitors to oversee the process should prove worthwhile.
“Buyers should also give detailed consideration to inheritance tax and legal matters” Matthew Cameron is a partner and head of the French Legal Services department at Ashtons Legal ashtonslegal.co.uk