A con­sid­ered de­ci­sion

Our ex­perts out­line six things to think about when buy­ing a French prop­erty

Living France - - Contents -

1. WHAT TO SIGN AND WHERE

When buy­ing a prop­erty in France you will be asked to sign a num­ber of doc­u­ments. These can range from the bon de vis­ite, which usu­ally just con­firms that you have been shown the prop­erty by a par­tic­u­lar es­tate agent, to the legally bind­ing pur­chase doc­u­ments.

One of the most sig­nif­i­cant dif­fer­ences to buy­ing prop­erty in Eng­land and Wales is that in France you con­trac­tu­ally bind your­self to buy­ing the prop­erty much ear­lier. The pre­lim­i­nary con­tract, usu­ally the com­pro­mis de vente, is the doc­u­ment un­der which the buyer com­mits to buy a prop­erty and the seller com­mits to sell it. In Eng­land and Wales, a con­tract to buy a prop­erty is al­most al­ways pre­pared by a solic­i­tor and is gen­er­ally signed a few months af­ter an of­fer has been ac­cepted.

By con­trast, in France the com­pro­mis de vente is of­ten pre­pared by the es­tate agent and is signed shortly af­ter the of­fer has been ac­cepted. The buyer only has 10 days to back out of the pur­chase, from the date of sign­ing, if they change their mind.

It is there­fore vi­tal to only sign a com­pro­mis de vente if you are sure that you want to buy the prop­erty. It is also sen­si­ble to ei­ther ask your no­taire to draft the com­pro­mis for you, or at least check it.

If all goes smoothly, a cou­ple of months later you will be asked to sign the trans­fer deed, or acte de vente.

It is al­ways prefer­able to sign the doc­u­ments in per­son. How­ever, if this is not pos­si­ble, you can ask your no­taire to pre­pare a power of at­tor­ney for you ( procu­ra­tion), which will en­able a mem­ber of the no­taire’s staff to sign the doc­u­men­ta­tion on your be­half.

2. HOW TO BUY A PROP­ERTY JOINTLY IN FRANCE

There are dif­fer­ent ways for two or more peo­ple to own prop­erty to­gether in France. The main ones are:

EN INDIVISION

This is the most com­mon ar­range­ment; each co-owner has their own dis­tinct share. Shares can be equal or un­equal, as agreed between the co-own­ers (for ex­am­ple 50:50, 25:75). Should one co-owner die, their share would pass ac­cord­ing to their will.

EN TONTINE

If you own a prop­erty this way there are no shares as such. Should one co-owner pass away, the other au­to­mat­i­cally be­comes sole owner of the prop­erty and is deemed to have been the sole owner from the date of pur­chase. This is re­gard­less of what the de­ceased’s will stip­u­lates.

Which method is best will al­ways de­pend on the buyer’s par­tic­u­lar cir­cum­stances, so it is im­por­tant to ob­tain le­gal ad­vice be­fore mak­ing a de­ci­sion.

3. WHAT IS A VI­AGER?

A vi­ager is a unique French sys­tem of buy­ing and sell­ing prop­erty between two in­di­vid­u­als. It in­volves the buyer pay­ing a bar­gain price (typ­i­cally between 15%30% of the mar­ket value) in ex­change for al­low­ing the seller to re­main in the prop­erty for the rest of their life. The buyer also agrees to pay the seller a monthly in­come dur­ing their life­time. Only when the seller dies can the buyer take pos­ses­sion of the prop­erty.

From the buyer’s point of view, a vi­ager is a form of prop­erty in­vest­ment which gam­bles on the life ex­pectancy of the seller. It could seem like a bar­gain to start with but it may be a long time be­fore the buyer can ac­tu­ally use the prop­erty. Un­til then, he or she is bound to make monthly pay­ments to the seller.

From the seller’s per­spec­tive, a vi­ager can be seen as a form of eq­uity re­lease. If the seller is not con­cerned about leav­ing the prop­erty to rel­a­tives, then a vi­ager is a way of se­cur­ing an in­come, as well as oc­cu­pancy of their home, for life.

Vi­agers are highly risky in­vest­ments and any­one in­ter­ested should seek pro­fes­sional ad­vice.

4. LO­CAL TAXES

A num­ber of taxes ap­ply to prop­erty own­ers in France, which it is im­por­tant to be aware of. These in­clude: • Taxe d’habi­ta­tion is a lo­cal tax payable by the oc­cu­pier of the prop­erty on 1 Jan­uary ev­ery year. • Taxe fon­cière is an­other lo­cal tax, payable by the owner of the prop­erty once a year. If you oc­cupy the prop­erty you own, then you pay both taxe d’habi­ta­tion and taxe fon­cière.

A vi­ager is a unique French sys­tem of buy­ing and sell­ing prop­erty between two in­di­vid­u­als. It in­volves the buyer pay­ing a bar­gain price in ex­change for al­low­ing the seller to re­main in the prop­erty for the rest of their life

• L’im­pôt sur la for­tune im­mo­bil­ière (IFI) is a wealth tax on res­i­den­tial prop­erty that ap­plies if your prop­erty or prop­er­ties are worth more than €1,300,000. • Like its UK equiv­a­lent, French cap­i­tal gains tax is a tax cal­cu­lated on the in­crease in value of a prop­erty when the prop­erty is sold. The rate is 19% if you are res­i­dent in France or in the EU, or 33% if not. The rate re­duces ac­cord­ing to how long you have owned the prop­erty, to the point that af­ter 22 years, it be­comes ex­empt. It is also ex­empt if it is your main home. • In­come tax is payable on rental in­come if the prop­erty is let out. • So­cial charges are charges levied on some forms of in­come such as in­come from prop­erty rentals and prop­erty cap­i­tal gains. These are levied on top of the rel­e­vant in­come tax and cap­i­tal gains tax. • In­her­i­tance tax may ap­ply when the prop­erty owner passes away, de­pend­ing on the value of the prop­erty and who in­her­its it. In­her­i­tance tax in France is payable by the ben­e­fi­cia­ries out of their share, rather than by your es­tate be­fore it passes to the ben­e­fi­cia­ries, as is the case in the UK.

5. DO YOU NEED A WILL?

Have you con­sid­ered what would hap­pen to the prop­erty you are buy­ing should you pass away? If you have no will in place, the prop­erty would be sub­ject to French in­tes­tacy laws, which may or may not re­flect your wishes. Mak­ing a will en­sures that your wishes are prop­erly recorded and that your prop­erty and other as­sets pass to your cho­sen ben­e­fi­cia­ries as far as this is pos­si­ble.

France has a sys­tem of ‘forced heir­ship’ laws, un­der which you do not have to­tal free­dom to de­cide who you leave your es­tate to. In­stead, rules dic­tate who in­her­its, de­pend­ing on which fam­ily mem­bers sur­vive you. These rules ap­ply even if there is a will. How­ever, if you are not a French na­tional and you do not wish to be bound by the French suc­ces­sion rules, it is pos­si­ble to by-pass them by ‘elect­ing’ the law of your own na­tion­al­ity to ap­ply to your French as­sets in your will.

If you have as­sets in both the UK and France, it is gen­er­ally ad­vis­able to have two sep­a­rate wills. This is to avoid de­lays, aid in the ad­min­is­tra­tion of your es­tate in both the UK and France and avoid the ex­tra cost of ad­min­is­ter­ing one es­tate af­ter the other.

Drafted cor­rectly, it is pos­si­ble for a sin­gle English will to cover your French prop­erty and be recog­nised as valid in France. How­ever, if this is what you wish, it is im­por­tant to re­view your ex­ist­ing will.

6. POW­ERS OF AT­TOR­NEY

What would hap­pen to your French prop­erty if a change in cir­cum­stances, such as an ac­ci­dent or health is­sues, mean you are not able to man­age it your­self?

You should con­sider nom­i­nat­ing some­one you trust to look af­ter your af­fairs in such an event. In Eng­land and Wales this is done by way of a last­ing power of at­tor­ney (LPA). Un­der an LPA you can ap­point peo­ple to look af­ter your ‘fi­nan­cial and prop­erty af­fairs’ and your ‘health and wel­fare’.

Tech­ni­cally, your English LPA could be recog­nised in France, how­ever this is likely to be a dif­fi­cult process. A num­ber of po­ten­tially oner­ous re­quire­ments could be im­posed by the French au­thor­i­ties, as they will need to sat­isfy them­selves that the doc­u­ment is le­git­i­mate and ac­cept­able.

A safer op­tion is to put in place a French power of at­tor­ney, known as a man­dat de pro­tec­tion fu­ture to cover your French as­sets, along­side your English LPAs to cover your English as­sets.

There are dif­fer­ent ways to pre­pare a man­dat de pro­tec­tion fu­ture. It can take the form of a sim­ple pri­vate doc­u­ment or a for­mal deed pre­pared by a French no­taire. The lat­ter is rec­om­mended, as you would ben­e­fit from the no­taire’s guid­ance and ex­per­tise with the peace of mind that the doc­u­ment has been prop­erly pre­pared and is safely stored at the no­taire’s of­fice.

Tech­ni­cally, your English last­ing power of at­tor­ney (LPA) could be recog­nised in France, how­ever this is likely to be a dif­fi­cult process

Char­lotte Mac­don­ald is an as­so­ciate and Rachel Ugalde is a solic­i­tor at Stone King LLP stonek­ing.co.uk

Char­lotte Mac­don­ald

Rachel Ugalde

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