LOOKING AT THE LEGAL ISSUES

The role of le notaire

Under French law, every property transaction in France must be overseen by a notaire. The distinction in the French legal profession is between avocats who can appear in the courts, like barristers in the UK, and notaires who undertake contractual work rather like solicitors in the UK.

Notaires must be impartial between the two parties of a property sale and are responsible for legally validating the deeds involved, advising clients, and drawing up the necessary contracts. He or she can and does also sometimes act as a tax consultant, and also as an estate agent in certain cases.

The notaire is entitled to a legally determined sum as commission when acting as a sale negotiator. Normally this is around 8% of the purchase price. If the building is a new property the notaire’s fee is reduced to no more than 3%. A building less than five years old which has never been occupied since construction also qualifies for this reduction.

Notaire’s fees (frais) will include money paid on your behalf, taxes, dues and contingency duties. Overall costs are high but vary from region to region within a set scale, and depending on the type and value of the property.

The notaire’s responsibilities when acting as intermediary for a sale are:

• 1.Verification of the seller including his/her right to sell the property.
• 2.Obtaining the relevant Land Registry papers, showing any planning objections to the property.
• 3.Contacting anyone with pre-emption rights to the property, and determining whether they plan to exercise these rights.
• 4.Contacting the Conservation des Hypothéques (mortgage/Land Registry) which must issue an état hors formalité. This shows any mortgages, securities etc on the property. Such debts must be payable and lower than the sale price to avoid redemption proceedings.

If you pay for the property through the notaire, she or he can withhold payment if it is discovered that the seller has used the property as collateral on a loan, until a negative état sur formalité has been issued.

Inheritance issues

It is extremely important that you take good professional advice when buying your property in France, as regards questions of ownership and inheritance. You must do this before you sign the contracts; afterwards, it will be too late. You should also bear in mind that the legal system is both very slow and very expensive in France.

The main thing to watch out for is that the notaire does not draw up a contract whereby you buy the property en division. The much more preferable option is to buy en tontine. There are other possibilities (eg, an acte de donation); but you will need to discuss these with your legal advisors.

If you and your spouse buy a property en division, you will each own half of the property. When one of you dies, the ‘half’ which belongs to the deceased person will pass automatically to his or her heirs. The surviving spouse will then own half a house or apartment, with the right of abode for the remainder of their life.

If you have children, you cannot leave your half of your property to your spouse. You can leave part of it to your spouse, but he or she will be liable for Succession Tax on the part they have inherited. If there are more than three children, they automatically inherit three quarters of the deceased person’s estate. Inheritance Tax is then payable immediately, even if the surviving spouse continues living in the house. The property cannot be sold to pay the Inheritance Tax without the consent of the surviving spouse, nor if one of the children is under 18 years old.

FINANCIAL CONSIDERATIONS

Financing your purchase

In France, the most common method of obtaining a mortgage is to apply to a high street bank. A French bank will calculate the amount of money available for your mortgage according to your cash flow. A mortgage should be granted as long as your outgoings plus your mortgage repayments equal less than 30% of your pre-tax income.

Successive French governments in recent years have tried to boost the property market by permitting loans at very low rates. It is worth enquiring widely about the possibilities before taking a decision. Banks and financial institutions vary from inflexible with anybody but the known and trusted clients, to more flexible and competitive in the face of opposition from high street competitors.

Paying tax on your property

Your purchase will make you liable for the following French taxes:

• Government registration tax. This tax is payable when you are completing your purchase, and when added to the fees of the notaire amounts to about 11% of the property’s purchase price.

You will also be required to pay the equivalent of UK Land Registry fees and Stamp Duty. The rates depend upon the size of the property and any grounds and annexes, and the age of the property. Once you have bought property in France, it must be registered with the tax authorities. If it is a secondary residence, contact the Centre des Impôts des Non-résidents, before 30 April.

• Taxe foncière. This is a local municipal tax levied on you as the owner. Your name will be added to a register at the local mairie. The register comprises lists of owners, tax rates paid, and notional letting values of the property concerned. In some cases you will be exonerated from the taxe fonciere (see below).
• Taxe d'habitation. Unlike the two taxes above, this local tax is not necessarily payable by the owner of the property, but by the occupant. If you rent a property you will be liable for this tax. The rate of tax payable is determined by the building’s amenities and size. The basic rate is calculated according to the nominal letting value of property in the local area.

Insuring your property

You are required by French law to take out third-party insurance as soon as you move into your accommodation, or as soon as work has begun on your future home if it is still being built. This is known as Civil Propriétaire.

It is also highly advisable to take out insurance against fire, theft, etc. Comprehensive policies known as assurances multirisques are available, as are specific policies. The sum insured should reflect your insurable interest or potential loss according to the contract arranged. Co-owners should already be insured for the building itself and all communal areas. In addition you need to take out insurance on your own belongings.