Beginners guide to buying in France

The French property-buying process is very straightforward, but it can still be nervewracking because of its unfamiliarity, especially if you don't speak French.

FREQUENTLY ASKED QUESTIONS:

What parties are involved in my property purchase in France?

The Agent (who markets the property), the Seller and the Notaire who does the conveyancing, i.e. draws up the contracts and undertakes the searches.

What are the steps when purchasing property ?

1. “Offre d’achat” (Offer to buy): A written offer to buy including the proposed price, and with suspensive clauses such as bond approval, building permit and expiry date.
2. “Compromis de vente” (Preliminary Contract): written sales agreement which legally binds the seller and the purchaser. On signing, a 10% deposit is payable, which the buyer stands to loose if  withdrawing from the sale. After signing the purchaser has a 7 day ‘cooling-off’ period in which to reconsider, i.e. to withdraw from the sale, but the seller cannot withdraw from the sale.
3. “l’Acte authenique” (Final Contract): this takes place 2 to 3 months after the first signing. You need to transfer the balance of payment to the notaire’s account timeously before signing. Once signed, the property is yours immediately. Arrange to view the property on day of signing as the final contract has a clause saying “sold as seen on signing day”, so you need to know that the property is exactly as you expect it to be, not with walls or windows missing.

Who would represent me as proxy in the signing if I cannot be in France for signing?

A “Procuration” (Power of Attorney) can be drawn up giving permission to someone you appoint, to sign on your behalf. This Power of Attorney must be translated into French and your signature witnessed by a Notaire (or a lawyer or your consular representative).

What is the Estate Agent’s fee?

French estate agents charge between 4 and 10% of the 'net' property price. If the price is followed by the letters FAI (frais d’agence inclus), the commission if included in the price. Kapstadt International Properties only work in association with French agents who are members of a registered body such as FNAIM (www.fnaim.fr), SNPI (www.snpi.com) or UNPI (www.unpi.org).

What is a Notaire?

The Notaire is a French government legal representative and is required by law to act impartially, thus acts for both buyer and seller. The notaire charges a fee - usually between 2.5 and 8% of the 'net' property price. The Notaire is responsible for collecting taxes and for executing title deed searches and drawing up the legal documents for the sale, including:

1. Ownership of the property
2. Land boundaries
3. Planning permissions

The Notaire can also advise you with regards to inheritance issues and the best way to purchase property in France.

How does French inheritance law work?

For foreigners it is often better to create a SCI (Société Civile Immobilière) to avoid inheritance tax. In these circumstances, it is the SCI which becomes the purchaser and there is no tax on an SCI.

What are the payable taxes when I die?

If there is a signed marriage contract in joint names, there is no succession tax on death, just a transfer. If in single name, the heirs will be liable for “droits de succession” (inheritance tax).

Will the Notaire provide a translation of the contract?

Generally this is regarded as the buyer’s responsibility. You can either employ a translator or rely on the agent handling the transaction for you.

Are there additional costs?

TVA (the French VAT, at a rate of 19.6%) is payable on most fees and commissions. Another cost to bear in mind is converting Rands to Euros, and the implications of any exchange rate changes.

Are searches and surveys normally done?

Once the compromis has been signed and the deposit has been paid, the searches begin on the property, including ownership, land boundaries and rights of way. Surveys are not usually undertaken in France, athough surveyors do exist.

ANNUAL TAXES ON PROPERTY

What annual taxes will I have to pay on the property?

There are two taxes on property, the Taxe Foncière (Ownership Tax) and the Taxe d’Habitation (Occupancy Tax). These are based on the rental value of the property and are normally paid annually or by monthly standing order.

As a non resident foreigner, what other taxes am I liable for?

You will be liable for Wealth Tax.
The French Wealth Tax, known as ISF (Impôt Sur la Fortune) is payable only on your French assets exceeding 750 000 Euros. The rate starts at 0.55% and goes up to 1,8%:

1. from 750 000 euros to 1 200 000 euros it is 0.55%
2. from 1 200 000 euros to 2 280 000 euros it is 0.75% etc...

Is the interest on a mortgage tax deductible?

Yes, in France interest charged on loans for improvements and mortgages are deductible.

When I sell, what taxes are payable?

When you sell a French property and you are not a French resident, the French capital gains tax is payable on the gain unless it has been owned for 15 years. After five years of ownership, the net gain is reduced by 10% for each subsequent complete year of ownership. But if your French property is your main residence and you are resident in France it is free of CGT (Capital Gains Tax).

Can I reduce my taxes by using a mortgage even though I can afford not to borrow?

Mortgages can be used to reduce the exposure to French Wealth Tax (ISF) and French succession taxes for non French residents.

Do I really need a bank account in France, especially if I'm only buying a holiday home and not moving across permanently?

It is certainly preferable if you have a French mortgage so that the repayments can be made to your provider. It also makes sense to have a domiciled account from which you can pay bills. EDF/GDF (electricity and gas) bills are normally sent out every 3 months on an estimated basis and can be paid simply by initially giving the utltities providers your French bank sort code and account number and then signing the 'TIP' (authorisation slip) attached to the bill to allow the money to be taken directly from your account. France Telecom normally insists on performing a 'prélèvement' (direct debit automatic withdrawal).

There are also the little bills that might need to be paid if you're having work done on the house - painters, decorators, gardeners, property managers, etc. By running an account in France with regular deposits, it is possible to limit your exposure to changes in the exchange rates every time a bill arrives for payment.

How straightforward is opening a current account in France?

The procedures for opening accounts in France are essentially relatively straightforward, but can be complicated by language barriers and the documentation. Having a bank manager or advisor that speaks English can greatly help to clarify anything and many banks in France are making efforts in this regard.

What do I need to open an account?

If resident in France, you will require a valid piece of identity, such as a passport or carte de séjour as well as a proof of address (such as an EDF/GDF or France Telecom bill in your name) - not more than 3 months old.

If a non-resident in France, as well as the above, you will need a recent credit card statement not more than 3 months old, (Visa, MasterCard, American Express, etc) showing your address, or a bank statement from a reputable bank showing your address, or a recent gas, electricity or telephone bill at your home address, not more than 3 months old will also be required. In addition, if you are opening an account from overseas and are not present in the country in person, then you will need to provide copies of two pieces of identity (passport and photo driver's licence for example), and two proofs of address, all certified by your bank and the letter of recommendation.

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