The Property Banks Buyers Guide to France
The Compromis de Vente
After you agree a price with a vendor, the next step is for an
estate agent, a notaire or a solicitor to draw up a preliminary
purchase contract. In effect, this puts into writing the fact that
your offer has been accepted. One of the most important parts of
this will be the conditions of purchase and sale (the conditions
suspensives, or get-out clauses, of which more below). It will also
contain a description of the property with its cadastre reference
(see above), the price and how it is to be paid, the amount of the
deposit, the date of completion and the name of the notaire who will
draw up the final deed of sale. The amount of commissions due to
interested parties and the names of those responsible for paying
them, the legal rights and obligations of both parties, and their
personal particulars including date and place of birth and precise
marital status will also be set out. This contract will form the
basis of the final deed of sale. Make sure that any agreements you
have made with the seller about fixtures and fittings, boundaries,
vacant possession, and so on are spelled out in the contract. An
inventory might also be useful.
Two-stage process
Contractually, buying a house is a two-stage process. First, you
sign a preliminary contract, the compromis de vente, which is
binding on both parties, and you pay a deposit. This is like
exchanging contracts, but is subject to certain get-out clauses. It
helps keep the two parties committed to the deal while the various
legal and administrative processes are completed, and during which
time the buyer gets the funds together for the purchase proper.
Then, the final contract – the acte de vente is signed.
At this point, the buyer gets the keys, the seller gets the money,
the notaire and agents get their fees, and the state collects its
various taxes.
Promesse d’achat and Promesse de Vente
While the most common form of preliminary purchase contract is the
compromis de vente, there are two other forms: the promesse d’achat,
binding only on the buyer, and the promesse de vente, binding only
on the seller. These are far less commonly used than the compromis.
If the seller insists on a promesse, rather than a compromis, extra
care should be taken in checking the contract before signing.There
are no statutory fixed penalties for breaking a contract: these are,
therefore, set out in the body of the document itself.
Who will own the property?
Generally, before the contract is drawn up, the purchaser has to
decide who will own the property and how, as this information is
included in the contract. This decision is particularly important,
both for tax reasons and because of the operation of French laws on
inheritance (see below), which apply to all real estate in France,
no matter where its owner is domiciled. The exception is if you buy
the property through a company, and remain domiciled in the UK
(again, more on this later).There are radically different
consequences if you purchase in a single name, joint names or the
name of a company set up for the purpose. It makes sense to consult
your legal adviser about this before you begin to look for
properties in France, as making the wrong decision can be costly.
If all this is too much to take in and you can’t decide under which
name to purchase the property when you sign the contract, don’t
panic. You can include a ‘substitution clause’ which will allow you
to substitute any person or company when you eventually complete the
sale.
Married couples
You will need to provide the notaire with details of your ‘civil
status’ (état civil), which should be included in the contract. This
includes the occupation, nationality, birth dates, marital status
and ‘matrimonial regime’ of each individual involved in the
purchase. In French law, couples can adopt one of several régimes in
their marriage contract, depending on whether they wish to hold
property in common (communauté de biens), with all property bought
after the marriage by either partner belonging to both, or
separately (séparation de biens). If you have been married under UK
law, without specifiying which régime applies, the notaire will
usually state in the contract that you are married under the
séparation de biens regime. Changing your actual marital regime and
adopting one available under French law may have legal and tax
advantages, if you feel up to doing all the paperwork!
Conditions suspensives
As the generalised notion of ‘sale subject to contract’ is unknown
in France, property contracts contain conditions suspensives.
Sometimes known as ‘parachute clauses’, these are agreed by both
parties and set out the specific circumstances under which the
contract can be broken without penalty. These could make the sale
dependent on, for example, the property proving free of planning
restrictions, easements (rights of way or access for adjoining
properties), covenants, pre-emptive rights of purchase or claims
from local or national government. If works such as the addition of
a water supply or septic tank are needed to make the property
habitable, the practicability and cost of such schemes should be the
subject of a condition suspensive. In practice, anything agreed
between the buyer and seller can be included. Nothing so vague as
‘subject to satisfactory survey ‘ is acceptable, but if you are
worried about a particular aspect of the building (say the condition
of the roof timbers), a survey of this can be made the subject of a
condition suspensive – if the vendor agrees. Conditions suspensives
are also included to make the sale dependent on the property
receiving a clean bill of health from lead, asbestos or termite
infestation. These surveys, compulsory in some parts of France, are
the seller’s responsibility. The gap of around two months between
signing the compromis de vente and the final sale going through will
provide time to check out the various questions raised in the
conditions suspensives.
Subject to finance
If you are applying for a mortgage, a condition suspensive should
make the contract subject to finance being granted. You will,
however, have to apply for a loan and fail to secure it within a
specified period to have the benefit of this clause.
Compromis de vente: What are you signing?
Signing the contract binds both parties to the sale. On or before
signing, the buyer lodges a deposit with the notaire or estate
agent. No interest is payable on this amount, which the buyers will
lose if they withdraw from the sale for any reason not covered by
the conditions suspensives (see above) in the contract. If vendors
cancel a sale without a valid reason they must return the
purchaser’s deposit, and might have to pay a similar amount on top
of that in compensation (depending on the contract). Penalties for
non-completion, and what triggers them, should always be spelled out
in the contract. Signing such a contract without taking legal advice
on its contents can prove costly.
Paying the deposit
The deposit, customarily 10% of the purchase price, is usually
lodged through the notaire’s or agent’s account before the contract
is signed. The simplest way to do this is by bank transfer to the
relevant account. This can be a quicker process if you have set up a
bank account in France in advance; if not, electronic payments to
overseas accounts are also rapid, though they incur extra fees. You
will be given a receipt for the deposit.
Setting a date for completion
The contract will usually include a suggested date for the formal
signing of the deed of sale (l’acte de vente) usually 60 days in the
future to give time for the necessary searches to be made. In
practice the signing day is a moveable feast, subject to the
vagaries of the bureaucratic system. You can, however, be confident
that it will not be brought forward.There will not be interest
penalties for delayed completion.
The cooling-off period
Buyers can withdraw from a contract without penalty (that is,
without losing their deposit) within seven days of receiving notice
that the contract has been signed by both parties. You should send
any such cancellation by recorded delivery or appoint a bailiff to
give notice to the vendor of your withdrawal.
Between Compromis and Acte de Vente
Once the contract has been signed, the notaire has to undertake a
series of legal checks. These take anything from five or six weeks
to three months to complete.
The SAFER option
Depending on the surface area of your land, the notaire has a duty
to inform the French Rural Development Agency, the Fédération
Nationale des Sociétés d’Aménagement Foncier et d’Etablissement
Rural (SAFER). This is a body controlled by an offshoot of the
Ministry of Agriculture and set up to preserve farmers’ interests.
SAFER has the right to pre-empt any sale of land over a certain
area, generally 2,500 sq m. Although this right is rarely exercised
in the sale of relatively small domestic properties, it can take
SAFER up to two months to come to a decision, though you can pay a
fee for a fast-track service. If SAFER does take up its option, you
will lose your purchase, your deposit will be returned, and your
contract cancelled.
Legal searches
The notaire must check with the Bureau de Conservation des
Hypothéques (the equivalent of the Land Registry) that there are no
restrictions on the vendor’s title, nor any outstanding financial
charges on the property. If you request it and have a project in
mind, the notaire will apply for a certificat d’urbanisme, which
outlines the planning status and potential of the property. This is
a step up from the note d’urbanisme which you will get anyway, and
which just indicates planning zones and rights of way.
Planning applications
When applying for a certificat d’urbanisme, it is worth giving the
mairie an outline of any proposed development you have in mind for
the property – such as conversion of outbuildings – and provide a
draft plan. The vital information to give at this stage is the extra
floor area to be created, as well as any change of use, such as from
agricultural to residential.
Personal identification
The notaire has a duty to check all the personal details given in
the contract, and will require proof of identity. The precise
documentation requested may vary, but potential purchasers will
generally have to provide copies of documents such as birth and
marriage certificates, divorce decrees and passports. Those who have
been widowed will need to show their spouse’s death certificate. You
will have to provide documentary proof – a utilities bill will
usually do – of your residential address. If you have a marriage
contract, the notaire may want to see this too. All these checks
must be completed before the final deed of sale is signed.
Property insurance
You must arrange insurance cover on the property to take effect as
soon as you sign the final contract. A minimum of third party civil
liability insurance (assurance à responsabilité civile) and fire
cover are required by law. It makes sense to take out a
comprehensive householder’s policy (assurance multi-risques
habitation) to cover damage to or loss of property as well as risks
to neighbours and third parties. It may be possible to take over the
existing property insurance – in which case you must check precisely
what is covered – or to arrange cover with an English firm
specialising in insuring French property. Remember that premiums,
particularly on a comprehensive policy, are likely to be higher if
the property is used as a holiday home, or is otherwise left
uninhabited for portions of the year.
Completion: The acte de vente
When the searches are done, the notaire will invite all the
interested parties to gather in the notaire’s office for the signing
of the acte de vente (deed of sale). This marks the transfer of
title to the property. Be prepared for postponements, often at short
notice. To provide for the possibility that you cannot be present,
you can give someone on the scene the power of attorney to sign on
your behalf.
Draft contract
The notaire will send you an account of all the money that will have
to be paid on the day of completion – the balance of the purchase
price, fees, taxes and commissions – along with a draft (projét) of
the acte de vente. If the draft is not included with the accounts,
request a copy to look through. The draft should be shown to your
legal adviser and checked against the compromis de vente. Look out
for any changes.
The amount of money requested by the notaire for taxes and fees is
usually set a little high to cover possible unforeseen costs. The
purchaser often receives a small rebate from the notaire afterwards
– sometimes a while later – once the final calculations have been
made.
Arranging for payment
The balance of the purchase price plus any legal fees and duties
must be in the notaire’s hands before the acte can be signed. Going
to the signing with a banker’s draft is probably the best and
simplest method of doing this. Bank transfers and clearance of funds
between British and French bank accounts can take a week or more.
Opening a French account can help, and may be a requirement in some
cases.
Power of attorney
The notaire will, on request, draw up a Power of Attorney (procuration)
for you to sign, allowing a friend or relative resident in France
(or, often, someone working in the notaire’s office) to sign the
acte de vente on your behalf. Even if you are planning to attend the
signing in person, it may be worth setting up a power of attorney in
case problems arise that prevent you travelling at the last moment,
or delay the signing beyond your intended stay. It is not something
that can be arranged on the spot in an emergency.
Final checks of the property
Before completion, you should check the property – preferably
accompanied by an agent or legal adviser – to make sure it has not
significantly deteriorated since the preliminary contract was
signed, that the vendor has not removed anything that was included
in the price, and that any special conditions in the contract have
been met. If there is a problem, you must inform the notaire, who
may keep back some of the purchase price to pay for repairs or
replacements. If you are not satisfied with these arrangements, you
should not sign the acte de vente, as it is virtually impossible to
obtain any redress after signing.
Registration of the sale
Once the acte de vente has been signed, the notaire will keep it in
his or her archive (for 100 years!) and will send you a certified
copy, once it has been registered at the Bureau de Conservation des
Hypothèques. Sending you this official copy (expédition) can take
anything up to six months after the signing of the deeds of sale. So
if, in the meantime, you require proof of purchase – to take out
property insurance, import furniture or have utilities connected,
for example – the notaire will supply a certificate called an une
attestation d’acquisition to serve this purpose.
Legal fees, duties and taxes
The buyer is responsible for paying the notaire’s fees and all legal
costs and expenses, including stamp duty, which usually adds around
6.5% to the price of the property. These fees must be included in
the payment made to the notaire when the acte de vente is signed. If
the notaire has arranged a mortgage for the property, you will have
to pay an additional fee for this.
The notaire’s fees
Notaires are paid on the basis of a fixed fee plus a sliding scale
from 0.825% to 5% of the value of the transaction. In practice, most
deals are charged at the lower rate. Notaires will charge extra for
advice or any additional work requested, such as arranging a
mortgage. All the fees are subject to Value Added Tax (TVA),
currently at 19.6%.
Duties
Stamp duty currently stands at 4.89% of the cost of the property.
Three quarters of this goes to the département and the rest to the
commune. There is also a registration fee of 0.75% of the purchase
price payable to the Bureau de Conservation des Hypothéques.
