French Notary:

Purchasing a home in France must be done through a French notary . Notaries are independent government officials. Their primary duty is to authenticate all deeds and documents and ensure that a transaction is carried out correctly.

Using a notary is mandatory when buying a property in France . However, if you require further or specialist advice on managing your property, do not hesitate to contact your personal solicitor or legal adviser.

Each party may use his/her own notary during the transaction at no extra cost to the buyer. The fees will be shared equally between the respective notaries.

The notary's tasks

• To check and confirm details of any charges affecting the property
• To ascertain details of title and third party rights to the property
• To control the conformity of the property (conformity with standards, identification by land registry references, zoning restrictions and planning, etc...)
• To draw up the acte authentique de vente or deed of purchase
• To collect all fees related to the transaction and forward them to the appropriate local or regional authorities
• To receive the funds for the agreed purchase price and to deliver them to the seller

Legal Fees in France

Different fees and charges

There are three types of legal fees associated with purchasing a property in France. Costs for all three combined will total approximately 8 – 10% of the purchase price for a second hand property and 4 – 5% for a new property.

These fees and costs are generally called frais de notaire or notary fees as they are all paid via the notary.

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Change of ownership fees (Frais de mutation)

A fee is charged when property in France is transferred from one owner to another. This fee, legally fixed by the authorities, is based on the agreed purchase price of the property and on whether or not it is old or new. The notary is responsible for collecting this fee and transferring it to the local or regional administrative bodies. For more information on change of ownership fees, please click on Chamber of Notaries or contact your notary.

Charges for mortgage security (Frais de garantie)

First charge on property

If you buy an old or a new existing property involving a transfer of ownership, the security associated with this loan is called a first charge on property PPD – Privilège de Prêteur de Deniers .

Contractual mortgage

However, if there is no transfer of ownership - as in the case of refinancing an existing loan or requesting an equity release - or you are purchasing a property under construction, the security is contractual mortgage Hypothèque Conventionnelle .

To encourage the purchase of old or new existing property, first charge on property fees (PPD) are based on a lower rate than those for a contractual mortgage.

Please contact your notary for additional information and costs of mortgage securities.

Notary Fees (Frais de Notaire)

The notary's fees include the cost of various formalities as well as the performance of certain acts, such as the deed of purchase and the registration of the mortgage. These fees, called "émoluments", are based on the purchase price and the amount borrowed. Notary fees are legally established by the Chamber of Notaries and are usually non-negotiable.

Each party may use his/her own notary during the transaction at no extra cost to the buyer. The fees will be shared equally between the respective notaries.

Insurance obligations

Two types of insurance are required when you purchase a home in France. One is a building and contents insurance that covers the property itself and the other is a life assurance (including total and irreversible loss of independence) covering the borrowers for the amount of the loan.

Building and Contents Insurance

Building, property and contents insurance is obligatory and the policy must be put in place before you sign the deed of purchase. Your notary will ask for a copy of the policy at the moment of signing the deed.

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Life assurance – Mortgage Protection

Taking out a life assurance policy to cover the amount of a property loan is not a legal obligation in France. However, potential buyers should be aware that French banks do not offer loans without it. In most cases, the mortgage protection and loan application are treated simultaneously.

The mortgage protection is available in two options:

• Cover of the remaining capital due in case of death or disability
• Cover of the monthly payments in case of long-term incapacity due to accident or serious illness.

We make your life easier, as life assurance payments are included in your monthly mortgage payments and remain constant for the duration of the loan.

Should a medical examination be necessary to obtain your life assurance policy, we will provide you with the necessary documents, in English and French and your examination can be arranged with a doctor in your home country.

The legal issues

International buyers should be aware that there are a number of legal requirements that may affect the purchase of their French property: the number of people wishing to buy a property together, their marital status, and French inheritance laws. The latter tend to favour children over partners.

Establishing an SCI

An SCI - Société Civile Immobilière – or Civil Real Estate Company - can be described as a property-holding company. It enables two or more people to purchase a property together. Creating an SCI provides the buyers with two main advantages as opposed to buying a property as separate individuals.

• It facilitates the transfer of a share of the property to someone else should one of the buyers wish to sell their interest. In doing so, the remaining parties who also purchased the property are not obliged to sell their shares if they do not want to.
• It can provide greater flexibility in the context of French inheritance laws.

An SCI has its advantages, but it can be costly. Fees to set one up can run to €1,500 or more. As a separate entity, the SCI has administrative and accounting obligations.

Creating an SCI does not necessarily provide any tax advantages for the property buyers. If you require additional advice on tax implications with regard to the creation of an SCI, we suggest that you contact an independent tax consultant, the French tax authorities or your notary.

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Marital Status

It is important for international buyers, and in particular those from the UK, to be aware that there are two types of marital status in France:

• Communauté de Biens (joint estates)
• Séparation des Biens (separate estates)

Unless specific steps are taken before purchasing, British married couples buying property in France will be deemed to be in the séparation de biens status. There are possible advantages to adopting the communauté de biens status for inheritance reasons.

Inheritance Laws

When you purchase a property in France, French inheritance laws apply to that property. These laws, which are very different from the Separate Estates laws in most Anglo-Saxon countries, can have an impact on the use of the property in the event of a spouse-owner's death. Unless specified beforehand, a surviving spouse/partner residing in France will not automatically become the legal beneficiary of the property prior to any children's rights. To counter these effects, specialised lawyers could advise to set up an SCI or change one's marital status and have it validated in France only for French assets. It is also possible to draw up a personal will. This is an important and complex issue. For more detailed information on the implications of marital status and inheritance laws, seek advice from your notary or a specialised lawyer.

Tax implications for home owners in France

Owners of property in France are liable to pay taxes on their property in a number of situations. The most significant of these concern income resulting from property, such as rental and French regional taxes.

Taxes on property revenue

Income tax in France is based on where you carry out your professional activity. The type of tax you will have to pay on your French property revenues, should you decide to let, will depend on where you live and work - on whether or not you are a French resident. Taxation conventions exist between France and other countries, which protect you from paying taxes twice. Most bi-lateral tax conventions state that properties which exist in France will be taxed only in France.

• For French residents
  You are a full time resident working in France, and the owner of a French property which you let. The taxes on your property income are calculated based on total annual property revenues minus annual interest payments on your loan. They will be incorporated into your overall tax assessment, which is determined by your professional income.
• For non-residents
  Non-resident owners of property in France are required to pay a fixed tax on property revenues. This is initially calculated as for French residents on the total annual property revenues minus annual interest payments on your loan; however, non-residents then pay approximately 25% of this sum.

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Some banks will offer favourable rates to clients who have French resident status. This typically requires having your primary residence in France, and French tax returns for at least the last year.

French regional taxes

All home and land owners in France must pay a local property tax known as a taxe foncière. This tax is based on the rateable value according to the location, the type of building, the surface area and the comfort criteria.

If your home in France is your principal or holiday residence, you will also be required to pay an occupancy tax called taxe d'habitation. Occupancy tax is based on the rental value of the property defined by the land registry and local authorities.

It is important to be clear about what tax payments you will be liable for in relation to your property. Do not hesitate to seek advice from an independent tax consultant, the French tax authorities or your notary.

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