After centuries of dealing with foreign buyers, France has a well-established and straightforward process for property purchases, backed by a strong national organization for property agents. Still, foreign buyers considering a property investment in France should be well aware of the additional costs in notary fees, taxes and capital gains, as well as the nuances associated with price negotiations and conditional clauses in mortgage contracts. For more on this, see the following article from International Property Journal.
The French property system for international buyers is well-established and relatively straightforward, bolstered by a strong national organization of property agents, the Fédération Nationale de l’Immobilier (FNAIM). There are few surprises–foreigners have been buying property in France for centuries; the industry is accustomed to the quirks of international transactions.
The key to the process is the mandatory presence of a notary for all official business. No contracts should be signed or money exchanged without the notary present, providing a level of organization and oversight to any deal. In addition, buyers and sellers often hire their own notaries to represent their interests and help streamline the paperwork.
The cost of the notary is part of a group of fees and taxes that can add anywhere from 3.5 to 10 percent to the purchase price. France has a reputation as a tax-heavy market, which is only partially deserved. Capital gains tax, in particular, can be a landmine for non-European Union citizens–typically 33.3 percent. Non-EU investors often opt to buy through an EU entity, although that raises a different set of tax implications.
Price negotiations are another potential danger zone. If a seller agrees to a deal—even verbally–it can be construed as a contract to purchase. The law provides for a seven-day cooling off period, but it’s best to tread carefully before talking price. A formal written offer, known as an offre d’achat, is a popular method to avoid any misunderstanding.
A deposit—usually 10 percent or less of the purchase price—isn’t due until a purchase agreement is signed, usually a document known as a compromis de vente. The sale is completed in front of the notary, who is required to read the final deed aloud, the acte de vente. Only then is the balance paid, deed signed and the keys turned over to the buyer.
- Many contracts include a “hidden defects” clause, which makes the seller liable for a wide variety of problems that may arise with a house long after completion of the sale. It can be valuable wording for a buyer; something to avoid for sellers.
- Establishing a French property company, a Société Civile Immobilière (SCI), is always an option for foreign buyers, especially when more than one party is buying a property. But there are tax implications.
- Buyers should always include conditional clauses in mortgage contracts, which protect their positions, some experts say. Conditional clauses can cover a wide variety of areas and are fairly typical in deals.
- New properties often carry extra taxes, which can add costs to the transactions.
- Sellers must provide an array of reports on the property, covering everything from asbestos to termites. The accuracy and professionalism of the survey companies is a long-source of debate; most reputable companies are members of a professional association called Chambre Syndicale des Experts Immobiliers de France (CSEIF).
This article has been republished from International Property Journal. You can also view this article from International Property Journal, an international property news and information site.