THE UK ESTATE AGENT

An increasingly large number of UK estate agents are represented in France. Most commonly these are ‘piggyback’ operations, where the UK agency is adjoined to a French agency. Some agencies, however, have associations with French agents as well as their own regional offices.

A few agencies, however, do things differently. They attract custom at UK-based exhibitions and ‘profile’ new customers before promising to find French property that suits the buyer’s budget and personal preferences. They claim to provide a one-stop service intended to deal with every aspect of the purchase process.

But the process is not always as straightforward and transparent as the publicity suggests. Included in one ‘package’, for instance, is advice on rights of way, land divisions etc. The same agency even talk about popping in for a cup of tea to see how you are getting along after the purchase. They also encourage the view that a successful gîte or bed and breakfast business can be off and running within a few months, and that continued support and assistance will be available to help make this possible.

Prospective purchasers should be careful about these claims. On occasion, buyers have been brusquely informed, following the purchase, that continued agency expertise, or a referral to an appropriate professional, is indeed available – at €100 an hour. And, although their fee is ‘all inclusive’ (including legal work and taxes) ‘one-stop services’ do not come cheaply. One agent’s scale of charges in 2004 ran from a minimum of €5,500. For the purchase of an €30,000 property in the Charente, in the same year, the agent’s bill was €8,800. In effect, the purchaser paid twice the normal cost of the transaction process.

The buyer must decide for himself whether this kind of ‘bells and frills’ package is worth the premium rates charged. Judging by the dissatisfaction of some customers, it is certainly worth checking the small print. Communication throughout in English may seem like an advantage, but this assumes that French estate agents and lawyers are poor communicators. They are not.

It is also worth noting that matters such as ‘rights of way’ and ‘land divisions’, etc. are routinely checked by the lawyer handling the legal work, and that some other elements of the package – such as ‘drawing up a will’ – can be done separately and relatively inexpensively. It is also worth asking if it is realistic to think that you can turn a property – which could require some renovation – into a successful business within a few months.

And, if communication remains an issue, there is an excellent network of UK agents, offering the same services at the same scale of charges as their French colleagues, www.real-estate-european-union.com has definitive listings. You will also find valuable advice delivered with the voice of integrity and experience at www.findaproperty.co.uk and www.hamptons-int.com

THE FRENCH ESTATE AGENT

More than 50% of French properties are bought through French estate agents.

The agent immobilier is rather more respected in France than in the UK. This may partly be because the profession is highly regulated. Before he can set up in business, the agent must have:

• high standards of qualification, competence, and experience
• a professional permit to cover all property transactions – the permit has to be reviewed annually by the local prefecture de police
• professional indemnity insurance
• bank guarantees that cover him for all the money he holds on behalf of clients; it is illegal for him to hold cash if the guarantee is for less than €85,000
• up-to-date knowledge of the cost of transactions and market values: he is required by law to give this information and to give it honestly
• power of attorney (mandat de vente) before he may negotiate any sale on behalf of the vendor. The mandat has to be reviewed after three months; the agent may not purchase any property for himself for which he holds a mandat for sale
• specified rates of commission written into the power of attorney and prominently displayed in his office.

Payments to estate agents

In France it is, traditionally, the purchaser, rather than the vendor, who pays the agent’s commission. This is no longer universally the case, however, as agents in some regions have adopted the more common EU practice of charging the vendor. It makes little difference in the end. The commission is hidden in the purchase price if the vendor pays for it; if a property seems unusually cheap it may be that commission is to be added.

Commission rates were once fixed by law but agents may now charge what they think the market can stand. In practice, they usually ask 5% (plus VAT at 18.6%), but the rate can be higher for upmarket properties.

THE NOTAIRE

The French solicitor, the notaire, is highly qualified and well respected.

• His authority is necessary to create valid contracts.
• His occupation is regulated by the Ministry of Justice and his professional association, the Chambre de Notaires.
• He is entitled to act (and usually does) for both parties in a property sale. This means that sales through a notaire’s office are generally cheaper than those through an estate agent.
• He is obliged to explain impartially the implications of the clauses of contract.
• He is entitled to act as a sales negotiator.
• He is invariably employed to negotiate complex sales such as those that involve co-ownership, or after a death or divorce.
• He draws up the act of sale, verifies the vendor’s right to sell, checks planning regulations, and notes existing charges against the property. Where these are greater than the sale price, he must ensure that the creditors can be paid in some other way.
• He is responsible for collecting registration fees and passing them onto the proper authorities.

PROPERTY PURCHASE CONTRACTS

A contract for the sale of property in France is more like the Scottish system than the English. Once a preliminary contract has been signed, it is both difficult and expensive to back out of the deal. One advantage of the system is that gazumping is almost unknown in France. Two forms of contract are in current use: the compromis de vente and the promesse de vente.

Compromis de vente

Signing the compromis de vente means that the vendor and purchaser are committed. It is possible to include ‘get-out clauses’ in the contract (conditions suspensives), but these usually relate to obtaining a mortgage and checking the authority to sell. You cannot, for instance, indicate that the purchase depends on finding a suitable tenant for the property or obtaining the required permissions to set up a gîte or bed and breakfast business.

Conditions suspensives take precedence over other clauses. If they cannot be fulfilled, the contract becomes null and void and deposits are returned.

The compromis de vente is the normal form of agreement in a private sale. The contract can include penalty clauses to be imposed by either the vendor or purchaser if the sale breaks down for any reason other than those listed in the conditions suspensives. The rest of the contract is a standard one.

The conditions of sale are clearly set out in the compromis de vente. These include:

• The responsibilities of vendor and purchaser
• Any easements that affect the property – such as public footpaths, naturally occurring water sources and any other parts of the property or its grounds which must be maintained as they are. This could include a designated area of woodland or a boundary wall
• Any government pre-emptive rights – such as water testing or special regional development projects
• The conditions suspensives
• The agreed price and method of payment.

A deposit is paid – normally 10% – on the signing of the compromis de vente. This is held by a third party (either the agent immobilier or the notaire) until final contracts are signed.

Properties are bought ‘as seen’ because owners are bound by law to reveal all defects they are aware of. Unfortunately, this is no guarantee that all is well. In the event of a problem arising after sale, the purchaser finds himself in the unenviable position of having to prove that the fault was likely to have been known before the signing of the compromis de vente.

The promesse de vente

This is a shortened version of the compromis de vente. Here, a type of completion is set against an agreed price and certain legal conditions and requirements.

Although the buyer has a period of time to ‘reflect’, he is still likely to lose his deposit if he pulls out of the deal. The main distinction is that the ‘promesse’ is a unilateral agreement to sell, whereas the ‘compromis’ is binding on both parties. Whichever agreement is signed, this leads to the ‘acte authentique’, which is the final conveyance of the property from seller to buyer.

The acte authentique

The notaire will draft a contract (projet de l‘acte) a week or two before the completion date. This is sent out with a letter of convocation, which reminds both parties of the date agreed upon to sign the final agreement.

The acte authentique is essentially the same contract as the compromis de vente. Additionally it will:

• clearly identify the property and land
• provide a clear analysis of ownership rights for at least the previous 13 years; when the property is new this will refer to the ownership of the land
• refer to searches made and authorisations issued. These relate to planning regulations, easements and guarantees.

Power of attorney

French law requires both parties to be present at the signing of contracts. This could involve an English purchaser in extra journeys to France, unless he signs a mandat (power of attorney). This will give the agent immobilier or the notaire permission to sign contracts on his behalf.

Additional cost of purchase

There is perhaps no such thing as a typical transaction, because the agent immobilier may charge either the vendor or the purchaser. Notaires, however, charge on a scale of fees that relate to the agreed sale price. The following scale of charges is fairly typical:

First € 3,333 of purchase price – about 5%
From €3,334 to €6,666 – at 3.3%
From €6,667 to €18,333 – at 1.65%
Rest of purchase price – 0.85%

There are five additional fees payable when purchasing property. These are again percentages of the property price:

• taxe départmentale – 4.2%
• taxe communale – 1.2%
• taxe régionale – typically about 1.2%
• stamp duty – 0.6%
• land transfer register – 0.1 %

The following example is based on an agreed price of property of €100,000:

Table 4.1 Fees based on agreed property price of €100,000

Sliding scale legal fees:
For the first € 3333 (at 5%)	€ 166
For the next € 3333 (at 3.3%)	€ 110
For the next € 11,666 (at 1.65%)	€ 191
For the balance € 81,666 (0.85%)	€ 693
VAT on the above (at 18.6%)	€ 216
Registration fees
Départementale (at 4.2%)	€4200
Communale (at 1.2%)	€ 1200
Régionale (at 1.2%)	€1200
Hypotheqe (at 0.1%)	€ 100
Stamp duty (at 0.6%)	€ 600
Total (at 8.7% of agreed property price)	€ 8676

These fees remain fixed, regardless of who negotiates the sale.

An agent immobilier’s fee is usually a flat rate of 5% (€5,000 in this example) so the total becomes € 13,676, or 13.68% of the property price.

If, on the other hand, the notaire negotiates the sale (acts as an agent immobilier) he charges a sliding scale for his services. Typically this would be:

For the first €29,166 (at 5%)	–	€1458
For the next €70,833 (at 2.5%)	–	€1770
Promesse de vente (at 0.3%)	–	€ 300
VAT on the above (at 18.6%)	–	€ 565
Total:		€4184

This alternative total becomes €12,860, or 12.86% of the property price. It will be noted that it is invariably cheaper to buy through a notaire.