Property Law in France
The French conveyancing system is on the whole a safe system and the purchase of a property is secured by registration at the equivalent of a Land Registry. The process generally takes up to three months from when an offer is made and accepted.
Signature of the contract (le compromise de vente) occurs at a much earlier stage than most British buyers will be used to in the UK. A contract is signed and is conditional on the notary (the French lawyer who is required to deal with the transaction) obtaining a clear Land Registry search result and a clear local search result. The buyer receives a ten day cooling off period which runs from the day after a copy of the contract signed by both parties is served on him by registered post.
Once the notary has completed all the required searches and other formalities he will invite the parties to attend his office to complete. There is no fixed completion date however. The contract will simply indicate a target date by which completion should take place.
A much higher percentage (as many as 50 per cent) of properties are sold privately in France than in the UK, avoiding the hefty estate agent fees, so a good starting point may be driving around the area you’re buying in, looking out for signs saying “A Vendre”, or sometimes just “AV”. Obviously, you then lose the “hand-holding” service that agents offer, both during and after the sale to help you settle in, and you will need good legal representation.
However most buyers start their search by looking for property online. When looking through French search engines, “pièces” means rooms and “chambres” means bedrooms. Unlike the UK, with French properties the floor size (surface) in square metres (m2) is prominently displayed, as well as the plot size (terrain), which is so much more useful in comparing properties. It is always a good idea to line up some sort of legal representation before you look for property, so that if you find the right property you’re in a position to make an offer, and can check what you’re signing!
When you’re ready to start looking at properties, make contact with some agents. They will show you a selection of houses that meet your criteria and will be able to answer questions on the buying process and compulsory diagnostic tests that will be carried out before purchases.
The Cost of Buying Property in France
A buyer should budget for between 7-8% on top of the purchase price for notary's fees and tax. The tax (effectively stamp duty) represents approximately 5.5% of this amount and the rest is the notary's fee. The seller doesn't contribute to the notary's fees. The fees and tax are payable via the notary’s account on completion of the purchase.
For new build and off plan purchases the costs payable by the buyer are significantly less - approximately 2.5%.
Additional notary's fees will be charged if the buyer is obtaining a French mortgage to assist with the financing of the purchase. Buyers should expect to pay additional notary's fees of 0.5 -1% of the amount of the loan for the notary to receive loan instructions from the bank and register a charge over the property in favour of the bank.
Getting a Mortgage in France
Applying for a mortgage from a French bank is a very bureaucratic process. The bank will require extensive information from the buyer in order to assess his financial standing. Details of income and all outstanding liabilities including current borrowings will be scrutinised.
The maximum loan to value permitted is 85% and life cover is generally compulsory for loans representing more than 50% of the purchase price. A buyer may be required to undergo a medical examination prior to being accepted for life cover.
French banks will not lend to non-French residents for what may be considered as a quasi-commercial project such as the purchase of a gite business. They will also tend not to lend to non-French residents who state they intend to move permanently to France once the property purchase is completed unless there is very clear income continuity. This is because they will be concerned as to how the borrower will be able to maintain his loan repayments if the previous UK source of income is discontinued by any proposed move to France.
There are no up-front valuation / product booking fees, but all lenders tend to charge an arrangement fee which is generally speaking only payable if you proceed with them with their mortgage offer. If the mortgage is refused, no fees are payable.
By using one of the regulated currency exchange companies to arrange the conversion of your GBP into Euros you will invariably save money compared to if you were to use your high street bank. The rates offered by currency companies are very competitive with no hidden charges.
They make hundreds of foreign currency transfers every day and have sophisticated systems in place to ensure that your Euro funds arrive where you need them, when you need them.
A 10% deposit is generally payable by the buyer on signature of the contract. It is sensible to set up an account with one of the currency exchange companies at the start of the buying process so that the Euros required for this deposit and in due course the balance of the purchase price and the fees and taxes can be purchased at the best rate available.
Property Ownership in France
In terms of how best to structure the purchase of the property, this is something that needs to be considered at the beginning of the transaction and it is important to take specialist independent legal advice on the ownership options available and the legal and tax consequences of the death of a joint buyer.
Some contracts but not all will allow for a substitution of the buyer by another or the addition of another buyer or a different legal entity between signature of the contract and completion. In addition, for some joint buyers it might be desirable to include what is called a tontine clause in the final purchase deed. This clause would ensure that on the death of one joint owner, the survivor is considered owner of the whole property. Use of the tontine is not however without its drawbacks and for married couples the adoption of the French marriage regime known as universal community is generally considered preferable to buying with a tontine clause.