The process of buying a property

Posted by admin in Property Investment, The Companies | September 13th 2005

If you are looking to buy a property or have already found the property and agreed the price, then this page will provide a general guideline to the process of buying a property in France and highlight points that you should bear in mind.

What happens next?

The parties usually sign an agreement to purchase, the compromis de vente also known as the promesse de vente within about seven days of the purchase agreed. At this stage you will be obliged to pay a deposit of 10% of the purchase price that will be held by the agent or notaire as stakeholder.

The purchase agreement can be prepared by your legal advisor, the estate agent or a French notaire. If a notaire is involved at this stage, as the purchaser you have the right to choose the notaire you wish to act. If the seller already has a notaire involved in the sale you are not obliged to instruct him and, if you choose another, he will assist your notaire and share the fee with him.

If you are not confident of your understanding of French language or French legal procedure, it is prudent to get independent legal advice to protect your interests and to guide you through the process.

Remember: it is not simply a question of the purchase of a property that you should consider; there are important taxation and inheritance issues that you should deal with at the time. If these issues are addressed at this early stage you can save money and worry in the long term.

How much will the fees and taxes be on your purchase?

You will have to pay tax on the purchase price of about 5% of the value of the property, which will be collected by the notaire. The notaire’s fee plus other minor expenses will be about a further 2% plus a further fee is payable to the notaire of 1% of the value of any mortgage you will take.

Generally, you should assume that taxes and fees will be about 7% to 8% of the purchase price of the property, for example on a property costing €300,000 you should allow about €21,000 to €24,000 to cover tax and fees.

What is the effect of the compromis?

The compromis de vente is a binding agreement between the buyer and the seller that may be subject to the satisfaction of a number of conditions, see below.

Under French law the buyer has an eight-day “cooling off” period after signature of the agreement in which you can withdraw from the agreement and the deposit will be returned to you in full. However, if after the “cooling off” period you change your mind and withdraw from the agreement, you will loose your deposit, which will be paid to the seller.

After the seller has signed the compromis he is effectively committed to sell the property to you.

If you are buying a new property “off plan” the agreement may be in the form of a contrat de reservation or contrat préliminaire which will provide details of the property to be constructed and a timetable for completion.

What are the usual conditions in the contract?

There is no hard and fast rule as the conditions must be adapted to suit the needs and circumstances of the parties and the property but the following are common:

Financial: if the buyer requires a loan, the agreement will be made subject to a mortgage being offered to him.

Satisfactory certificat d’urbanisme: confirmation of planning approval and confirmation of developments in the area of the property.

Properties constructed after a certain date and in specified areas must be inspected and a report prepared to confirm the absence of termites, lead and asbestos.

It is important you discuss with your legal advisor or notaire any terms that you wish to see incorporated into the purchase agreement before signature – after you have signed and paid the deposit may be too late.

Make certain that all the items you think are included in the sale, are included. There must be an accurate description of the property being sold in the agreement and you may wish to agree an inventory of small items with the seller. There is no equivalent to the fixtures and fittings questionnaire as used in the UK. It is best to be clear at this stage and avoid disagreement later.

What happens after contracts have been signed?

The title will be checked and certain enquiries made regarding items that might affect the property, for example rights of way, planning and any near by development. If you are taking a mortgage the notaire will act for the lender and deal with the legal formalities, as mentioned above, he will charge a fee of 1% of the value of the loan.

Other points to consider

It is at this point that you may need advice on taxation and the French law on inheritance as the law may be very different from what you may assume might be the case. You will need to consider how the property should be owned, whether personally or through a French property company (société civile immobilier).

These are not matters that can be postponed for consideration at leisure after the purchase, as the tax consequences will have immediate effect. It is not always possible to change an arrangement at a later date and, even if it is, a later change can be both difficult and expensive. It is best to get advice at the outset.
What happens at completion?

After the conditions to the agreement have been met the parties attend in person at the notaire’s office to go through the documents, in French, before the transfer document, the acte authentique, is signed The balance of the purchase price (after deduction of the deposit) is paid plus the tax and notarial fees. You will receive a receipt for the purchase price and a document confirming your purchase attestation de propriete plus the keys to what is now your property. Later you will receive an exemplified copy of the purchase deed and the original will be held by the notaire.

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