French property is highly attractive to expatriates and the buying process is a familiar and relatively straightforward one. There are no restrictions on foreign ownership of real estate although the process may take a little longer in France than in some other countries.
When purchasing in a foreign country and foreign language, it is always wise to appoint an independent lawyer to look after your interests when purchasing your property.
Buying real estate in France runs along the following process:
- A property is carefully selected by the buyer and an agreement on price is reached between the vendor and purchaser.
- A solicitor or notary draws up a contract (compromis de vente) to be signed by both parties to agree the principles of the sale.
- A 10% deposit is paid to take the property off the market and the funds are kept in an escrow or other secure account until the date of completion. If the purchaser withdraws in the next 7 days or the sale falls through because one of the conditions for it are not met, then he/she gets the deposit money back. If the purchaser withdraws after 7 days or for any other reason he/she loses the deposit. This is why it is unwise to sign anything in France unless you are 100% certain that you wish to proceed.
- The legal system begins to check out debts and surveys regarding the property
- Once all checks are completed, a final contract (acte de vente) is prepared for signature by the vendor and purchaser at the Notary’s office. The deeds are passed on to the purchaser and the balance of the purchase price is paid.
- The Land Registry is updated once the deed of sale is complete
Documents required for purchase
You will need to present the notary with a copy of your birth certificated translated into French, and, if applicable, a translated copy of your marriage certificate.
Fees and taxes
- Notary fee – approx. 3% of the property price.
- Registration fee – approx. 6%
- Agent’s fee – between 7 and 8%
- Mortgage arrangement fees – depending on your financial institution
- Lawyers – normally up to 8% of purchase price for older properties and 4% for brand new ones
- VAT – 19.6%
- Transfer tax – 7.5% or below 1% for new properties
Capital Gains Tax is not payable on property sale if it has been your principal residence. As a non-resident you are also exempt from paying social taxes. However if the property is not your principal residence, tax will be levied at 16% unless you have owned the property for more than 15 years.
Property taxes: Taxe fonciere (land tax) and Taxe d’habitation (local taxes) are both due annually in arrears in October/November. These taxes are calculated on the theoretical rental value of the property and are payable by the owner of the property. New or newly restored properties are normally exempt from taxe fonciere for the first two years.
Maintenance charges (charges de co-proprietaires) for apartments vary in amount in accordance with neighbourhood and amenities offered.
Income tax: IRPP is payable in France as in any other country, based upon your annual income received.
As the laws of succession vary greatly from country to country, you cannot take it for granted that your assets in France will be passed on to those you intend them to. The notary will assist you in drawing up a will to ensure that upon your death, your property is dealt with in accordance with your wishes. To avoid unnecessary complications, this will need to be done prior to signing the final deed of sale.
The mortgage market is well developed in France and due to the great numbers of British purchasers seeking French mortgages, products are easily accessed and are run along a tried and tested procedure. Foreigners can often obtain 100% finance and with interest rates capped at 4%, a French mortgage is a very attractive option to many investors.
Fixed rate mortgages are also available, but not for short terms. Generally they are only available for between 10 and 20 years. The maximum term for a French mortgage is 20 years or up to the age of 70, whichever is sooner.
Mortgages can also be obtained from British lenders such as Abbey, Halifax, HSBC and Woolwich, while specialist brokers may be able to get you a loan locally.
Some developers of new build and off-plan developments offer installment plans over between 12 to 60 months and charges applicable vary according to developer. The Government’s Leaseback system offers purchase with guaranteed rental over many years and yields of some 5.5%, more than covering the cost of mortgage interest, as well as allowing a full VAT refund of 19.6%.
If you possess property in your own country and would like to borrow against this in an equity release plan, we can introduce you to an independent financial advisor who will help you raise the necessary finance.