Buying Property in France

Paris Property Group is a full service real estate agency offering tailored buyer and seller property solutions in Paris. We navigate our clients through the market to find, purchase and enjoy a perfect property in Paris.
Once an offer has been made and accepted on a property in France, what are the buyers rights and responsibilities? How does the process from accepted offer to owning the property? What are the important issues to consider on structuring a purchase to maximize enjoyment and profit? These and other common questions about purchasing property in France are answered below.

At the signing of the acte de vente, the buyer pays the purchase price , plus (plus) all taxes, and fees and commissions, the are paid by the buyer, keys are handed over by the seller, and ownership of the property passes to the buyer.

Who is committed to what at the signing of the preliminary contract?

Whether the parties sign a compromis de vente or a promesse de vente, the preliminary contract will always contain the following terms: The agreed purchase price. Any conditions for completion of the sale, including the minimum acceptable terms for financing if the buyer will be seeking a mortgage. The party to whose benefit any conditional clause was written will be released from the contract if that condition is not fulfilled. The final (last possible) date for signature of the acte de vente.

What are the necessary steps for purchasing a property in France?

The essential purchase process is divided into two stages. The purchase is first formalized by a preliminary contract that may be prepared either by a notaire a promesse de vente - or by an estate agent or privately between the parties a compromis de vente. In either case, the seller is obligated to sell immediately upon signature, whereas the buyer has a 7-day period of reflection during which he can withdraw from the purchase without any financial penalty. The sale is finalized with a formal deed of sale, the acte de vente. Regardless of the form of the initial agreement, the signing of the acte de vente is overseen by a notaire. Once the preliminary contract is signed, (normally the acte de vente is completed within two to three months) it is ordinarily between two to three months between until the the signing of the acte de vente is signed.. During this time, the buyer obtains any needed financing, and the buyers notaire verifies the(delete) good title to the property and takes care of other legal and administrative (requirements -added) surrounding the sale.

Upon the signing of the preliminary contract, a good faith guarantee of 10% ( oit is often possible to negotiate putting only 5% down) of the purchase price is paid into the escrow account of either a notaire or an estate agent. The buyer may be able to negotiate putting only 5% down, but will in any case responsible for the 10% if he defaults. The buyer will lose the good faith deposit if he fails to meet his obligations to purchase the property in accordance with the timing and conditions set out in the preliminary sales agreement. Acting in a timely manner to secure your loan and to arrange your final payment at closing is important to ensuring that this problem does not arise.

What is the difference between a compromis de vente and a promesse de vente?

A compromis de vente is a mutual obligation of the buyer (to buy) and the seller (to sell). Literally translating as a promise to sell, the promesse de vente is a unilateral obligation to sell. There are two substantial drawbacks to a compromis de vente:

If the buyer chooses not to complete the purchase, he can be sued for specific performance. While ordinarily the seller will just take the good faith deposit and resell, the agent who stands to lose their fee entirely can and may sue to recover their commission. If the buyer ultimately decides to purchase through a company structure, or wants to add a co-purchaser, there is a risk that this substitution will be considered a second sale of the property subject to double the taxes. Most importantly, the promesse de vente is drafted by your notaire, a legally trained authority on property transactions. Signing a compromis runs the risk of being poorly drafted and resulting in consequences the buyer (and/or seller) did not foresee. Our advice is always to sign a promesse if possible or, if not, to have a notaire review the compromis during the 7-day period of reflection, so that you can retract without consequences if need be.

If the property is mortgaged, ensuring that the purchase price will be sufficient to redeem the mortgage completely Obtaining from the local Town Hall a planning certificate showing the planning rules relevant to the property Informing any person or entity with preemption rights of the impending sale, so that they may decide whether they wish to purchase in the place of the buyer. In some areas of Paris, the city government has a right of preemption on any property sale. Calculating and collecting the stamp duties or purchase taxes, commonly known as notaire fees. A detailed breakdown of the notaire fees is provided below.

A notaire is different from a lawyer, since his primary role is to ensure that the transaction is legitimate and that the official requirements have been met. A good notaire, of course, is also an advocate for his clients interests. One notaire can represent both parties in the transaction, or each party can have their own notaire. The notaires total fee on the transaction is set by law, and is simply divided between the notaires if each party is represented separately. Having your own notaire is ordinarily advisable, and will not cost more than sharing one with the other party.

What is the role of the notaire?

The notaire is a public official with legal training (but different from a lawyer) who prepares and registers official acts such as wills and property ownership transfers. Notaires enjoy a very privileged and highly respected position in French society. In the context of property sales, while the preliminary contract can be prepared by either the notaire or the estate agent, French law requires that this deed of sale be prepared by and signed by a notaire. The notaire plays a vital role in the closing process: Ensuring that the property being sold matches the title deeds and registry documents Establishing the identity of both parties (with the help of birth and marriage/divorce certificates) Ensuring that the seller is indeed the owner of the property to be sold Ensuring that there are no covenants other than those already mentioned in the preliminary contract that might adversely affect the property Searching the Land Registry with a view to establishing whether there exist any restrictions to the right of disposal of the property, such as easements or mortgages over the property

Is it possible to finance property in France?

French banks will lend up to 85% of the assessed value of the property and renovations to most non-resident buyers. French banks respect a very strict loan-toincome ratio for issuing mortgages, although some are more flexible in considering assets and investment income. Mortgage rates can be fixed or variable rates or a combination of the two. French banks require borrowers to obtain life insurance to guarantee the loan. If the buyer is seeking a loan in France, the preliminary contract will include a conditional clause for financing. The clause sets out the intended loan amount, rate of interest, and length of the term. If the buyer cannot obtain a loan on terms at least as favorable as those specified, he is released from the obligation to buy the property without penalty.

Note that with higher priced properties, the seller may choose a buyer who does not have a conditional clause over one who does. So, agreeing to waive this conditional clause can be a real point of negotiation. Also note that, if you will be seeking financing only outside of France, the conditional clause will not protect you. It is advisable to be in contact with banks or a mortgage broker at the start of your property search, so that you know what your borrowing capacity will be and will have all your documents ready once you have found the right property.

What about a property inspection?

Property purchase in France requires the seller to provide to the buyer the results of 6 required diagnostic examinations of the property: loi carrez precisely defined measurement of the surface area of the property presence of lead presence of asbestos presence of termites condition of the electricity installation condition of the natural gas installation assessment of the quality of insulation, gas emissions, etc. (graded on an energy index) presence of any natural/environmental risks (for example, flood zone) These tests are performed by companies that certify their results; if they prove to be incorrect, you will have recourse for compensation. However, they are purely informational: the seller has only theno obligation to inform, not to correct any problems that are revealed. It is thus important that you read and understand the tests, so that you can make an informed decision whether to purchase. You can also choose, at your own cost, to have the property you intend to buy surveyed. However, additional surveys are ordinarily not performed and, particularly in Paris, ultimately prove to be of limited use. A survey may be advisable for properties purchased outside of Paris or other metropolitan areas, particularly of independent houses, as their condition may be less certain.

Are there more/less tax advantageous ways to purchase a property in France?

There are several options for structuring the property purchase: in your own name in the joint names of you and your spouse or copurchaser(s); in the names of your adult children or of someone who will eventually inherit the property from you; through an ordinary limited company, whether foreign or French; in the name of an SCI (socit civile immobilire), a company specifically structured for owning and managing properties in France. Each method has its own advantages; the best structure depends on your own personal circumstances and your intended use of the property. For example, SCIs are only allowed to rent out their properties unfurnished; so if you are looking to do furnished rentals, that is not the right purchase structure. It is important to address the ownership issue early on and to purchase correctly, because substantial fees and taxes are assessed any time the property changes hands or if you change your holding structure. In this regard, if you create the right structure so that a property passes smoothly to your inheritors without changing hands, your inheritance tax savings can be substantial. Having the right information and choosing the right ownership structure is the key to maximizing the potential of your property investment.

How much are the taxes and additional fees notaire fees on the purchase?
The buyer should normally expect to pay fees and taxes of about 6.5-7.5% of the purchase price. These break down roughly as follows: Land Registry taxes (known as TPF - Taxes de publicit foncire) of approximately 5.1% Miscellaneous expenses calculated according to various documents that the notaire must search and examine in order to draft the deed of sale. They usually amount to less than 700. The notaire's service fee, set at 0.825% for properties over 16,800. The fee is subject to VAT (value added tax) of 19.60%. If each party is

represented by their own notaire, that fee is split between the two.

exchange service is key to getting favorable exchange rates on transfers, mortgage payments, and other financial needs. If you take out a mortgage in France, you will be required to establish a French bank account for your monthly payments. Even if you dont, most utilities and other French services can be paid by automatic debit if you have a French bank account, so most owners establish one regardless.

Who pays the broker fees, the buyer or the seller?

Agency fees are included in the listing price that buyers see for a property. Listing fees are ordinarily about 5%. The purchase is ordinarily structured so that the buyer pays the seller and the seller pays the agency out of his total. But, it is also possible for the purchase contract to separate the two, with the buyer paying the seller his net price and the agency fee separately. The advantage to most buyers of this second option is that they do not then pay notaire fees on the agency commission amount; a significant savings. But, for nonresident buyers who need the maximum possible financing, banks often will not finance the agency fee if it is paid in this way. Since there is no loss or gain either way to the seller, the buyer should be aware of this issue ask for the structure that best suits his needs.

Are there other arrangements to make at the time of purchase?

All property in France is governed by French inheritance laws, which include certain forced inheritance provisions. Particularly for buyers without children, or with children from previous marriages, it is worth consulting an attorney and possibly drafting a separate will to govern inheritance of your property in France. You will also want to establish homeowners insurance on the property and its contents that should be effective as of the date of close. Once the purchase is complete, you will want to have utilities transferred to your name, and set up telephone, Internet and other services. If you want the building management company, the syndic, to send you quarterly statements and other information overseas, you will need to get in touch with them to let them know your home address. It is customary, as well as convenient, to set up automatic debit of these bills directly from a French bank account, so that you are not struggling to keep up with bills from afar.

How is the purchase completed, and must I be in France for the final signing?
Prior to the final signing, the notaire will send the buyer a completion statement showing the balance of the purchase price and all other fees and taxes required to complete the purchase. The buyer will need to get those funds into the escrow account of the notaire in time for the date fixed for the signing of the deed of sale, the acte de vente. The buyer can either be physically present to sign the acte de vente, or arrangements can be made for a Power of Attorney to enable another person to sign on the buyers behalf. When the acte de vente has been signed, the notaire distributes the funds to the respective parties: the purchase price to the seller, the taxes to the state, fees and charges owed to the building management, commissions to the real estate brokers, and keeps the amount of his own fee.

After I have settled in, what are my continuing obligations?

Property owners who spend less than 184 days a year in France and do not pay income taxes in France are considered "non-resident." Non-resident owners are expected to: pay property taxes ("taxe foncire"); pay occupancy taxes (taxe dhabitation), unless you have a long-term renter in the property, in which case this tax is their responsibility; pay income tax on any income deriving from activities in France (including rental income from the property).

Can I move money into and out of France freely?

Yes. But, exchange rates can be prohibitive if you are moving money from other currencies. If your home currency is not Euros, working with a currency

How much capital gains tax will I have to pay when I sell my French property?
There is no capital gains tax on the sale of a primary residence in France. For a secondary residence owned either individually or through an SCI, the amount of capital gains owed is determined by (1) the fiscal residence of the seller, and (2) the number of years that the property was owned by the seller. Residency: The base rates are as follows: 28 % for French residents 16 % for residents of any other EU country 33,33 % for non-EU residents (US, Canada, Australia, etc.) Period of ownership: The level of the tax is reduced by 10% for each full year of ownership beyond 5 years, with complete exemption after 15 years of ownership. This means that after 15 years of ownership, there is no capital gains tax to pay in France. The seller may still be liable for capital gains tax in their home country. For the purpose of calculating the capital gains, fees paid to licensed real estate agents on the purchase or sale, and notaire fees paid at the time of purchase, are included in the basis of the property for purposes of calculating the sellers taxable gain. Other adjustments also apply, including certain renovation and improvement expenses. After 5 years of ownership, a seller can either itemize actual renovation expenses, or add 15% of the purchase price to the basis of the property as the value of improvements (even if no improvements were made). Any tax due is calculated and collected by the notaire at the closing of the sale. If capital gains tax is due, the law requires that a nonresident seller engage a company that guarantees that the correct amount of capital gains was withheld from the sale proceeds and paid to the government. The fee to the company is ordinarily 1% of the selling price of the property.

buyers. A comprehensive property search requires visiting scores of agencies, scanning websites, and pursuing numerous listings in each individual neighborhood. Whats more, about 40% of the properties in Paris are sold directly by the owner. Accessing those properties is yet another challenge. Paris Property Groups approach is comprehensive. Working one on one with a search consultant, you access all the best properties on the market, and are assisted with the evaluation, selection, negotiation, financing and closing process. Our end to end approach ensures that you find and ultimately enjoy a great Paris property. How we work: Initial Consultation: We begin with a consultation, by phone or in person, working with you to define your search criteria in terms of budget, location, and the objectives for your property purchase. Property Search: We search, source and screen properties based on your parameters. We provide you with photographs, floor plans, and detailed information about the property and the neighborhood. We provide an expert analysis of price relative to market, a breakdown of taxes, fees and ongoing cost considerations, and any other information that might impact your purchasing decision: renovations expected in the building, city planning projects, proximity to schools, parking, shopping or other conveniences. With complete information on each property we see on your behalf, we save your time for visits only to those properties that are worth seeing. Property Purchase: Once weve found the right property, we manage the entire process: from the negotiation, to the purchase contracts, through to closing. We schedule and attend meetings with the notaire, and the signing of the preliminary purchase agreement. During the two-to-three month period till closing, we help you access all the resources you need mortgage lenders, banks, renovation and decorating experts, legal and tax advice to ensure that your closing process is smooth and easy. At the time of the signing of the final deed of sale, we assist you with setting up your utilities, telephone, building management communications and homeowners insurance, all to ensure your smooth transition from property buyer to property owner.

How can you help me buy a property in Paris?

There is no Multiple Listing Service (MLS) in Paris. With over 3,500 agencies in Paris alone, finding a property is a difficult task for resident or non-resident

What are my next steps?

If you would like further advice or more information about our services, please be in touch. We are glad to answer your questions and to help you find the perfect property to fit your needs.
For more information please contact

Kathryn Brown Client Services Director +33 (0)6 42 44 88 41 kbrown@parispropertygroup.com

Paris Property Group 20110 www.parispropertyfindersparispropertygroup.com