Friday, October 30, 2009

France needs to build 500,000 new dwellings a year

In a recent interview with Capital magazine, Alain Dinin, MD of the French construction group Nexity, agreed with the government's view that France needs to build at least half a million new dwellings annually to cope with demand resulting from the country's population increase and the rise in divorce and newly re-constituted households. Of these 140,000 would be in apartment blocks and the remainder divided between individual dwellings and social housing.

Nexity is one of France's largest developers, and as Dineen points out, has managed to survive the current slowdown as a result of the France's policy of selling at least 50% of each new development before even the foundations are laid. This, he notes, is in contrast to the position in Spain where speculative blocks have been built before a single apartment was marketed or sold, leaving the country with a glut of empty high rise buildings. 'In France, we only sell off-plan in the case of new build properties' he stresses.

Dinin estimates that the 2009 will see around 90,000 order's for new-build dwellings, just 10,000 ahead of 2008, but less than the 127,000 sales recorded in 2007.

Although the government has set targets for annual energy consumption to be reduced to 50kW/m² per year (against today's 150), Dinin argues that these changes will take time as manufacturers develop bew building materials and construction methods, citing the end of 2012 as a reasonable timescale for implementation. He notes however that France has been relatively slow in building newstyle eco-homes and cites a recent visit to Lille to open six new buildings, which was followed a few days later by a trip to South Korea where 15,000 new energy saving homes were launched onto the market.

Dinin also notes that while 77% of French people already live in towns, they will be forced to travel longer distances to and from work - creating an extra cost burden for infrastructure - if too many people choose to live in a typical house-with-a-garden in the subsurbs, as opposed to a multi-occupancy apartment block. Given the high cost and scarcity of land aroound France's major cities, building apartments he argues is an more cost effective solution to the country's housing problem. With restrictions on building more than five storey's, Dinin points out that with ten storeys, you could double the number of apartments, on the same amount of land!

Source: Capital, November 2009 pp 7, 9.

Wednesday, October 28, 2009

The syndic - apartment owners have wide choice

With some 2.8 million French co-ownership properties managed by professional organisations ('syndics'), owners are faced with a wide range of options when selecting the managers of their building. Only the smallest multi-occupancy buildings are run by a group of volunteers, and most opt instead for some kind of formal arrangement in order to cope with the complexities of insurance, maintenance, planning applications, upkeep of the common parts, collecting the annual charges and mediating between neighbours.

Traditionally much of this work has been done by local estate agents whose licence ('G') enables them to offer the services of professional building management ('gestion'). Inreasingly however, banks and other financial conglomerates are moving in this (lucrative) area and among the largest are companies such as Foncia (Banque Populaire), Lamy (Nexity), Urbania, Immo de France (Procivis), Icade (CDC), Tagerim etc. Some of these groups have taken over small local firms - reminiscent of the days when British banks and insurance companies moved into the estate agency sector, and subsequently withdrew after incurring heavy losses.

There has been some dissatisfaction expressed by owners about the loss of the local company presence and the large groups are not always popular, due to their appearance as remote and impersonal. A number of problems were highlighted in the April 2009 issue of the French consumer magazine '60 million consommateurs'.

Apartment owners have considerable power and can use the annual general meeting to vote the professional syndic out of office, and in all cases it is their vote alone which decides how much or how little can be spent in the comming year, and which determines the future of the building they part own through their shares.

Tuesday, October 27, 2009

French property prices inching upwards

A report by French estate agents body FNAIM notes that average property prices are starting to recover some of the 7.8% losses of the last twelves months, and are now up by 2.8% in September 2009, with expectations of an overall recovery in the French property market in 2010, as widely forecast by many commentators.

There are signs too that despite their traditionally cautious lending policies, French banks are now more readily offering euro-currency mortgages of up to 100% to British buyers, thus helping to offset difficulties associated with a poor pound to euro exchange rate. Interest rates of around 4% or less can be expected, with terms ranging from 15 to 25 years. Monthly repayments should not normally exceed one-third of income after deducting fixed costs.

While there are undoubtedly bargains to be had, wide variations can be expected, depending on the area and type of property. The Mediterranean coast has generally experienced only marginal price reductions, due to the high percentage of second homes, which owners tend to withdraw from the market rather than sell at knock-down prices.

There is a shortage of modern (less than 20 years old) holiday homes in the most sought-after areas close to the sea and around the marinas and leisure ports such as Argelès and St Cyprien, close to France's southern border with Spain.

Saturday, October 24, 2009

Cost of running a business in France

France has the reputation of being a country of high taxes compared with its European neighbours. It is certainly true that although income tax is low - 50% of the population do not pay any - social contribitions are relatively high for employers, employees and the self employed. However, in return the health and social security systems are extremely generous in terms of medical care, nursery, primary, secondary and university education, unemployment benefits and assistance to job-seekers.

Recent figures show that overall contributions including income tax, local taxes and social contribtions equal 43.5% of GDP, compared with 36.5% in Britain, 34.8% in Germany and just 27.3% in the USA where the level of social care is probably the lowest in the world.

All governments attempt to strike a sometimes delicate balance between the requirement for revenue and the amount of taxation the population will tolerate. Where this balance is perceived to be unfair, tax evasion will increase. France's underground economy is currently estimated to represent nearly 15% of the country's GDP, just behind Spain at 23%, but on a level with Germany. Figures for Britain are 13% and for the USA 8.8%.

The figures include under-declaration and concealment of income by 'legitimate' businesses and individuals, as well as earnings from drugs, trafficking and prostitution. Revenues from these activities in one year could wipe out France's social security deficit, leaving an additional 10 billion euros to spare.

Although there are strict laws applied to French taxpayers governing payments in cash up to a mximum of 3,000 euros, a recent report demonstrated that the rules are frequently ignored. Among the cases investigated were removal firms, dentists, fashion stores, cosmetic surgeons, garages, artisans - and psycho-analysts!

Source: Capital, October 2009, pp 63-64.

Wednesday, October 21, 2009

Cooling-off period when buying French property

One of the many protective measures built into the French property buying process is the right of the buyer to withdraw from the transaction within seven days of receiving or signing the initial purchase contract or 'compromis de vente'. All the prospective buyer has to do is notify the vendor or the agent of his intention not to proceed. When buying through a French agent or Notaire, the seven-day period starts from the day after reception by registered post, at the buyer's home address, of the 'compromis de vente'.

If an initial deposit has been paid to the agent or French Notaire handling the transaction, this must be returned within a maximum of 21 days.

The 'compromis de vente' can include a number of conditional clauses - known as 'clauses suspensives' - agreed between vendor and purchaser. If the purchaser intends to buy the French property by means of a loan or mortgage, he is allowed a further six weeks right of withdrawal ('delai de rétractation') to allow time to search for, consider and accept the formal offer of a loan or mortgage.

During this period, the transaction is virtually on hold, and the property is withdrawn from the market. During the six week period, the prospective buyer must demonstrate due diligence in seeking a loan or mortgage, and must keep the parties informed of progress. He cannot sit back and do nothing, and then announce his intention to withdraw, without risking financial penalties.

Financial penalties can include forfeiture of any deposit paid (usually 10% of the sale price), payment of the estate agent's commission and/or a payment in compensation to the vendor. Difficulties can arise where the buyer is dilatory in obtaining the mortgage and does not inform the parties of what is going on.

Faced with competing offers from, say, a buyer offering cash and one seeking to purchase by means of a mortgage, a vendor may prefer the cash buyer, because of the potential consequences of the six-week delay before the transaction can proceed - or not - to completion. 'Cash' in this context refers to funds in place that will be transfered by the buyer's bank to the Notaire's special sequestered account prior to completion.

Potential buyers are advised to have an outline offer in place when seeking to purchase French property and will improve their chances of negotiating a good price if they can provide a letter of confirmation from their bank or mortgage provider.

Saturday, October 17, 2009

A tenant's right to buy or 'pre-emption'

If you own or are thinking of buying a French property that is occupied by a tenant, then you need to be aware of what rights the tenant has to buy the property he/she occupies.

A tenant can at any time ask the owner if he can buy the property. The owner can refuse and even sell the property to another person, who will inherit the tenant and any existing lease. But in three situations, the tenant has a right of pre-emption:

(1) When the owner informs the tenant of his intention to sell, by sending a notice 6months in avance and proposing a price. The tenant has then 2 months in which to respond, 4 months if he has to arrange a mortgage or loan.

(2) When a property, typically an apartment is first incorporated into a co-ownership arrangement, and the lots are first offered to the existing tenants.

(3) When a building of more than 10 apartments is sold en bloc or split up. In the latter two cases, the sitting tenant has 2/4 months to respond, otherwise the apartment is sold 'occupied' by the tenant as before.

In all three cases, the owner cannot by law sell to a third party at a price less than that offered by the tenant.

Friday, October 16, 2009

When to use a 'géomètre expert' ?

When buying land in France there are a number of situations when it is advisable or even obligatory to commission a 'géomètre expert' to measure and mark the boundaries of the property.

When buying a parcel of land in a 'lotissement' (housing estate) from a developer, this will have been done already and the boundaries clearly marked and expressed in square metres when setting the selling price of the parcel of land.

The seller of an isolated plot of land has no obligation to have the boundaries marked but must inform the purchaser whether this has been done or not. Without precise marking, it is impossible to define the exact boundaries of the land - something that is important if you plan to construct a building close to the boundaries as this will be subject to strict norms regarding distances from a neighbour's property. In some cases, a contravention can result in an order for the building to be demolished.

The boundaries marked on the local 'cadastral plan' can sometimes be out of date and inaccurate, and cannot be used in evidence in the case of a legal dispute. The purchaser is therefore advised to have an accurate survey done by a 'géomètre' in order to establish the precise boundaries of the property.

In a recent case, a litigious neighbour insisted that a brick garage be 'moved' as it was a few centimetres too close to his property. And in another, mains services that were described as 'on the boundary of the property' were found in fact to be 30 metres away, leaving the owner with a considerable bill to have then connected to his property. In this case, all parties were relying on an out of date 'cadastral' plan provided by the Mairie! It may require a court case to establish who was responsible for the mistake, should the new owner wish to recover his costs.

Thursday, October 15, 2009

Power of attorney - when to use?

Questions are sometimes asked about when is it possible to sign French property purchase documents using a power of attorney - and whether it is okay to do this at the time of the pre-contract ('compromis de vente').

In replying to this question recently on a French discussion forum, I cautioned against using a power of attorney at the time of the 'compromis de vente'. This document is very much the key to the property purchasing process, as it sets out the terms and conditions under which the buyer will buy, and the vendor will sell, the property in question. It is in a sense an 'agreement to agree' (not strictly recognised in English law) and the final sales act signed on completion will include all the elements that appeared in the initial 'compromis'.

The 'compromis' can also include a number of conditional clauses (known as 'clause suspensives') agreed between purchaser and vendor, and if any one of them is not fulfilled, the purchaser can withdraw from the transaction. Typical 'clauses suspensives' include buying subject to a survey, subjet to planning permission or subject to the buyer obtaining a bank loan or mortgage.

It is important that the purchaser fully understands what he/she is signing and it is wiser to go through the document in detail and in person with the agent handling the sale or the French Notaire who will oversee the transaction. Simply having the 'compromis' translated and explained by a third party - such as a UK based lawyer - is in my view of limited value, and not an effctive substitute for having someone in place who knows the property and may be aware of elements that may not appear on paper.

Clearly the potential buyer should visit the property and its vicinity and be satisfied as to what he is buying - you buy a French property in the condition in which you find it. That said, advice and guidance given on the spot can often be of more value than a precise translation of a written document that is presented to you for signature.

Wednesday, October 14, 2009

Building near a historic monument?

Proposals are before the French parliament to ease the potential restrictions when applying for planning permission to build or renovate a property that is located close to a historic monument.

Currently, the consent of an architect from Batiments de France (equivalent to English Heritage) has to be sought and his decision is final. The new proposals plan to make this consent purely advisory in some cases, to the dismay of many local authorities anxious to preserve France's valuable 'patrimoine', as well as architects from Batiments to France.

M Frédéric Auclair, president of the association of architects of BdeF has pointed out that his members oversee some 500 places in France classified as of special historical interest, and deal with some 400,000 applications annually. Of these only 10% are rejected outright, and the majority are allowed subject to often minor alterations to the building plan submitted.

As part of a widespread reaction against the government's proposals, some regions are actively considering the establishment of protective zones which would consider planning applications in sensitive areas similar to those managed by Batiments de France.

The 200 architects employed by Batiments de France are part of the French ministry of culture, and their role is to help protect and preserve sites considered of special historic interest.

Saturday, October 10, 2009

French property buying - a safe and secure process

Reading a story in the property section of today's Daily Telegraph offers a timely reminder of the uncertainties surrounding the British property buying process compared with that in France.

The report tells of a couple in the process of selling their West London apartment and buying another, and due to complete - and move - at the weekend. A last minute problem in the resultant 'chain' meant that everything was suddenly on hold, just days before the removal vans were booked to arrive, and even a temporary parking space agreed with the local council.

Fortunately, such a situation could rarely, if ever, occur in France. When a buyer agrees to buy and the vendor agrees to sell, the first thing the parties do is agree on the offer price of a property and then enter into a pre-contract of sale (known as the 'compromis de vente') which sets out the terms and conditions under which the transaction will be carried out. The document will include an agreed date for completion before a French Notaire.

At this point, the buyer has seven days of 'reflexion' or 'cooling off' (more if he is seeking a mortgage) during which he can pull out of the deal. If he does not avail himself of this option, he is firmly committed to the deal and pays over a 10% deposit as security, to be held by the Notaire or the estate agent handling the sale. The vendor has no right of retraction.

Conditional clauses may be written into the 'compromis de vente' with the agreement of both parties. They can typically include the buyer securing a mortgage (nearly six weeks are allowed for him to find and accept an offer), a satisfactory building survey, or the obtaining of planning permission in the case, for example, where the new owner wants to carry out extensive renovations.

If all the conditional clauses are met, the buyer has no grounds for withdrawing from the deal and will as a minimum forfeit any deposit paid if he decides not to go ahead. If he is seeking a mortgage, he must show due diligence in his efforts: he cannot sit back and do nothing and then withdraw within the specially extended six week period.

Completion - signature of the final sales act - will normally take place within six to eight weeks of signing the 'compromis' - plus additional time allowed to satisfy any conditional clauses noted above. The balance of the purchase price must be lodged in the Notaire's special client account several days before the parties attend his office to sign the final act of sale.

Buyers are advised to visit the property with the agent, just before completion and signing of the final sales act, to check that the property has been vacated (unless other arrangements have been mutually agreed) and that it is in the condition in which they found it when agreeing to buy - for example, that no fixtures and fittings have been removed that were agreed to be included in the purchase price.

If all is well, all parties will sign the final sales act. The buyer is handed the keys and becomes the new owner, and the vendors can walk away with a cheque for the proceeds, once the Notaire - in his role as tax gatherer - has settled any outstanding payments such as a mortgage or any capital gains tax that may be owed to the French State.

The timescale between signing the pre-sale contract and the date of completion can be considerably shortened where, for example there are no conditional clauses in the pre-contract, and both parties are prompt in furnishing the documents required by the Notaire to prepare the final sales document.

Monday, October 5, 2009

Using a French architect can save you money

In this month's issue of French Property News* I have described how using an architect to oversee your French building or renovation project can enable you to make substantial savings in your budget.

The article is based on research I undertook in June and July on small new-build projects, none of them costing more than about 100,000 euros (excluding land) and involving a two or three bedroom detached family home.

'People have the idea that you need only use an architect for projects involving over 170m²' explains my architect colleague Manuel Grau DPLG**, 'but they should bear in mind that when they buy a standard model house from a developer's catalogue, they are paying an in-built profit mark-up of 20 or 30 per cent. By using an independent architect you are paying basically for the labour and materials, plus the architect's 12 - 15 per cent fee.

'With careful design and listening to what the client wants, it is possible to site a three-bedroom detached house on a plot as small at 200m² and still have enough room for a small garden for the children and eating-out. We can also ensure valuable cost savings by correct choice of materials, proposing standard as opposed to custom sizes, and improve insulation by using the very latest materials.

'Where the architect oversees the project through to completion, he of course takes full responsibility and only authorises payments as the building work progresses. Essential if you cannot be on site yourself and do not know the intricacies of the building business'.

* or
** Email

Photos show a 3-bedroom family house of 110m² built at a cost of 114,00 euros (excluding land) or 1,036 euros/m². Kitchen, bedrooms, bathroom and laundry room were sited on the north side service road, with living rooms facing south to the garden. Architect Cécile Gaudoin DPLG, Rennes. Email

Saturday, October 3, 2009

French property title deeds

A question that is often asked on discussion forums is When and what sort of property deeds will I receive, after buying a property in France?

French title documents are similar to those encountered in other countries, and are basically a compliation of the documents the buyer (and seller) will have initialled or signed before the Notaire on completion of the sales transaction. They include the final sales act and other items such as a certified copy of the 'expertises' (the technical survey carried out before the sale), and generally comprise some 40 or 50 pages.

On completion of the sale, the Notaire files these documents with the local land registry ('bureau des hypothèques') and in due course will receive in return a certified copy bearing the bureau's official stamp and file reference number. The Notaire will then in turn send the new owner a certified copy of his 'titre de propriété' as it is now called (usually along with the Notaire's itemised account, made up of his fees and expenses and taxes, including those for filing the aforementioned documents). The process normally takes 3 to 4 months.

Because of the delay between filing and receipt of the 'titre de propriété' from the land registry, the Notaire will provide the new owner with an 'attestation' (several copies) certifiying that he is now the owner of the property. The 'attestation' is an interim document and may be useful to have when dealing with the utility companies, tax office, your bank etc.

The Notaire will normally keep a copy of the 'titre de propriété' in his files and it is important to retain a copy for yourself, as it will be required should you decide to sell the property, and in situations such death/inheritance, divorce/separation, or should you wish to borrow money using the property as collateral.

The 'titre de propriété' is the only proof you have that you are indeed the true owner of the property.

French mortgage interest rates down 1% in 12 months

A year ago - according to an article in today's Le Figaro - it was impossible to secure a French mortgage at a rate of less than 5% over 15 years, rising to 5.5% over 20 years. Today's reductions of 1% may at first seem scarcely worthwhile, yet over time they can represent a saving of up to 10% on the cost of borrowing to buy your house or apartment.

Taking a typical loan of 100,000 euros over 20 years, monthly repayments fall to around 600 euros a month, with a mortgage negotiated at 4%, as opposed to 660 per month at the rate of 5.15% which was typically proposed by the banks just 12 months ago.

The reduction in interest rates also means that you can borrow more with the same level of monthly repayments, normally required by French banks not to exceed one-third of your nett income. Monthly payments of 1000 euros per month over 20 years would, just one year ago, have allowed you to borrow up to 150,000 - today you could borrow 165,000 under the same conditions.

According to mortgage brokers Capfi, cited in the article, it is possible today to negotiate a mortgate over 20 years at a rate of 4% or 3.75% over 15 years, in both cases excluding the cost of insurance.

While variable rate mortgages have always been regarded as risky but attractive - currently offered at 2.60% today - they can be capped at 1% or 2% above the starter rate, which is this case could be around 3.5% (capped at 4.5%) to reduce the element of risk.

If you expect to sell your property within a few years, the variable rate option can be particularly attractive, when linked to the prospect of capital gains on the sale, which are free of tax if your property is classified as your principal residence.

As always, it pays to shop arround for the best deals. And according to Capfi, todays attractive rates should remain on offer 'for at a least a few more months'.

(Source Le Figaro, Hervé Rousseau, Saturday 2 October 2009).

Thursday, October 1, 2009

Problems with the neighbours?

Problems with neighbours ('troubles de voisinage') are taken very seriously by the French and are covered by both the civil and criminal law codes.

Problems that typically arise include noise, DIY activities at night or the weekend, late night partying, and domestic animals, including in the latter case loud and persistent barking by a dog left alone at home or on a balcony (a common occurrence where people are out at work all day), and dangerous and threatening dogs.

If you live in a co-ownership property such as an apartment, you can first speak to a member of the residents committee ('conseil syndical') or failing that to the 'syndic', the professional management company in charge of the property.

In serious cases, you can make a formal complaint ('porter plainte') to the Gendarmerie who are bound to take action.

Sanctions include fines - 150 euros or more for noise, 450 euros if it occurs at night ('tapage nocturne'), and up to 3000 euros for premises such as a bar or disco. In very serious cases, such as threats from a neighbour, the result may be a prison term for the offender.

In all cases a remedy must be applied promptly to hault the nuisance; and a dangerous animal such as dog might be obliged to be kept on a lead or muzzle, or possibly be ordered to be put down.

If you are the victim of nuisance, you should act quickly and decisively, perhaps trying to include the support of neighbours but if necessary going it alone. Your complaint will be taken seriously.

Anticipating and avoiding problems
Checking the area around a property you are thinking of buying is time well spent, and we always advise clients (or do it for them) to return at difference times of day, during the evening, at the weekend as well as during the week, even if possible at different times of the year in the case of, say, a property situated in a holiday resort which is quiet out of season but can be busy in the short holiday period.

Real life examples include:
- properties close to a school you may have visited during school holidays or over a weekend that may be noisy on schooldays
- properties near shops or business premises need to be visited on weekdays
- properties near bars, restaurants cafés should be re-visited in the evening

It is generally wiser to allow time to explore an area thorouhgly than spread your research over too wide an area, in the hope of finding your dream home!