Buying a Holiday Property in France
Buying a property in France
France’s legal system is very different from the British one, and it is essential to use the services of an independent, English-speaking solicitor.
The notary (notaire) is a mandatory part of the purchase process. Do not be fooled into thinking that the notary will look after your legal interests, because he won’t. The notary is a government official and works for the state, not the buyer or the vendor, although, confusingly, notaries often act as estate agents as well.
Once a sale has been negotiated, an initial legal contract, the compromis de vente, is prepared by the notary and signed by both parties. On signing, the buyer pays a 10 per cent deposit, with the balance due on completion. By law, there is then a seven-day cooling-off period, during which the buyer may withdraw from the purchase if he wishes.
There follows a period of generally 10–12 weeks in which the searches are carried out. At the end of this period, the final contract, the acte de vente, is signed in front of the notary, and the property passes to the purchaser. The various fees and taxes, including transfer tax and the notary’s fees, become due for payment at this point, after which the deed of sale is registered at the Land Registry.
Costs
Several fees and taxes are payable when buying property. Budget to pay 9–13 per cent of the purchase price, excluding a buying fee, payable to the estate agent, which may be applicable in some cases – ask before you proceed. Costs may include:
• Transfer fees: 6–7.5 per cent (less for a new build property)
• Notary fees: 1–1.5 per cent
• Legal fees: 1–1.5 per cent (for the appointment of a solicitor)
• Property registration fee: 0.6 per cent for properties less than five years old, 1 per cent for others
• Surveyor’s fee (optional)
• Mortgage fees (if applicable)
• Foreign exchange costs (if applicable)
• Estate agent’s fees of up to 10 per cent may be applicable when buying
• Finally, don’t forget that there will be costs for registration, VAT, land registry and stamp duty
Mortgages
As in the UK, it is commonplace in France to use a loan (mortgage) to purchase a property. Should this be his choice, the buyer should declare to his solicitor that he intends to do so, in order that it may be written into the preliminary contract. Thereafter, should the buyer be unable to secure a mortgage, for whatever reason, the preliminary contract would be cancelled and his deposit forfeited. Loan levels of up to 80 per cent of the property value are generally permissible, leaving the buyer to raise a 20 per cent deposit.
Securing finance these days is a relatively straightforward process, given that the buyer has an income and/or owns a property in the UK. Should he be a homeowner, he has the choice to take out a first (or second) mortgage against the UK property to raise the capital to buy the property in France outright. Alternatively, he may elect to take out a mortgage against the French property, in which case his income would be the primary determining factor as to whether a loan would be granted. In most cases, rental income is not taken into account when deciding on an individual’s ability to repay a loan.
Euro mortgages
It is increasingly common to take out a mortgage on a property in France in euros rather than sterling, essentially because it is cheaper to do so, since euro mortgages are tied to the rate set by the European Central Bank (ECB), which is currently lower than the Bank of England base rate.
This option is particularly attractive for owners who receive income in euros, for example rental income, as well as making the mortgage repayments in euros – effectively negating the need to transfer sterling to a French bank account (at a cost) to cover the mortgage repayments. Should an owner choose not to let his property, he may well find that the monthly cost of currency exchange and transfer from sterling to euros to pay the mortgage counteracts any saving made by the lower euro mortgage rate.