Before you fall head over heels with a property across the Channel, Matthew Cameron advises you spare some time for forward planning to ensure things run smoothly
Fees, finance and forward planning; how to get prepared for your move
One of the themes we often raise with clients when they are at an early stage in their property purchase in France is initial preparation and investigation of the background procedures. It may seem a little obvious to suggest it is important to prepare thoroughly for something as huge as buying a home in a different jurisdiction, yet our experiences show that some of the differences are often not worked through in advance.
Take, for example, mortgages. There are strict lending criteria in France, just as is the case in the UK. However, a person’s ability to afford a mortgage is calculated differently; ‘affordability’ is established predominantly by reference to overall debt, with less consideration given to the ‘loan to value’ assessment of the property to be mortgaged. The result is that while a buyer may not have a problem were the funding to be sought in the UK, the same base criteria could result in a rejection in France.
Inevitably, there are ways to avoid such potential pitfalls. You could consider securing a British mortgage against a home in the UK, thus becoming a cash purchaser in France, for example. That may not always be possible though. In any event, the point here is that it is important to ensure – however any funding is to be sourced – that you are fully aware of how much can be borrowed.
Whether using a mortgage broker or dealing directly with banks, it should be possible to organise a non-binding ‘preapproval’ in advance even of finding the right property. That, at least, would reduce the risk of problems arising later.
Timing issues Of course, not every buyer needs to raise a mortgage to buy their new home in France. Another common scenario is to sell your home in the UK in order to fund a purchase in France, as part of a permanent move. However, it is extremely difficult to successfully synchronise a UK sale with a French purchase, such that the whole process is seamless.
Property transfer procedures are different either side of the Channel, and the points at which each contract becomes binding are going to be far apart. The result is that you may be unable to complete the purchase in France as intended, or that you could be ‘homeless’ for a while – perhaps for several weeks or longer.
We occasionally take instructions from clients being called upon to complete a purchase in France when they have not yet completed their sale in the UK. There are different ways of addressing this problem, and it may not necessarily turn out to be a concern in any event. However, it does underline the importance of a thorough understanding of the entire procedure, as well as planning for such situations.
Don’t forget fees Another point to bear in mind is the level of notaire’s fees. When the stamp duty element (by far the largest part of notaire’s costs) is taken into account, these can easily rise to 7%-8% on a standard sale. And where the buyer is
Even for something as huge as buying a home in a different jurisdiction, our experiences show that buyers don’t always work through the differences in advance
taking a mortgage to be secured against the property in France, a further 1% should be budgeted too.
Commission payable to agents in France is often higher in France than in the UK – in practice, their business model is somewhat different. Commission rates of around 4%-8% are standard. However, it is more important that the buyer understands whether that commission is payable in addition to the marked purchase price or whether it is included in the sale price and thus payable by the seller. Asking prices can be advertised in both forms. That is entirely usual, although it is important to know which.
Successful succession Much is written about the complexities of French inheritance law and tax rules; in particular, the French rules of forced heirship that have concerned Brits for many years.
While the EU Succession Regulation (which came into force in 2015) has changed much, it is not necessarily the case that simply writing a UK will is sufficient to cover all issues about post-death estate planning.
A typical UK will, with all its complexities, can cause difficulties in the administration of a deceased person’s estate in France, not least because of the likely imposition of trusts under a UK will: trusts are treated with suspicion in France.
In practice, there are a number of ways of planning the devolution of your estate, perhaps by the application of English (or other UK) inheritance law rules, maybe by French. Everyone’s circumstances will be slightly different, and so specific advice is required.
This is even more the case when we bear in mind that French and UK inheritance tax could both have an impact – and the two inheritance tax systems are also calculated differently.
This shows that there are many points to consider in advance of a purchase in France. Perhaps one of the most important points of preparation is to consider whether a suitably experienced firm of solicitors should assist with the transaction.