Once you have found the property of your choice, you will be required to enter into a written purchase agreement. This is a binding Agreement for the Vendor to sell and for the Buyer to purchase. Your notary will advise you as to which agreement is the most suitable. Once you have signed this contract, you have a 10 days “cooling-off” period. Once this period has expired, the contract becomes final and legally binding. The deposit can then be paid to the Notary. The most common agreements used are the following :
- Contrat de Réservation (new build properties)
- Compromis de Vente
- Promesse de Vente
In some cases the deposit is forfeited if the Buyer changes his mind after the cooling-off period and decides not to proceed, unless the Buyer can justify that it is due to one of the specific clauses stated in the preliminary contract not being fulfilled. These clauses are known as “Conditions Suspensives” and allow the Buyer to legally withdraw from the contract prior to completion if :
- The Buyer’s mortgage application is declined
- The Vendor is unable to provide proof of title to the property (Deeds)
- The Diagnostics don’t match the stated size of the property (Surface “Carrez”) mentioned in the preliminary contract,
- There are natural or technological environmental risks not previously mentioned
- Gas/electricity/paint does not meet conformity/safety standards…
If none of the above conditions poses a problem, it is usual for completion to take place within two to four months of Exchanging Contracts. Upon completion, the outstanding balance must be forthcoming and the Buyer and Vendor will both be present to sign the “Acte de Vente”. A Proxy (Procuration) can be signed in the UK, this Proxy will be signed in the presence of a Notary Public and will require an Apostille stamp from the Foreign Office to authenticate the documents.
The Conveyancing takes place through an “Office Notarial” (Solicitor or Notary Public in the UK). The French Notary is a publicly appointed official. As part of a long-established French legal profession, the Notary has full professional Indemnity Cover, which offers you added protection in the unlikely event of his negligence. It is his duty and responsibility to ensure the property title is in order, the transaction of the sale is completed correctly, the absence of preferential purchase rights waived (usually from the Local Council), Vendor’s obligation to obtain and provide necessary documentation and property diagnostics. A Notary may be appointed by each party or may represent both. His role is to legally implement what the Vendor and the Buyer have agreed. At this stage, a deposit of 1 to 10% of the purchase price is paid and remains in Escrow with the Notary.
Your Notary will undertake to complete all the necessary formalities and the exact fees associated with the purchase of each property will vary slightly depending on the work undertaken and where the property is situated (fees vary depending on Local Authorities and Counties: Départements in French) and the price of the property. As a guideline, you should expect to pay the following conveyancing fees :
- Between 2% and 3% of the agreed purchase price for New Build properties
- Between 6% and 8% of the agreed purchase price for completed properties and previously sold (the 5 years rule to benefit from reduced fees has been abolished)
Traditionally these fees are payable by the Buyer. You can estimate these fees by going to the French Notaries’ website: www.immobilier.notaires.fr
Similar to new developments in the UK, each apartment is referred to as a plot (“lot”) and you effectively buy it prior to the property being built to the specifications advertised on the Master and Unit plans. The preliminary contract is known as “Contrat de Réservation” and is subject to a cooling off period of seven days.
The Contract contains the timetable for the property’s completion, payment dates etc. Staged payments are required during the construction of the property, unlike other countries where the developer would only receive a deposit and the full payment of the balance after the property is fully built. Payments are usually spread over 12 to 18 months.
An initial deposit of 1-10% of the purchase price is required at the signature of the “Contrat de Réservation” which is usually a fixed price and inclusive of VAT. You are then required to pay in stages as the construction progresses.
A retention of 5% is usually held by the Buyer against finishing off minor defects on completion. Before entering into any agreement to buy “Off-plan”, we would advise you to ensure that the developer or builder has a guarantee known as “Garantie d’achèvement” which protects the Buyer against defaulting builders and developers before the property is completed.
If you take out a French mortgage this will normally be checked by the lender. For Buy to Let Leaseback projects please call us for further advice as there are different types of projects – developments and we will also advise you on the most sought-after locations.
For a period of ten years following delivery and the handing over of the keys, the contractors remain liable for any defect, which affects the main structure of the building.
You need to make sure your builder has such insurance cover by asking him for his “Assurance Décennale | Dommage Ouvrage” Certificate.
This insurance cover is normally included in the above contracts signed with the developer or builder or taken out by the Buyer. In the case of construction defects, this pre-finances the necessary repair work when the liability of the developer or builder is established.
This guarantee is often compulsory when taking out a mortgage and evidence of such cover often requested by the Notaire when you sell a property that is less than ten years old.
“Garantie de Livraison” is a completion guarantee that legally binds the developer or builder to complete the property in due time and at the agreed stated price mentioned in the contract. It also covers the Buyer in the event of the developer or builder going bankrupt during the period of construction.
There are basically two local taxes you are required to pay in relation to your property. The Notaire will give you the relevant details of the costs relating to the property being purchased as these vary according to the Local Authority where you buy.
- “Taxe fonciere”
Is a Land Tax on a property normally paid by the owner/landlord. This tax is payable even if the property is inhabited, providing it is furnished and habitable.
In Leaseback Buy to Let, we will often refer to it as the Council Tax as your sole tenant is the Management Company and the Taxe d’Habitation (see below) is replaced by the Taxe de Séjour paid by the user on the holiday let.
- “Taxe d’Habitation”
Is a Residential Tax normally paid by the Tenant.
This tax is computed on the basis of the property’s rental value. It is payable by anyone who lives in the property, as an owner, tenant or rent-free. It is paid annually at the end of the year, for the property you occupied on the 1st January in that year.
Payment of these taxes is usually made in one instalment or as a monthly direct debit over ten months.
Forms in relation to the assessment of both Taxes are sent out by Local Councils and must be completed and returned to the local Tax Office (“Centre des Impôts”) by a specific date.