Glossary Buying terms
Read below to learn about the most usual buying terms and customs when buying a property in france
The Final Contract is an official document, called the deed of sale. It incorporates the terms of contract and on its signature at the Notaire’s office, the property passes to the buyer. At the time of signing this deed, all moneys must be with the Notaire. You will get an ATTESTATION, a certificate of purchase, whilst you are waiting for the acte authentique to be registered with the cadastre.
The original is kept with the Notary, and a copy of the acte de vente is send to you with the remaining funds which where reserved to ‘publish’ the deeds. It will take minimum 3 months before the deeds are avaiable, it has happended that it takes up to 12 months for the cadastre to deliver the deeds.
Tip : make sure you the right adress to the notary on where to send the deeds, it can be that you want them at your main home, in the case of buying a second / holiday home.
Tip 2, at this time the Notary will also close the financial account he has for this transaction, as the buying costs are an estimate, there is usually a little surplus to send back to you. That is why it is good if the Notary has your bank details.
When the compromis de vente ( sales agreement) is signed, the buyer is expected to pay a deposit (usually 10%). This deposit will be deducted from the purchase price when the final deed is signed. If however the purchaser wanted for personal reasons not to proceed with the purchase then the deposit will be paid to the vendor (except if the cancellation is due to uncontrolled events – see Clauses Suspensives). At France4u we ask you to pay the deposit into the escrow account of the Notary. We will give you their bank details for a bank transfer. You should allow 3-4 days for this money to appear in the bank account of the Notary. This deposit is not expected before the end of the 10 days cooling off period plus 5 days alowance of ransfer of funds, but is good to prepare in advance the transfer, or the purchase of currency. If the deposit is not in at the agreed time, the vendor can declare the sale void and go his own way.
if for any reason the safety deposit is less than 10%, the penalty for non completion is still 10% as defined by law once all suspensive conditions have been agreed,
The estate agent is a professional representing the vendor, the buyer or the tenant, during the purchase or the letting procedure of apartments, buildings, houses, parcel of lands… The estate agent is not the owner of the properties he or she is offering to sell or rent. The agent can only represent a sale if there is a mandat de vente or recherche (a contract by which he is empowered to conclude a deal)
Vendors of houses and apartments built before the 1st July 1997 are required to append to their preliminary sales agreement a certificate stating the presence or absence of asbestos. They must have a survey carried out by an authorized asbestos surveyor and, where necessary, provide proof that any measures stipulated in the surveyor's report have been completed.
If no asbestos has been found in all buildings, the report carried out after april 2013 is valid for always.
In 2013, new rules have been applied so that tests have to be repeated even if no asbestos was found in the past.
If asbestos was found regular tests are needed to check the quality of the items with asbestos. Also the owner of the property has the obligation to inform any workers of the asbestos presence.
There is obligation to remove asbestos if at the house, the vendor just has an obligation to inform the buyer.
Insurance delivered on works done on the structure of the building, in french also called "assurance dommage des oeuvres"
When structural building work has been carried out, the owner of the property is expected to take out an insurance that covers his responsability as works manager.
This costs about 1% to 3% of all works carried out with a mimum of 450 euro, and is a guarantee over all the work done by al artisan at the house.
The Assurance domage des Oeuvres pays out and will then go and claim the fault on the artisans 10 year guarantee. All artisans need to guarantee their work for 10 years. That is why the bills of such work done are passed on to the new owner.
It is also useful if there is a design fault.
Even if it is a legal obligation very few owners take this insurance, therefor minimum at time of exchange of deeds the bills and the insurance of these artisans need to be handed over for structural work younger than 10 years old.
It is important that a house is insured at all times. We ask vendors only to cancel their insurance after the exchange of deeds. The buyer needs to organize this before the purchase. If a mortgage is taken, the bank will demand proof of this being done as they want to be sure their loan guarantee is secured. In France, and in certain regions insurance is cheap, comprehensive insurance is the norm, insuring the walls, the contents and third party liability, legal representation is a small extra and recommended by us. We work with generali, do ask us to put you in contact with them, they have a bilingual help desk.
This is a centralized data base of all plots of land, where for each plot the owners are known and the rights to them such as a first mortgage by a bank when a loan is given with the plot of land and its buildings are used as a guarantee.
The land registry or cadastre is also used as the basis for the tax fonciere. So when the deeds are exchanged the Notary will pass on the details of the new owners. Here the address of the main residence can be given so that all tax bills relative to the house are sent to your home address instead of your second home.
“GET OUT” CLAUSES
The Clauses Suspensives are there to protect the parties and are drafted as part of the Compromis de Vente. They permit the buyer to withdraw from the purchase under certain circumstances, such as not being able to obtain finance, having a request for outline planning permission refused. These clauses are an important element of the contract because until they become unconditional (within a stipulated time limit) the contract is unenforceable.
The Sales contract results from the negotiation between the vendor and the buyer of a property. Either the Notaire or the Estate Agent can prepare it; it is then respectively called a Compromis de Vente or a Sous-Seing Prive.
If the Notary makes it usualy called a promesse de vente.
The Initial sales Contract, signed by both parties, is a legally binding agreement on both parties. At France4u we believe in taking time in the preparation of it. As here all details of the agreed deal are laid out, and the brief for the Notary is laid out: Agreed sales price, expected extra costs for stamp duty and Notary. What is and is not included, eg furniture, rights of way Technical information on the house, Lead in paint test, Asbestos, Energy efficiency of the house, and any other legal test requirements that we need to provide the purchaser before he commits. Suspensive buying conditions, (i.e. the purchase only goes ahead if..). Examples are : Obtaining a mortgage ; Obtaining a positive building permission.
Members of the European union with a euro account, do not really need a bank account, as they can make transfers with IBAN (international bank account number)and BIC (Bank identification code, or swift code). It does help though to have a cheque book, there are still artisans that like them as they are useful to pay on the spot. Non euro residents, are highly recommended to have a local bank account, where they use a currency dealer to feed in money at the best of times.
Do shop around for the best deals, there are banks with different rates, and varying degrees of internet facilities.
The Contrat de Reservation applies on New Development. It is a preliminary private deed whereby the developer ("reserving party") agrees to reserve for the buyer ("reserver") an agreed area in a building he plans to build. The buyer pays a 5% deposit and indicates his financing plan.
They are obligatory since March 2015 in dwellings. They usually work on batteries. It is preferable to purchase them in France to make sure they are conform to the local legislation.
ENERGY EFFICIENCY REPORT
The vendor is obliged to present a report detailing the energy consumption of a house, and its carbon emissions. In the same way as a Fridge in the shop has a letter from A to G, houses need to be given such a label. It is for information purposes only, but is used more and more in the buying decision. The following information is provided in this document: a) kilowatts used per squared meter, with its corresponding letter from A to G. A being a consumption of less 51 kWh/m2 per year, and G more than 451 Kwh/m2 per year. b) Total amount of euros needed to heat the house, cool the house and heat the water per year. (These figures should be seen as an indication) c) Estimation of green house gas emitted (kg eqCO2/m2 per year) d) Suggestions to improve the systems in the house. e) Indication of investment costs and economies to be expected of these investments. The validity of this document is 10 years. No label can be given for houses that are not occupied all year round, or have no heating. There are also property that are exempt from such a test: monuments, churches, buildings smaller than 50m2.
The Vendor must supply before any sale contract a technical report. According to the age of the building and it geographical situation, the report can include test on the eventual presence of lead, asbestos,termites, dry rot. It will also assess the gas and electricity installations, and the treatment of grey waters.
Regarding the lead, they don't test the plumbing but the evental presence of lead in paints.
This report is part of the pre-sale contract.
10-DAY COOLING OFF PERIOD
(LOI SRU) Under this legislation, purchasers have a 10-day withdrawal or "cooling off" period (Droit de Rétraction or Droit de Réflexion). The payment of the security deposit is only demanded at the end of this reflection time.
The information about the Inheritance, relating to what is happening to the property if the owner dies, is in the final deed and is not always determined by the content of a will. The form of the purchase contract of the property will determine what happens to the property following the death of the owner. French law for inheritance is substantially different to the English one, you should seek advice from a specialized lawyer who understand the French law and implication for you. The France4u representative can ask "your" notary to give you advice. It does not cost more than 100 euros per person to register such a hand written will.
For installations older than 15 years, a survey needs to be represented to the buyer. The validity of this survey is three years. The survey is arbitrary and for information purposes only. Most items that are noticed are : not sufficient earth of the installation, a trip switch that is not delicate enough, some loose cables in cellars or outbuildings.
This is another of the obligatory information that needs to be given to the purchaser. The national and local government have defined risk areas related to for example flooding, land movement because of mining, technological risks like nuclear power stations etc. If the area is not concerned, the owner needs to declare if he has received insurance coverage for any similar damage, thereby also informing the purchaser of for example flash floods, regular strong winds etc. A France4U representative will help you understand these documents, as a house in an official flood area might concern the river banks further down, and not the specific house high on the hill.
When Capital gains is levied on a sale for a sale involving more than 150 000 euros a fiscal representative needs to involved for non European resident owners. This as the government needs to be sure that the tax calculation is correct, before the money leaves the country. I.e. tax is levied at the moment off sale. If in doubt the notary can keep some money back in an escrow account, until a dispute is settled.
In France it is the purchaser that pays the costs of the Notary and the « stamp duty» of a purchase. These are determined by official tables, ie fees and provision for buying taxes are fixed by the state. For a houses priced as off 100 000 euros, these costs are between 7.5% and 8%. The lower the price the higher the percentage. About 2% goes to the Notary, 5.5% goes to the local and national government. The tables cannot be exact regarding the taxes, that is why once the deeds are all published and literally stamps have been purchased, some money is left over. The Notary will hand this over together with the deeds some three months after the signature. If you take a loan registration costs also apply. Please contact a notary or an estate agent to have an idea what these costs are. Though remember the costs are on the negotiated price. Some UK websites show the conveyance costs in the sales price, but of course these will change according to the negotiated price. The France4u website advertises its houses, as all other French websites, excluding the conveyance costs.
If the system is older than 15 years, a survey of the gas pipes, and system needs to be presented to the buyer. A loose bottle directly connected to a cooker does not need this survey, but if the connection passes a wall, or has joints, a survey is needed. The report is valid three years from date of execution.
When a parcel of land is adapted, a land surveyor needs to intervene, this company will trace the new land boundaries and easements involving all people: vendor, buyer, neighbours and local government (mayor) if needed. Once all have agreed he will register these changes in the Cadastre, the land registry. The costs are normally carried by the buyer, if it does not involve a plot of land to construct on.
Right of use
The date of start of usage of a house does not need to be the same as the date of exchange of deeds, i.e. the new person becomes owner. Use of parts of a building can be given early, but only under strict conditions and guarantees. This is only done once all suspensive conditions of the sales contract have been met (there are no impediments for the sale). Usage of the property after purchase can also be negotiated in, thereby allowing the vendors time to purchase their own house with the funds received before the move.
This is the contract between a client looking for a property to purchase and the estate agent. With this contract, the purchaser is contracting the estate agent to find him a property matching his requirements. This contract is generally established for 3 months.
SALES ADVERTISING CONTRACT
This is the contract between the vendor and the estate agent. This contract in France is usually on a non-exclusive nature. That is why you see several estate agents representing the same house. At France4u, we pride ourselves with having more and more mandat de vente EXCLUSIVE. This is where the vendor agrees to sell only through the one agency. This is especially handy when the owners are not there, and key handling is managed by the one agency.
There are now regions where it is obligatory to undertake tests for dry rot. Dry rot is a fungus that infests wood, in areas that are humid and badly ventilated. Even though a department does not require it to be tested, it is the vendors obligation to mention it if present in the house. Dry rot is difficult to eradicate, first the causes of it must be treated, and by careful control afterwards of the treated area. Specialized companies need to be involved.
The Notaire is known as the solicitor, he is a member of the legal profession entrusted by the French Republic to authenticate deeds, thus bringing more security to both signatories. It is also thanks to them that the French system for real estate transactions is noted to be one of the most secure in the world. The Notaire is a neutral body in the transaction as he acts as a public official. Hence it is mostly unnecessary to appoint a dedicated Notaire. French do however appoint a Notary for the vendor and one for the buyer. It does not cost more, as they divide the costs amongst them according to an agreed formula. The notary nearest to the property, or the notary of the vendor will write the deed proposal.
The vendor to all preliminary and final sales agreements of houses built before 1949, must append a lead-based paint survey. Lead pipes are not checked, just if there is lead in the paint.
In this report a mention is also made of the general condition of the house, but only to the extend if the house is dangerous to live in. It can in no way be compared to a survey. The Lead Survey should be part of the compromis de vente if the property is older than 1949.
Cash, credit cards or any cheque are not accepted as legal tender by Notaries. It is best you order a bank transfer. We advice you to use a currency exchange dealer such as Currencies Direct or Baydonhill, to plan when best to buy Euros at the best rate. You get this way a better exchange rate than high street banks, and better service at lower cost. Your Currency contact will help you decide when to buy your euros. Your France4U representative will provide you with the IBAN and BIC codes for the Notaries bank account.
All swimming pools in France need to have proper protection to avoid accidental drowning by children. This can be a fence round the pool, a cover that can be walked on, or an agreed alarm system that alerts if there is somebody in the pool. The Notary will demand a proper certificate as proof that these measures have been taken.
There are communes where the right to intervene in the sale is given. For example if they plan to build a school, or another municipal project. The commune then takes over at the same conditions as the sale was agreed with the vendors and agency.
It also happens that the SAFER preempts a farm land, see under SAFER.
This is what usually takes the longest time to sort out after the compromis de vente has been signed. The Purchaser has by law 30 days time to sort out the mortgage counting form the day the compromis is officially delivered to him. There are costs involved with a Mortgage, cost to register the loan with the cadastre (land registry) and usually administration costs by the financing bank. You will need the completed compromis to formally apply for the mortgage. Of course you will already have had an idea of your ability to get the funds before the offer went out. Let us know if you need help with finding a competing loan offer in your language. France4u has contacts with English speaking banks in France, that can give you a free loan offer.
The Draft Title is prepared by the notaire. We at France4u, ask for a copy so that we can use it to translate to you if you so require. The Draft Title includes all the information relating to the Final Contract terms and conditions.
CAPITAL GAINS TAX
It is payable on the profit realized on the sale of certain assets in France, including property, antiques, art, jewellery and stocks and shares. There are two elements the capital gains tax itself at 19%, plus 17.2% social charges for another. Your principal residence is not subject to capital gains tax, provided that it was your principal residence at the time of sale, or was still your main residence less than one year prior to the sale. You can prove that a property is your main residence by showing that you pay income tax at that address. A sliding scale exemption is applied to any other property that you have owned for at least eight years. A small amount is reduced every year as of year 6, resulting in total exemption after 22 years. Should you be obliged to sell your home for family or worked-related reasons, you are also exempt from capital gains tax. Please note that taxes may vary if you live or not in France. It is recommended that you ask for specialist advice from a tax consultant who has knowledge of the French tax system.
Deductibles are only work done by registered companies charging full VAT for structural work, and NOT decoration work. Instead of the bills a 15% rebate on the purchase price can be applied, as this is usually more than the bills that can be presented, it is the preferred route. We experience mayor problems when a owner renovates the property himself, and adds that way a lot of value. This work is not deductible, neither are the materials he bought to do the work. Deductibles that can always be taken off are buying and selling costs, such as notary costs, diagnostiques, and estate agency fees. Also can be deducted the charges by the fiscal representative.
Chimney sweep and central heating maintenance
It is obligatory for occupants of a property to undertake regular maintenance, not only of their chimney, but also of their boiler.
The insurance company will require it, but also the new owner has the right to know what has been done in the past.
As long as the chimney has not been used, a cleaning ceritificate is not needed, but the vendor needs to declare this in the sales contract.
Accronym for SOCIETE D’AMENAGEMENT FONCIER AND D’ETABLISSEMENT RURAL
The SAFER is involved in property purchase when the property land is over (5000m²) 1.2 acre. In this instance, the SAFER has an automatic right of pre-emption in order to preserve the land, which it feels should either continue or remain in agricultural use. The SAFER rarely exercises this right, but the Notaire is obliged to notify the SAFER before proceeding to the sale. Should the SAFER object the sale, than any agreement is null and void, the purchaser shall then recover its deposit.
It is common in France that rights of way, or other easements are present. It is important that you are aware of any before you sign the compromis de vente. Common rights of way are
The Taxe d’Habitation is a local services tax for example for rubbish collection, TV licence, other local services. The occupier of the house or flat on the 1st of January is liable to pay the tax, whether he owns, rents or occupies it free of charge. There can be some exemptions for over 60’s and if the property is incapable of occupation due to extensive renovations. The latest will need to be proved and the exemption confirmed by the local mayor!!
The Taxe Foncière is a land tax paid to the local authorities by all owners of real estate in the municipality concerned. This is managed by the “hotel des impots” and the cadaster. Not having seen the tax bill is no excuse. If you did not receive the taxe d’habitation and taxe fonciere, please contact the respective Hotel des impots, to make sure they have your correct mailing address to avoid late payment penalties.
The vendor of a property is also required to carry out a termite survey, less than 3 months prior to the preliminary agreement for the sale. Not all regions demand this test, in BURGUNDY for example the local government has decided that it is NOT needed to do this test, as they are not found in our area. Not withstanding we ask the vendor to declare in the compromis de vente that there are no termites in the house. Such a test is valid for 6 months.
The current TVA rate in France is 20.0% Building work done on houses older than 2 years, and not considered as a complete renovation have a lower VAT rate of 10.0%.