Friday, December 24, 2010

Spanish property woes highlight security of French system

Although Spain is still the number one choice for British overseas property buyers - ahead of France - recent reports in the Daily Telegraph and elsewhere continue to highlight the many uncertainties surrounding property purchase there, in comparison with France's highlys secure system of property buying and selling.

Headlines such as 'Britons lose millions on the Costa homes that never existed' or 'Nearly 400 Britons lost £43 million in property deal' appear almost daily in the property columns of the daily and Sunday newspapers. Among the most recent scandals has been the failure of some regional Spanish banks to provide the financial guarantees (against deposits paid) which are required under Spanish law 57/1968 designed 'to protect the funds paid by the buyer into a special account and ensure they are used solely for the purpose of building the property'.

Speaking of a recent ruling by a provincial court in Cantabria, Charels Svoboda - head of an action group in Valencia - noted "While this is an improvement, and it does make me hopeful, it is important to remember that half of the Spanish banks are in financial trouble and many of the developers have gone out of business or simply disappeared - so where is the money going to come from to pay them back?"

According to recent figures there are some 683,000 new-build properties in Spain seeking buyers, plus an estimated 700,000 homes for sale by their owners, according to consultancy RR de Acuna. Several Spanish banks, who have repossessed properties from owners unable to keep up repayments, are now trying to offload them at 50% of their original price. The same report notes that out of 60,000 property companies, some 23,600 have gone bust, owing 137 billion euros to the banks.

Could this happen in France? The answer is a resounding No! In the case of off-plan developments, a minimum of 50% of the proposed properties (such as apartments and villas) have to be sold before work can begin. Purchasers then pay a small deposit and a series of stage payments only when building work progresses - foundations, first floor, roof etc - which are verified and authorised by independent lawyers ('notaires') in charge of the transaction. It is rare for a building company, many of whom are large multi-nationals, to run out of funds and for work to cease.

Because of its system of land registry, existing properties and their ownership can be verified by consulting the 'plan cadastre' on-line or at the local Mairie. Part of the duties of the Notaire handling the transaction is to ensure that the property exists and that the owner/vendor has has true title. Any additions or alterations can also be checked to make sure the appropriate planning permission was obtained. Building work undertaken by correcntly registered French artisans will be covered by insurance guarantees of up to 10 years.

Buyers should exercise reasonable care particularly when purchasing new-buildss or off-plan property, either for occupation or investment, and as a minimum personally visit the site of the proposed development and samples of recent properties built by the constructor.

Sources: Sean O'Hare, Daily Telegraph 23 December 2010; Graham Norwood, The Observer, 26 December 2010.

Tuesday, December 7, 2010

Auto-entrepreneurs - shock tax, resolution!


Many people opting for the comparatively new French self-employment regime (known as 'auto-entrepreneur') suffered a nasty shock this autumn when they received huge bills for a new local tax (CFE*) which replaces the old 'taxe professionnelle' levied on all commercial and professional enterprises, including those run from home. This despite the fact that many of the newly created enterprises had little or even a nil turnover, and had relied on the French government's promise (when the scheme was launched in January 2009) of 'no turnover, no tax' - including exoneration from the 'taxe professionnelle' or its equivalent for the first three years of operation.

The problem, as is often the case, lay in the small print, in this case buried within the auto-entrepreneur registration form, which basically offered two distinct options for paying income tax and social security contributions. Both of these are based on a fixed percentage of revenue - 13% in the case of 'commerce' (basically businesses that buy and sell) and around 23% for services and professions. Of these amounts the majority comprises social security contributions and the remainder (1% - 2%) income tax.

The registration form offered two methods of payment of the tax element, either by three-monthly declarations (along with the social security payments) or at the end of the tax year, together with any other income tax. The latter option appeared attractive to those on very low incomes or a pension, who might end up paying no income tax at all. (For a single person, earnings up to nearly 10,000 euros do not attract tax, and for a couple the amount is around 15,000 euros).

What many signatories missed when completing the form was the provision that the exemption from 'taxe professionnelle' - replaced in 2010 by the new CFE - only applied to those electing for the system of three-monthly payments - known as 'prélèvement forfaitaire libératoire' - a term not easily understood by the average French person, let alone an English speaker resident in France. Those that had opted for the once-off annual income tax payment were as a result suddenly faced with a huge CFE bill, often when they had not generated any income from their newly created auto-enterprise.

Further anomalies arise as the former 'taxe professionnelle' and its new replacement the CFE are calculated on notional values of property owned by local businesses, whereas many auto-entrepreneurs work from home and already pay 'taxe habitation' and 'taxe foncière' - personal taxes applied to domestic properties and their owners/occupiers! Many auto-entrepreneurs also point out that they do not actually work at home but at their clients' base (such as those offering services delivered in their clients' home or business premises) or at most use a few square metres in their living room, occupied by a computer.

Fortunately after vigorous protest and a lot of adverse publicity, the government has amended the law and on 6 December, as part of the budget for 2012, announced that all auto-entrepreneurs would be free of the new tax, during the early years of startup.. Anyone who had paid the tax already, ahead of the 15 December deadline, would be reimbursed. There are ongoing discussions about paying a contribution towards local business training programmes.

While the decision has been welcomed by auto-entrepreneurs, it is regrettable that a basic form of self-employment has become so complicated in the hands of French bureaucrats.

The French discussion forum http://www.auto-entrepreneur.fr/ is an excellent source of information about the auto-entrepreneur regime, including the new EIRL** version available from January 2011, which offers an element of limited liability, similar to a company, for the individual auto-entrepreneur, by separating (and protecting) personal assets from those of the enterprise.

(*'cotisation foncière des entreprises')  (**'entreprise individuelle à responsabilité limitée')

Wednesday, November 24, 2010

Selling your French home - description!

In a recent case involving the private sale of a French apartment, the English owners offered the property 'as is' but included in the asking price certain items (refrigerator, microwave, beds etc) plus certain others that were offered separately, at a price to be negotiated. The property details included two lists - items that were included in the asking price, and the items offered separately.

An offer was received from a French couple, who intended marketng the apartment as a summer rental, and accepted by the owners. As they approached the preparation of the compromis de vente (pre-contract) the French buyers insisted that the apartment was offered 'fully furnished' and that their offer was based on that. No amount of discussion could convince them that the printed details, of which they had a copy, clearly noted which items were included and which were not. It took considerable negotiation to finally reach an agreement, the owners reluctantly conceding all but a few items they wished to retain, in the interests of concluding the deal and moving on.

Could the property details have been clearer? Perhaps with hindsight one could use the French word vide, to emphasise that the apartment was offered empty. This term however does need clarification and agreement between the parties, as it does not normally imply that the vendor can strip out fittings such as kitchen units, bathroom cabinets etc which are expected to be left behind.

However, in all situations, it seems advisable to list and agree the items that will be left behind, and those that the vendors wish to retain. Some of the latter could of course be offered for sale at a price to be agreed.

Saturday, November 13, 2010

Home DIY when you come to sell

When the times comes to sell your French property, DIY renovations carried out by owners are generally not popular with French buyers, who prefer to see work undertaken and guaranteed by qualified artisans.

A recent French court decision may now alter the legal responsibility of owner/vendors for work they have undertaken themselves. The appeal court has used the argument that an owner who does building work on his own property automatically becomes a "builder" - and as a result is subject to the same laws requring a 10 year guarantee on the work done, that is applicable to registered artisans (who are obliged to carry the requisite insurance cover).

The court case cited a vendor who had re-covered the outside of the property in question, but the work had proved defective. The new owners sued for damages and won, despite the arguments of the previous owner that he was merely the seller and not a builder. The court ruled otherwise.

How far this ruling will affect current legislation or lead to the introduction of new rules covering DIY renovations is unclear. French jurisprudence does not carry the wame weight as in British law, where previous judgements can be cited in subsequent cases. However, a vendor doing renovation, repair or rebuilding work on his own property should be aware of the potential risks following the French court ruling.

(Source: Europe 1)

Saturday, November 6, 2010

Opening a French bank account

Opening a French bank account is relatively simple, but can be the subject of frustrating delays which appear inexplicable to the client. In the interests of preventing money laundering (the reason usually given), increasing amounts of doculmentation are asked for, to prove that you are who you say you are. If you are not living and working fulltime in France, or receiving pension payments, the French bank may require proof of your non-French resources, such as salary slips, and/or UK bank statements.

All this can take several weeks, as new accounts are eventually approved by the Banque de France, meanwhile the client has no way of paying French bills - for utilities, suppliers, artisans etc - other than in cash (only allowed for small amounts) or bank to bank transfers from his home bank. It is not uncommon for utilities to be cut off without warning as a result of non-payment of the initial bill when moving into a French property.

Regular bills, such as those for electricity, gas, telephone etc can be paid by standing orders ('prélèvements') and the first bills received usually include a form to complete and return to the supplier, which will be passed in turn to your French bank, once the account has been opened.

In view of the delays associated with opening a French bank account and its sometimes annoying consequences, we advise clients to set up a French bank account well ahead of the intended completion/occupation date of any property purchase, allowing at least two months - which is normally the time allowed for completing a French property purchase from initial offer to final contract.

Thursday, October 28, 2010

Rise in French property transactions 2010

According to a report published earlier this month by the French estate agents' body FNAIM, property transactions during 2010 are likely to reach 700,000 - and by mid-year had already exceeded 650,000, representing an 18% growth over 2009.

These are encouraging figures after the decline in the number of transactions to less than 600,000 in 2008/2009, which had been preceded by six years (2003 - 2008) when the number of transactions exceeded 800,000 annually.

Monday, October 18, 2010

Buying to let - caution!

Last night's Capital (M6) programme emphasised once again extreme care needed when buying an apartment intended for letting, particularly under recent government tax saving schemes such as the 'loi Scellier'. Under this scheme, monthly repayments of, say, 1200 euros can be reduced to around 400 euros, after taking into account income tax saved and income from rentals, encouraging many French investors to put their money into bricks and mortar.

The programme looked at two examples, a typical commuter town 15 kms from Paris and the city of Bergerac. In the first case, the development turned out to involve hundreds of apartments, located not 10 minutes but nearly 45 from the rail station, in an area of over-supply and lacking public transport. Much the same situation was apparent in Bergerac, where despit the promises of developers, the majority of apartments were un-let - due again to poor location and over supply according to local estate agents interviewed.

Even though the developers promised a guarantee against failure to find a tenant, in practice this lasted for only 12 months. And when desperate owners tried to sell, they found that their apartment was over-priced, and that after one year without tenants (and rental income), the tax advantages were cancelled. One owners found himself paying over a 1000 euros a month for an apartment he did not occupy, which remained un-tenanted and which he could not sell.

Surprisingly, less than half of buyers bother to visit the site or the area where they are being urged to invest an average of 200,000 euros, to check the quality and location of the property, and to find out for themselves whether a rental market actually exists. A government official interviewed admitted that the criteria for selection of projects under the Scellier scheme  were being revised to include an asessment of rental potential, but the new rules would not apply before 2012.

Curiously, France currently has an estimated immediate need for over 1 million new homes.

Tuesday, October 12, 2010

Signing a 'mandat de recherche' - advisable?

Potential buyers looking for a French property may be offered the option of signing a 'mandat de recherche' (research mandate) by an estate agency, which empowers the agency to search for a property on behalf of the would-be buyer. Is this advisable?

Normally, an estate agency will present the buyer with details of those properties already on his books - for which he has a mandate to sell signed by the vendor - which approximately match the buyer's requirements. In the case of a visit to view the property, the buyer is asked to sign a bon de visite which is a simple acknowledgement that he was introduced to that particular property by the agent. This is largely to prevent an unscrupulous buyer from subsequently attempting to strike a private deal with the owner/vendor which would deprive the agent of his commission, and presumably for a lower price. Agents have been known to sue and successfully win a claim in court for payment of their rightful commission, based on their written agreement (the sales mandate) signed by the vendor.

An agent proposing a mandat de recherche will argue that this enables him to widen his research, including for example approaching private vendors and other 'hidden' sources, and generally work harder to find the sort of property the buyer is seeking. Such a mandat involves payment of a percentage commission, based on the price of the property, in the event of a successful transaction.

Confusion can arise however when for example agent X holding a mandat de recherche concludes a deal with agent Y holding a mandat de vente (sales mandate) from the vendor, under which he too is entitled to a commission in the event of finding a buyer and concluding a sale. Are two lots of commission payable? Should the two agents divide and share the commission? Does signing a mandat de recherche cost the buyer more?

The answer to the last question is probably Yes, and a potential buyer might argue that in offering to find him a property, an agent (who has nothing currently suitable on his books) is doing no more than his normal job, when he contacts colleagues to see if they can propose something suitable. Indeed, many agencies work together in this way by means of formal or informal local groupings. In the event of a transaction occurring, the commission is normally split between the two agencies involved.

The situation is slightly different when a potential buyer, possibly someone who is exceptionally busy or who has special requirements, engages an independent property searcher - one of the new-style chasseurs de bien who have recently made their appearance in France. Many of them are operating under the laws (loi Hoguet) regulating the estate agency sector, and may charge both a fee and a percentage commission for their services. In Britain, several large estate agencies have even opened 'property search' subsidiaries, leading one to question where their independence lies - and whether this type of operation is simply another device to extract more fees from the potential purchaser.

In choosing his approach, a potential buyer can weigh up the cost of using these extra services, against his time availablity, knowledge of the local area and property market, and in the case of France his knowledge of the language and the property buying process.

Tuesday, October 5, 2010

French interest rates lowest since 1945

According to a report in Monday's Le Figaro, French mortgage interest rates were at their lowest - 3.30% - since 1945 during September 2010. The previous record low occurred towards the end of 2005 when rates were at 3.36% (excluding insurance). The number of mortgages granted by lenders was up 17% in the same month, compared with autumn 2009.

Source - Observatoire Crédit Logement/CSA.

Monday, September 27, 2010

Selling up and moving back


Second homes do not come cheap and the cost of owning and running them are among the reasons why many second-home owners decide to sell up and - if they are foreigners - return home or decide to take their holidays elsewhere than in France.

France has one of the highest levels of second-home ownership, and in the Mediterranean coastal region where I live, around 70% of properties are second homes, occupied for only a few weeks of the year. They comprises mainly studios and apartments in co-ownership buildings, holiday villas sometimes located in a complex with a pool and other facilities, and villas or older house a few kilometres inland.  As a result outside the main holiday season, many properties lie empty and the coastal resorts are deserted from October to the following June.

Some second homes may be owned as part of a family inheritance, due to France's peculiar successions laws which favour keeping acquired property within the family. Second homes also attract capital gains tax if sold within the first 15 years of ownership, although there is 10% per year relief in years 6 to 16 after which there is no CGT to pay - as is the case with your main or principal home. Newer buildings approaching their 15th year and in which owners may have bought apartments off plan at the time of construction may suddenly lose a number of owners simultaneously as they approach the end of the capital gains period. The resulting glut of similar style properties can force prices down and offer attractive bargains to buyers.

Second homes that were originally purchased with a view to family holidays can also lose their appeal, as children grow up and adolescents want to holiday separately from their parents and explore places outside France. A decline in the summer rental market may also provoke sales of second homes, as is happening along the Mediterranean coast. Owners who have failed to upgrade their rental apartment or villa are facing stillf competition from camp sites, many of which have upgraded their facilities, providing modern chalet style accommodation, swimming pools and numerous other attractions for their clients. During the summer, many of these become veritable holiday villages with 5,000 or more residents in place.

Costs of maintaining the second home are also another factor considered by vendors, as the prices of utilities, local taxes and  leisure (especially eating out) have continued to rise, forcing comparisons with the cost and attraction of holiday packages, including villa rentals, outside France.

Second home owners from Britain and Ireland especially who were attracted by convenenient low-costs flighs to nearby airports are now finding many flights reduced or diverted to more distant locations - both in the case of departures and arrivals. With journey times extended to a day or more just to take a short flight, many owners are questioning whether they want the hassle of travelling by air associated with short visits of a week or less. The good news is that areas which can be easily reached by car and increasingly fast TGV trains will attract second home owners disenchanted with low cost airline services.

The French themselves have always favoured locations no more than two hours drive from their main home, and it is generally economic and family considerations that influence the decision to sell. However, research show that the majority of second homes are nonetheless sold by their owners within 10 years of purchase, even during times of relative prosperity. In times of crisis, leisure spending is a major item that can suffer as family budgets are cut back, and the second home may be sold if for example it is not producing revenue from rentals and the costs of buying and running the property are simply too high.

The exceptions are properties intended for eventual occupation in retirement. Owners who thought long term and bought before 2002 have seen the value of their investment rise steadily or hold its value, even during the recent economic crisis. With the comparatively high transaction costs (agency fees, Notaire's fees, registration charges and taxes) associated with buying a property in France, you need to take account of these factors when deciding to sell your second home, or hold onto it in the expectation of better times.

Thursday, September 9, 2010

French Property News, September 2010


In this month's issue I describe the first part of my search for a working olive grove in the south of France, on behalf of an English couple planning a new life in their early retirement.

I have also written an article about the subtle art of negotating the price of a French property, when to take advice, doing your research on local prices and above all avoid pitfalls such as expecting that every vendor is prepared to drop the asking price by 10 or 15 per cent as a matter of routine. Above all, I advise against trying to bargain based on your ambition to buy something that you cannot afford - wanting a three-bedroom house for the price of a two-bedroom, for example.

Tuesday, August 31, 2010

Larger deposits demanded by UK banks

In the wake of the econmic crisis, British banks have started asking mortgage applicants for larger deposits, which according to Rightmove could have an adverse effect on property prices. First-time buyers now need a 25% deposit instead of the traditional 10% common before the crisis. And according to the Council of Mortgage lenders, 80% of first-time buyers aged under 30 need the assistance of their parents to finance their purchase, pushing up the average age for a non-assistd purchase from 33 to 37 years.

In many ways, the British housing market may gradually come to resemble that in France, where buyers purchase essentially with a view to the long term (for occupation or investment) and banks maintain their traditionally cautious lending policies - a loan being based on the borrowers ability to repay, rather than the notional value of the property, with monthly payments not allowed to exceed one-third of income.

The higher cost of transactions, which include agents' fees, Notaire's fees and government taxes and charges, also serve to discourage frequent property purchases with a view to 'trading up' and making a short term profit. Many first-time buyers are in fact older than their British counterparts, and may choose to establish their main home in a rented property (for example in a city centre where the cost of buying is prohibitive) and buy a second home in the countryside in which they will eventually retire.

Commentators on the article* have generally applauded the idea of higher initial deposits, with some suggesting it is time British house buyers get used to the idea of regarding their home as a cash-making asset instead of somewhere they intend to live for a long time.

Source - Philip Aldrick, Daily Telegraph 30 August 2010.

Sunday, August 29, 2010

Can journalists 'talk up' property markets?

An astonishing report in the Irish press tells of a goup of overseas property investors who are contemplating suing property journalists, claiming that their upbeat descriptions of variour property investment opportunities abroad caused them to lose money, when property prices subsequently collapsed. Among the markets cited in this context are many former Eastern communist countries that have recently become independent and in some cases joined the European Union, and areas such as Florida, Dubai and the Spanish Costas. Speculative investments became popular during the 1990s and reached a peak in 2002, only to collapse a few years later leaving investors facing heavy losses.

Whatever the outcome of any proposed legal actions, a number of lessons can be learned, among them the need to check and double check any proposed investment opportunity, particularly in newly developing and largely untried areas, and particularly if the prospect is offered of more than average returns from rental income.

Regrettably, property buyers are often dangerously casual about about their investments, as has been witnessed in France during the mini-boom in investment properties destined for rental, under various government tax saving schemes (Robien, Borloo etc). Anecdotal evidence suggests that more than 50% of 'investors' failed to actually visit the area and the property they were buying within France, to verify if the rental levels promised by developers were actually achievable.

What many found to their cost was that many buy-to-let properties had been built in unsuitable locaations, remote from towns and centres of employment, and lacked basic facilities such as nurseries, schools, shops, and public transport - all major deterrents to prospective renters on low incomes, to whom these properties were primarily addressed.

When they finally woke up to the reality of nil or reduced rental income from their investment, many buyers found that their properties were often badly constructed, largely unlettable and in many cases unsaleable. Many have since been heavily discounted and sold, often by the original developers.

Buying French property rarely promises high short-term profits and should only be considered as a long-term investment. Rental income is unlikely ever to contribute more than half of the monthly mortgage repayments, with French banks insisting that loans on based on your ability to repay rather than on the notional value of your investment.

Monday, August 23, 2010

Fancy owning an olive grove?


One of the most interesting property search requests I have had was to help an English couple find an olive grove somewhere in the south of France. They ideally wanted a property they could also live on, within reasonable distance of a largish town (providing a market for their olives and olive oil), and land that was already certified organic or capable of conversion in the coming years. I am telling the full story of the search and hopefully their final choice, starting in the September 2010 edition of French Property News.

Thursday, August 19, 2010

Energy performance label for properties

After the 1st January 2011 an energy performance label will have to be included in descriptions of French properties offered for sale or to let (loi Grenelle 2). The label - rated from A to G - is similar to that already applied to domestic items such as a refrigerator and to new motor vehicles, and is designed to highlight whether a house or apartment is rated as 'energy efficient' or one that is likely to be expensive to heat. The French government emphasises that buildings are responsible for 21% of CO2 emissions and 43% of energy consumed.

Estate agens are already asking whether a poor rating will have an effect on the saleability of a property, and note that vendors will have to organise and pay for a 'diagnostic de performance énergétique' (DPE) before putting their property on the market.

Low ratings - E, F, G - indicating that a property is costly to heat, due for example to poor insulation, may encourage potential buyers or renters to ask for a reduction in the asking price, according to a spokeman for FNAIM, the main body representing estate agents in France.

The new regulations may give a boost to the market for new-build properties while having an adverse effect on un-renovated older properties, including many dating from the building boom of the 60s and 70s along the French Mediterranean coast.

Tuesday, August 17, 2010

Top five tips for buying your home

An interesting piece in the Daily Telegraph recently (about property buying in Portugal) offers some useful tips which are equally applicable to buying a home in France. They are:

'Take your time - never be rushed or pushed into purchasing'

'Get independent legal advice' - Not always necessary if your French Notaire or agent speaks enough English to guide you through the various purchase documents, from pre-contract ('compromis de vente') trhough to completion. An adviser on the spot who knows the area and the local property market is helpful if you do not speak French and are unfamiliar with the French property buying process.

'Choose your area carefully' - Always important with a vew to a future sale, even if you intend to live in your new home 'for ever' unforeseen circumstances may force a change.

'Research what you can renovate' - Be aware of planning permissions, likely costs and regulations regarding what is and is not possible, particularly in areas classified as of historic interest and requiring permission from Batiments de France.

'Be willing to wait' - France like Portugal is slowly pulling out of recession but there are no quick profits to be made from buying and selling property. Properties are rarely offered at huge discounts, and you have to look at your property as an essentially long term investment.

Source - Leah Hyslop, Daily Telegraph 26 July 2010

Thursday, August 12, 2010

Studio apartment in Argelès-Port


I am helping friends sell their property in Port-Argelès as they have run out of space and need something larger, now they have decided to live here almost pemanently. Details are posted on http://www.argeles-apartment-sale.blogspot.com/ if you are interested. This is a private sale by the owners.

Wednesday, August 4, 2010

Living on the top floor

An interesting article in this month's French Property News* explains some of the advantages of living on the top floor, a point to bear in mind when buying an apartment in France. I have always favoured the top floor of buildings, provided it is not much above the third floor (a personal choice, though I lived for many years on the sixth and ninth floors of apartment blocks in London), and many people will not consider living higher than, say, the third floor if the building has no lift. I currently live on the second and top floor of a building facing south east and a leisure port, with a large terrace; whereas the Mediterranean side of the building rises to four floors, facing east, and tends to be cooler in summer after midday.

Older buildings may not have a lift installed. This is often the case with older buildings in Paris, particularly where a series of 'chambres de bonne' (servants quarters) have been converted into desirable apartments with stunning views. However they are invariably located at the rear of the building and access is by the 'back stairs' with no possibility of finding a lift.

Aside from that, top floor apartments offer a number of advantages, not least that of sound insulation, particularly in older buildings and conversions. Sound from below is less intrustive and easier to control by installing a 'floating' wood floor or buying thick carpets and rugs. Top floors offer the prospect of more light and air compared with the lower floors, where you can end up looking into the apartment of your neighbour.

On the Mediterranean coast there is the prospect of sea views or views over the rooftops of an historic town or village, and the almost certainty of a roof terrace for sun bathing and enjoying meals outside. Not unnaturally, top floor apartments can command a premium, ten per cent or more according to Rebecca Russell, author of the article, compared with lower floors, even in older bourgeois  buildings without a lift.

The presence of a lift means higher services charges paid to the building managers (the 'syndic') for maintenance and eventual replacement - many older lifts are currently being renovated or replaced to comply with new safety norms. Buyers, according to Russell, should also check that the building is well maintained, particularly with regard to the roof, as top floor apartments are among the first to suffer the results of high winds and rain storms common in the south of France.

However, the author concludes, top floor apartments invariably hold their value, are ideal for renting and in every way represent a sound investment should the time come when you wish to sell.

* French Property News, August 2010.

Monday, August 2, 2010

Independent property searchers in France

Property searchers, buyers' agents or 'chasseurs de biens' have been around for a few years in France, even forming their own membership association, but unfortunately like many good ideas - I would cite here the French 'auto-entrepreneur' initiative as another spectacular example - the French have managed to get it wrong! This usually happens once the bureaucrats get involved and try to pick apart something that started out as innovative and clearly responding to client demand.

What happened in the case of property searching was the official insistence that this new occupation fell within the estate agency sector, and consequently was subjects to the 40 year old 'loi Hoguet' of 1970 which defines how the French estate agency sector is governed. Under this law, only licensed estate agents are allowed to mandate and market properties, and take part in the negotiating process between vendor and potential buyer.

As a result many property searchers became freelance commercial (selling) agents tied more or less loosely to a licensed estate agency, instead of the truly independent, impartial advisers they should have been to their client - the potential buyer. This was until a little known ministerial reply of August 2008 sensibly clarified the role of someone paid by a client - in this case referred to as the 'mandant' - who acts as an independent searcher and adviser, working outside the traditional estate agency sector - but using local estate agents as one of their sources when conducting an initial property search on behalf of their client.

Some estate agents and even various newly formed associations of property searchers seem unaware of this important distinction or choose to ignore it. Fortunately, the role of the relocation adviser has developed alongside that of the independent property searcher, in the former case often working for a corporate client and helping relocate and settle one of their employees and their family in another part of France. Their services can include finding a property to rent or buy, and helping with all the administrative formalities of moving and settling in.

Recounting her experiences trying to find a family home in Edinburgh, Financial Times journalist Merryn Somerset Webb* describes finding and using a property searcher and poses the question Why are buyers prepared to spend the largest amount of money they are ever likely to commit when buying a property - and not ask for independent advice? Recognising, of course, that estate agents are in business to sell property, not to worry about whether you are going to be happy in it or not.

As an independent French property searcher and adviser working outside the traditional agency sector - though I was for two years a negotiator/salesman in a busy French estate agency - I now find I spend almost as much time dissuading clients from buying certain properties as I do advising on those I think will meet their requirements. As a negotiator I was under pressure to sell. Today I am relieved of that burden and derive considerably more satisfaction in seeing a client truly satisfied with the property they eventually purchase and move into.

* Financial Times 30 July 2010

Sunday, August 1, 2010

French Property News August 2010

In this month's issue I offer a few tips on how to get the most out of your French estate agent, based largely on my experience of working for two years as a negotiator in one of my region's largest independent agencies, catering mainly for British and Irish clients, and subsequently as an independent property searcher and adviser.

France has around 15,000 estate agents (double the UK figure) and entry qualifications and controls are rigorous. French agents are much more hands-on, for example always accompanying the client on property visits, often over a wide geographical area. They are also much more involved in preparing the package of documents that will be passed to the Notaire in the event of a sale.

I also describe a typical day in the life of an agency, based on my experience in a busy office in Collioure, attempting to juggle phone calls, emails, visitors to the office, sales visits with clients and meeting property owners with a view to taking-on a mandate to sell their property. We invariably worked a six or even seven day week, and lunch was usually a sandwich consumed on the run between appointments. Perhaps not the relaxed Mediterranean way of life some readers might imagine!

French Property News is available on subscription or on sale in newsagents. http://www.french-property-news.com/

Sunday, July 25, 2010

Selling your home? Some things to avoid....

Writing in the UK Daily Telegraph, property expert Phil Spencer of the TV progamme 'Location, Location, Location' offers some useful tips on how not to try and improve your home before selling. Among his suggestions are:

- Avoid 'outgrowing your street'. 'If houses in your street cost £250,000 don't build an enormous extension and ask £400,000. People looking for a £400,000 house won't want to live in a £250,000 street'. Harsh but true.

- DIY bodging. The greatest turn-off especially for French buyers used to work undertaken by registered artisans, with the accompanying invoices and guarantees.

- Replacing all the furniture. This, he says, will not add value to the house. This does not mean neglecting to present the property well, including home staging.

- Too big a television. 'I have seen far too many living rooms that have been overpowered by the size of the plasma screen' he says. This is a common fault among French owners, whose living areas have been turned into virtual home cinemas.

- Too many bedrooms. 'There is a substantial difference in price btween two, three and four bedroom houses' says Spencer, 'after five there's hardly any'.

Although writing about English property, many of Spencer's ideas can be equally well applied to your French house or apartment. In the same article he offers a list of improvements that can add value, from re-painting to opening-up internal spaces.

Spencer also suggests that sellers should be aware of their target market. 'Work out who is your most likely type of buyer' he suggests, 'and aim accordingly. This will determine whether you present a spare room as, say, an office, a play room, a gym or a study'. Related to French property, I would add being able to offer a ground floor bedroom,  as many older buyers appear concerned about not being able eventually to climb the stairs, while younger ones are becoming increasingly responsible for looking after an ageing parent.

Source: Daily Telegraph, Property Section 23 July 2010.

Tuesday, July 20, 2010

Letting your French property

One of the attractions of buying property in France is the chance to earn additional income from letting, particularly where the property is purchased as a second home and you do not intend to occupy it all year round. However, the rental markets differ widely according to location and market demand, and can broadly be divided into short, medium and long term.

Typical medium term markets include student rentals, if you happen to live in or near a university town. Suitable properties include one or two person studios, or larger apartments suitable for sharing. Such properties are invariably offered furnished and equipped, and wear and tear can be considerable, so you need to factor in the cost of replacement and redecoration. Tenant turnover can be high as young people tend to give minimum notice and will leave if they find another cheaper apartment or decide to move in with friends. Rentals are of course confined to term time. In some areas, furnished studios or apartments could also be offered to those moving temporarily for work or house hunting.

Longer term lets are generally for three years or longer, and unfurnished if the let is more or less permanent. Many French people choose to rent rather than buy, or live in a rented apartment in a city centre during the week (where the cost of buying can be high), and return to their family home in the country at weekends and for holidays. Rental properties in high demand include three and four bedroom houses suitable for families with children, with a garden and possibly a pool. Ideal locations are suburban or in towns close to public transport and main centres of work, and offering schools, nurseries and conveneint shopping. Ideal tenants include dual-income families with children in local schools, who are likely to want to stay for a number of years.

The most common short-term letting markets are those addressed to holiday makers, and comprise the six to eight week summer season (July, August), the period around Christmas and skiing, Easter, and in some areas shorter periods outside the main season, for example during spring and autumn.

The main summer season has tended to contract in recent years, and now stretches from mid-July to the third week in August at its peak, with large concentrations of visitors on the French Mediterranean and Atlantic coast, and some inland areas of special interest, such as national parks or the mountain regions of the Alps and Pyrenees. On the Mediterranean coast, there is increasing competition from camp sites, many of which are graded 4-star and describe themselves as 'hotelerie en plein air'. Many thousands of euros have been spent on upgrading accommodation (chalets) and facilities, with the largest sites catering for 5,000 or more visitors at any one time, and are virtually transformed into temporary villages complete with supermarket, restaurants, bars, cafés and all facilities, as well as every kind of sports and entertainment.

In contrast many coastal apartment and villa owners have failed to react to changing customer demands. Having managed for years to let their fairly average holiday homes at inflated prices, many are now feeling the pinch. In some Mediterranean resorts, apartment bookings are reportedly down by 30 to 40 per cent (in the third week of July 2010), and restaurants and shops are also suffering from lower takings as a result.

A few home owners have reacted by turning their apartments into 'boutique' accommodation, in competition with hotels, and specialising in short-stay breaks - typically long weekends or mid-week to weekend - possibly outside the main holiday season, and where the location has more to offer than the traditional sun, sand and sea.  Popular destinations are centres of historic interest, as a base for excursions and sightseeing. Another niche market is that catering for special interest holidays. These can range from cycling or hiking to cookery, crafts, art classes, slimming, vegetarian, yoga, nature study, languages, or culture.

In looking at short term rental options, property owners should take into account the potential of their area and its adaptability to these new markets. If your property is part of a co-ownership (condominium) complex you also need to be aware of the rules regarding visitors and letting. Invariably owners are held responsible for the 'good conduct' of their tenants and residents are quick to complain to the building managers in the event of noise or misconduct that disturbs the tranquility of other (permanent) residents.

Some large apartment or villa complexes include attractive gardens and a pool, as well as easy parking, and can be attractive to holidaymakers who do not wish to stay on a campsite or in a hotel. Agencies handling seasonal rentals demand a fairly high standard of furnishings and equipment, such as washing machine and possibly a dishwasher, and will take care of rentals, security deposits, insurance and cleaning between rentals.

An attractive location such as facing the sea or a marina, together with a balcony or terrace, will help make your apartment or villa stand out among the hundreds on offer. If you are offering a country house for short term holiday rental, minimal requirements will be a garden and a pool, as visitors do not like travelling every day to the beach due to the inevitable traffic congestion around the coast in high season.

Income can be made from renting but you need to research the different markets and decide how your particular property can be best adapted to varying local demand.

Wednesday, July 7, 2010

French property prices nearly back to pre-crisis levels

Prices of older properties have almost reached the pre-crisis levels recorded before 2008, according to figures just released by Century 21 for sales during the first half of 2010. With an average cost of 2508 euros per m² (7079 euros/m² for Paris), prices have risen by an astonishing 8.48% in just one year, and an even more remarkable 15% in Paris (5.4% higher than the first half of 2008).

Commenting on the figures, Laurent Vimont chairman of Century 21, which has 850 offices throughout France, noted that "We are now suffering a shortage of properties for sale, with 50,000 compared with 63,000 a year ago; with very narrow margins for negotiation, just 4% for apartments and 6.3% for houses. We are also seeing vendors demanding unrealistic prices which only serve to stifle the market".

The French Mediterranean coastal regions continue to record rising prices, an average of 11% in Provence/Cote d'Azur and nearly 7% in Languedoc-Roussillon.

With mortgage interest rates at their lowest for several months, averaging 3.6% over 20 or 25 years, a typical borrower who had access to 146,500 euros in 2008 can now borrow 169,000 euros to finance his acquisition.

Vimont predicts that average property prices will rise 6% during 2010 before stabilising.

Tuesday, July 6, 2010

French Property News, July 2010

In this month's issue of French Property News I look at a number of reasons why you should sometimes NOT buy a French property, and at all times use your head and not your heart. Among the reasons for not buying I include falling in love with the owners or their lifetyle, or being seduced by cosmetic improvements which may be the result of preparing the property specifically for sale. Bear in mind that attractive curtains, carpets and furniture will not be left behind - unless you intend buying the contents - though they may give you an idea of what might be achieved.

It is tempting also to imagine buying into the owners' lifestyle, which in part we do, as almost all advertising and selling is based on our aspirations. However I do recommend sometimes taking along a dispassionate third party on property viewings - an estate agent's worst nightmare but possibly your best ally.

As someone who advises potential buyers of French properties, my personal list of problem areas includes uncertainties about ownership, boundary rights, unclear rights of way, sitting and protected tenants, DIY renovations and other factors that can make a sales less straightforward than normal. Prolems can be ironed out in most cases, provided the property is worth the extra effort, but sometimes it is easier to simply move on and find something else.

Thursday, July 1, 2010

Another twist to French estate agency sector

Although an admirer of the French estate agency business - I used to be an agent but now prefer my role as adviser - I am also aware of its many defects. The sector is in theory highly protected under French law, such as the 'loi Hoguet' which closely defines estate agency activities and sets down standards for anyone wishing to apply for an estate agency licence, normally a business degree and/or several years experience.

In practice, estate agency operations can be open to anomalies, notably in the use of freelance 'commercial agents' who are self-employed and loosely attached to an agency as property negotiators. They depend for their legitimacy on the agency's professional licence, issued by the Prefecture to the principal/owner.

A recent and worrying development is the establishment of several national networks of freelancers, recruited for the most part without previous experience, and relying for a living on the commissions they could potentially earn from mandating properties for sale and subsequently negotiating a purchase. These activities require considerable professional expertise and experience if they are to be performed correctly, including an in-depth knowledge of the property market, estimating property values and completing the transaction from initial pre-contract to final signature.

Many of these sub-agents depend on an estate-agency licence issued by a single Prefecture and used to legitimise the activities of an entire national network. FNAIM, the French estate agents' national body, has expressed concern about "the reality of control over the activities of these negotiators at a time when we are trying to strengthen the guarantees offered to consumers" (Le Monde 06 July 2010).

Checking up on one of these networks (which continues to recruit) I found that my small local town has two of their 'agents' in place (in addition to more than 20 properly licensed estate agencies), operating from their home addresses. A search of their property website revealed just two properties listed, where the average licensed agency has a minimum of 100 on offer.

These developments are worrying not only for potential buyers, who may find themselves in the hands of these fringe operators, but also for individuals who imagine that joining a network as a commercial agent is a viable route into the French estate agency business.

Picture - Daily Telegraph, UK

Friday, June 25, 2010

Electrical installations - new norms

As a result of a new law passed in June 2009, anyone selling a French property must now provide a further expert report concerning the state of the building's electrical installation. This is in addition to those covering termites, lead, asbestos, gas installation, flooding and natural risks, and energy efficiency.

The inspection, undertaken by a certified professional, is extremely thorough, and covers everything from the mains supply, distribution panel and fuse box, wiring, electrical sockets and switches. The expert's report includes an obligatory list of comments and recommendations.

The result is that many existing properties will not be in conformity with the latest norms (as they may well not be in terms of energy efficiency) and in extreme cases an expert might recommend shutdown of the system by the supplier (EDF) until alterations have been carried out. Similar procedures apply to gas installations.

The new inspection imposes another obligation on vendors, who have to pay for the expert's report, and may encourage buyers to seek a further reduction in the sale price if it appears that there is a considerable cost involved in bringing the electrical installation up to standard.

In all cases and especially where defects or 'anomalies' have been identified by the expert, the report emphasises that the new owner inherits the risks and responsibilities associated with the installation as it exists, and notes that in some cases insurers may decline to offer cover until alterations have been carried out.

Wednesday, June 16, 2010

500,000th auto-entrepreneur registered this week

This week, France's minister for small business, announced the registration of the 500,000th auto-entrepreneur, another clear sign of the popularity of this simplified form of self-employment created in January 2009. Originally registrations were expected to reach 100,000 in 2009 but this figure was later revised as they excceded 320,000 in the first year of launch, finally reaching today's figure of half-a-million registrations in just 18 months.

This week's announcement notes that combined income generated by new auto-entrepreneurs was over 1 billion euros in 2009, and is expected to reach three billion in 2010, represented a significant extra income for many new full and part-time businesses.

A recent study has found that 64% of new auto-entrepreneurs are men against 34% women; 16% are aged 30 or under, and 19% are aged 60 or over. This last figure is particularly encouraging, given the very low percentage of French people actually in fulltime jobs after the age of 55, five years before the tradtional retirement age of 60.

In January 2011, the French government intends to launch another new regime - the E I R C or Entreprise Individuelle (avec) Responsabilité Limitée. This will be similar to the single-person limited company (EURL) but enables an individual who is self-employed to enjoy the same sort of protection, with the added benefit of limited liability.

Individuals opting for the auto-entrepreneur regime are self employed, and pay a combined total of tax and social contributions (at a rate of 13% for commercial activities and around 21% for services), based on actual income earned, and declared quarterly. There are limits on annual turnover, currently around 80,000 euros for commercial activities and 34,000 euros for services, such as consultancy. Auto-entrepreneurs are not alllowed to deduct or charge VAT on their activities, and some reserved occupations are excluded from the regime.

Activities as an auto-entrepreneur can be combined with full or part-time employment in another occupation, including students. The regime is open to those out of work (11% of AEs), pensioners (about one quarter of AEs) and EU nationals, including British who wish to work in France. A search on Google will reveal a wealth of information on the subject, much of it in English.

Monday, June 7, 2010

French property sales up, interest rates down

A recent batch of reports has produced the usual confusing picture of the French property market.

Among the certainties are the fact that typical interest rates are at their lowest since 2006, with some lenders offering 15 year loans at a fixed rate of 3.35%, with borrowers contributing 10% of their own capital. The T3 (three rooms, kitchen and bath) is still seen as the most secure investment by buyers. A rise of 10% in loan approvals was recorded during the first quarter of 2010.

Some sources also report an average 16% shortage of good saleable properties, and 21% for apartments. As a result small price increases have been noted in some of the most popular sectors, including Paris and other large centres.

In Languedoc-Roussillon we are currently experiencing a shortage of good, saleable properties, with too many still coming onto the market over-priced and not in a fit condition to show to potential buyers.

Would-be sellers have only themselves to blame if their property fails to sell within a reasonable time, while these near ideal market conditions continue to prevail.

Sources: Argus du logement, Universimmo, Notaires de Paris.

Thursday, May 27, 2010

Sudden surge in new-builds.......


Fifty-four new apartments and villas, out of a total of sixy-two available, were sold in a single weekend recently in France. A sign that the property market is picking up?

Certainly the predictions are optimistic according to various experts quoted in Le Figaro who cite another example of nearly 70% dwellings sold on a development by Nexity, and a rise in building permits of 25% recorded in March and April alone. In the first quarter of 2010, sales of new developments have risen by 5.3% against a dramatic 59% fall in 2007/8, with around 75% new starts already recorded in 2010.

This year sales of new-builds are forecast to reach 106,000 in addition to 100,000 much needed social housing units.

Already there are signs that new property prices are rising, up by 8.5% for studios and 8.9% for properties of four rooms and above. Reasons given are the need for new-builds to comply with the new BBC norms ('batiment basse consumption') for low energy consumption, with tend to add around 10% to building costs.

Source: Le Figaro 27 May 2010.

Monday, May 17, 2010

Making an offer on a French property

It is virtually always possible when considering buying a French property to propose an offer that is below the asking price. The crucual question is By how much?

Properties offered for sale by estate agents should have been subject to an estimation of the property's value, before being formally taken onto the agency's books with the completion of a 'sales mandate' by the vendor and the agent. The mandate sets out the agreed asking price of the property, the commission payable in the event of a sale, and the term of the mandate - usually three months renewable in the case of a simple mandate.

In discussion with his client, the agent may have gleaned an idea whether there is any room for manoeuvre in the event that a potential buyer makes a formal offer on the property. Almost invariably owner/vendors have an inflated view of the value of their property, which they may have loved and cherished over the years, and are now reluctant to part with. Emotional reactions may cloud their judgement and many do not, at this stage at least, always listen to the advice of the agent, who may have his own view of the property's saleability. (A reputable agent would not take on a property that is so over-priced as to render it unsaleable).

Buyers considering making an offer should consult their agent and listen carefully to his advice. There can be certain legitimate grounds for proposing an offer, for example if the state of the property means that extensive renovation works are required. In this case asking for a price reduction is justifiable, and you could support your request with builders' estimate to prove the point. Asking for a price reduction simply because a particular property is priced at more that you can afford leaves little ground for justifying your request. In this case, you would have to turn elsewhere and find something cheaper.

Potential sales often collapse because of intransigence by either buyer or seller, even when the two sides are only a few thousand euros apart. More often it is an unrealistically low offer by the buyer which is put forward, against the agent's better judgement, that effctively kills the sale. Well instructed agents will know or have a feel for how much leeway is possible, and may know from past experience that offers at or below a certain amount have been refused by the vendor, and simply refuse to pass them on.

Even in what is currently regarded as a buyers' market, many owners are simply withdrawing their property from the market, as many may be second homes or there is no particular urgency to sell. In every case, it is wisest to listen to you estate agent or adviser, who knows the market, knows the property and - above all - knows the vendor.

Wednesday, May 12, 2010

Getting the best out of your 'agent immobilier'



Your first contact as a potential property buyer in France is almost always through a local 'agent immobilier', a member of a licensed profession uniquely authorised under French law to handle the sale of properties entrusted to them by their client-vendors. As French agencies tend to work a little differently from their English counterparts, it is useful to know what to expect - and what not.

Many first approaches are made by email and a common frustration for non-French buyers is what they see as tardiness by the agent in responding to their requests for 'more information' about one or more properties. Having worked in a busy French agency, a three-person office of a group of four, I can explain how life really was. We routinely received 20 to 30 emails per day. In addition to potential buyers seeking general information, many emails concerned ongoing transactions, as well as requests from vendors to consider taking their property onto the agency's books.

In addition there were phone calls, mainly from French buyers; visitors arriving at the office either unannounced or by appointment; visits to make to view properties with the client; or to a vendor to prepare a mandate for sale, take photographs and prepare the sales description for the office window, magazine advertising and the website. Every sale also absorbed numerous man-hours preparing the documents for the Notaire's dossier, with some agencies, such as ours, even preparing the initial sales contract ('compromis de vente') and taking a 10% deposit on account.

As a result, general enquiries arriving by email tended to sink to the bottom of the pile, particularly if they were vague requests for more property details (often no more than we had posted on the website), compared to phone calls which could be dealt with quickly or visitors arriving in person.

We also learnt over the years that 90% of these general-enquiry emails produced no result - no subsequent phone call, no visit, no sale. We also developed a fairly accurate profile of the typical property buyer as someone who:

- knew or had visited the region
- were often already known to us
- knew what they were looking for (house, apartment, land etc) but prepared to be flexible
- phoned a few days ahead to arrange property viewings by appointment
- had allowed sufficient time to visit us and several other agencies (a minimum of several days) and make return visits if necessary
- had their finanaces in place and were ready to sign an initial offer or the 'compromis de vente' and pay a deposit to secure the property
- might come back for a second visit
- might come back in three to six months time

Most had NOT requested information by email but had probably phoned us after identifying a property or several, mainly to check their availability and to arrange viewings. Very few were travelling a long distance to view only one property they had identified or 'set their heart on'.

To make the most of your property search visits, I advise clients to be reasonably certain of which region and type of property they are interested in; to listen to the agent's advice about alternatives, prices, locations, lettability, offers; allow sufficient time for visits and preferably by appointment; try not to visit too many properties too quickly; to be aware that the same property may be with several agencies; to be honest with the agent about whether they are really in a position to buy or simply making a preliminary visit to get a feel for the market.

Following these simple guidelines can help ensure that your dealings with the French agent are pleasant and productive. If you are not used to the French property buying system or do not speak French, then firms such as ours are available to help you from initial property search through to completion and settling-in.

Monday, April 26, 2010

Getting on with the neighbours

A recent post on one of the French discussion forums concerns an English family who moved to a small village in France 'hoping for rural solitude'. They had in fact bought a derelict plot of land and spent the last two years building a house, and are now suffering hostility from the neighbours.

Perhaps not surprising, as they describe their activities as including long periods of using a mechanical digger, receiving deliveries of building supplies, keeping a noisy guard dog, erecting a seven-foot high surrounding hedge, and claiming they do not work during lunchtime or on Sundays! If it was a British person writing about a French family, doubtless they would have been labelled as neighbours from hell.

Much of the advice given in the replies to this post has included adopting a more conciliatory approach to the (French) neighbours, and trying to apreciate the situation from their point of view. Sadly, the original poster appears more ready to file a formal complaint for harrassment.

I think one can draw a number of lessons from this truly sad situation. One of which is clearly that you can not and will not find peace and solitude in a small French village, where typically everyone knows everyone else's business and new arrivals have to make a super-human effort to fit in and slowly become accepted. It is very much about contributing something to the overall life of the community.

If you are not prepared to do this, for whatever reason and it is entirely a personal choice, then it is perhaps wiser to settle in a larger, more cosmopolitan community, where your arrival and lifestyle will pass largely unnoticed. In many of the Mediterranean coastal resorts where I live, the original residents are used to the influx of seasonal visitors of virtually every nationality, and those who live here permanently tend to go about their affairs wihout attracting any particular interest. Friendships and connexions can be made but they are an option not an obligation.

Selecting your French property for either occasional or permanent use should take into account your personal preferences, and time is well spent in searching for the neighbourhood which suits your way of life and in which you will feel most comfortable.

Tuesday, April 13, 2010

Home renovations that add value

In an interesting article in yesterday's Daily Telegraph, property expert Phil Spencer - presenter of the TV programme Location, location, location - points out that not all home renovations necessarily add value to a property when it comes to re-selling.

He particularly cautions against over-spending on kitchens and bathrooms, as these are items that new owners are most likely to want to change and 'impress their personal style on their new home'.

Anything that creates more space and light will generally add value to the property, including extra bedrooms, an office, a utility room or garage. He also advises that quality details will always impress, including items such as wood floors, bathroom fittings and light switches.

Source: Daily Telegraph, 12 April 2010.

French Property News, April 2010

In this month's issue I look at the recent trend to buy atypical properties, including basements that that can be converted into living space and which have been awarded the name 'sousplex' by astute Parisian estate agents. I also look at the potential for converting former commercial properties into housing, sometimes with the option to revert back to commercial status, and the rules and regulations that are commonly applied by the planning authorities and the managers of co-ownership properties. The latter tend to be very conservative when it comes to innovative projects!

French Property News is on sale in newsagents or on subscription. See www.french-property-news.com

Friday, April 9, 2010

Translation or interpretation?


Buying French property necessarily involves reading and understanding a large number of documents - a difficult task if French is not your first language. Documents include the estate agent's description, the obligatory technical reports on the property and its environment, building surveys, reports and regulations from the syndic of co-owners, the pre-sale document ('compromis de vente'), power of attorney, the final sales act and many others, running in some cases to fifty or more pages. How do you set about dealing with such a mountain of paperwork, written in legal jargon and in a language you do not undertsand?

One option is to use a qualified translator, and for some documents French law may require the use of an approved translator ('traducteur assermenté') who can provide official translations for use in court. These translators have a near-monopoly, are in short supply and are expensive. Other translators can provide a 'literary translation' but this is usually offered without guarantee or legal authority ('sans portée juridique') and in all cases, in the event of a difference of understanding, it is the original French document that counts.

Because of the wide differences between French and Anglo-Saxon law, even an English translation of a French document can be difficult to understand, as the terminology and practices differ between the two jurisdictions.

A more helpful approach is to use an interpreter, particularly one who can be present before and during the signing of the principal documents, and ideally someone with a good knowledge of both French and English law. Someone who lives locally and knows the property business and the area offers a distinctive advantage.

An interpreter can work with the Notaire to help explain the broad concepts behind a particular French document, and what its implications are for the signatory. French Notaires are also under an obligation to ensure that you fully understand what your are signing. Working in conjunction with an interpreter (and many Notaires speak at least some English themselves) can usually provide a more cost-effective and useful solution for the client.

Many documents associated with a French property purchase are more or less standard, using well known approved models (such as those provided by FNAIM, the estate agents federation), and provided the broad principles are fully explained to you by the Notaire, you can normally proceed to signature confident that you not committing yourself to anything you do not understand.

Where a home-based adviser is employed, such as your family lawyer, even someone who understands French and French law can at best best only work with the information contained in the original French documents supplied by the Notaire (property description, technical reports...) and in the absence local knowledge is obliged to rely solely on their written content when advising the client. This is not an effective substitute for employing someone on the ground who can carry out any necessary, independent checks and verify the accuracy of any information supplied.

Thursday, April 8, 2010

Buying a French property for re-sale


A question that is frequently posed by potential buyers is whether it is feasible to buy a French property, do it up and then offer it for re-sale. Some principles to bear in mind include:

1. Capital gains tax will be payable on the re-sale of a property that is not your main home (as evidenced by your tax status as resident in France). There are some abatements possible, with tapered relief after year six years of ownership, and no CGT to pay if you sell the property after fifteen years.

2. Other costs that need to be factored-in include transaction costs - agent's fees, notaire's fees and taxes - both on the original property purchase and its subsequent re-sale. Be prepared for delays due to planning permissions, cost overruns and other hazards associated with this type of project.

3. If you plan to undertake the renovation work yourself (DIY), note that particularly French buyers prefer renovations that have been carried out by registered artisans, and like to see the bills and accompanying guarantees regarding the quality of the work.

4. If due to change of circumstances, such as a cash shortage, you are unable to complete the renovations, a partially renovated property can prove very difficult to sell, except perhaps at a knock-down price, that may result in your incurring further losses.

However, if you plan to invest in a property for future (short-term) re-sale:

5. Choose an area and a type of property where there is an active market. Examples include areas where holiday lettings predominate or there is a demand for student accommodation.

6. Check local prices for fully renovated properties against the cost of buying a property for conversion, plus building costs and a margin for profit, after taxes etc.

7. Ensure that all work is carried out by properly registered, fully insured (French) artisans, who can provide the appropriate guarantees ('décenniale' etc).

8. Ensure that you can be on site to check progress or have someone who can do this for you. An architect is advisable in virtually all cases, even for small projects, to plan and supervise the work, liaise with artisans and suppliers, and authorise stage payments as work progresses.

9. Check and double check the figures from initial purchase through to completion of the conversion.

Thursday, March 25, 2010

Tighter rules for syndics

The French government has just issued new rules for the operation and management of 'syndics' - the professional building managers who look after multi-occupancy properties on behalf of their co-owners, such as blocks of apartments or private estates.

The emphasis of the new regulations is on greater transparency in relation to the financial management of the building, including right of access to documents such as estimates and invoices received for building and maintenance, and clarification of management charges. The new law also forebids demands for additional payments for information such as a copy of the syndic rules, building plans and explanation of the maintenance charges - all information that would typically be requested by someone considering buying a property in the building.

The changes reflect the government's concern about criticisms of some professional syndics that have been widely expressed on French television and in some consumer magazines, in particular relating to the activities of several syndic organisations which have recently become subsidiaries of major finance and banking groups.

Source: Arreté 19 March 2010 modifying that of 2 December 1986, JORF 21 March 2010 p 5673.

Wednesday, March 24, 2010

Buying older properties in France



Many British and Irish buyers seeking a principal or second home in France are sometimes attracted by the idea of buying an older property that they can 'do up', perhaps with the assistance of family and friends, and if necessary a professional builder. The process is not without its problems.

Major building works including external alterations and extensions are invariably subject to French planning consents, and in the case of buildings sited within an area of historic interest, will require approval from the architects at Batiments de France (roughly equivalent to organisations such as English Heritage). Planning permission may be subject to restrictions such as height, dimensions, type of materials to be used and colour schemes, to name but few. All building and alteration works above 170m² require the services of a professional architect, and is advisable in most (older) buildings even below this size.

The initial survey, paid for by the vendor, may indicate the presence of lead, asbestos, and termites, as well as the condition of heating and electrical systems, gas installations and thermal efficiency. All these may have a bearing on the price you are prepared to pay.

In the case of older buildings, common problems can include damp; uneven floor and wall surfaces; lack of right angles (for example if you are installing a fitted kitchen). The electrical installtion is unlikely to conform to current normas and may have to be renewed, bearing in mind that French wiring relies on separate circuits for items such as hot water, cooker, heating, lighting etc which emanate from and return to the central distribution panel and fuse box. The French do not use the 'ring main' system.

Heat and sound insulation may require improvement, particularly in the case of parquet floors resting on wooden beams in many typical older village houses, as well as more recent (1950s onward) precast concrete structures, where noise transmission levels can be a deterrent, particularly in apartment buildings. In many cases there may be no double glazing, with heat lost through drafty ill-fitting window frames.

It is certainly prudent to have a professional survey done before committing to purchase, and if possible get some idea of likely renovation costs. In practice, fully renovated older homes can cost little more than those requiring work, provided the improvements have been carried out by approved French artisans, and are to your taste. It is a truism that homes that have been renovated by their owners, and are accordingly offered without guarantees, are extremely difficult to sell, should the time come for you to move on.

Thursday, March 18, 2010

French Property News March 2010

In this months issue I talk about the various ways in which you can do business in France, starting with the recently introduced and relatively simple self-employment regime known as 'auto-entrepreneur'. Under this scheme, which has proved extremely popular since its introduction in January 2009, tax and social contributions are paid quarterly, based on a fixed percentage of the income actually received by the business, rather than on notional amounts applied under some of the other business regimes (which can prove to be a burden for new start-up enterprises).

I also look at the different types of French limited company, including the SCI which is a special arrangement to enable different members of a family or a group of friends to jointly buy a French property. There is also a summary of the general business rules and regulations, as well as some curious anomalies.

French Property News is available on subscripton or see www.french-property-news.com

Tuesday, March 9, 2010

Checking your 'syndic'....

Co-ownership ('co-propiété') properties in France are similar to the American style condominium, where residents own their apartment or villa, and in addition have a share in the property's common parts - corridors, staircases, lift, gardens or grounds if they are present. Such properties are usually managed by professional organisations known as a 'syndic' which is appointed by the residents, usually through a residents' committee and the annual meeting of the co-owners.

A number of recent articles in French consumer magazines have been highly critical of some professional syndics, particularly those belonging to large groups such as Foncia (part of Banque Populaire). Specific complaints include high administrative charges, and the recent costs associated with bringing passenger lifts up to the new standards required by the French government. A typical eight-storey apartment building in my region would pay around 80,000 euros for replacing the lift - the cost borne by the residents in proportion to the size of their apartment and the floor level on which it is situated.

Residents however have been fighting back, sometimes appointing outside specialists to examine expenditures, check that competitive estimates have been secured before any work commences, and vetting income and payments. In some cases, syndics owned by large conglomerates have been sacked by the residents in favour of smaller, local firms who have effectively cut back on management costs.

If you are considering buying a co-ownership property, such as apartment, you should ask to see the minutes of recent AGMs, to check what expenditure is anticipated and what are the standing maintenance charges. Particularly high cost items are outside painting ('ravalement'), interior decoration, and lift maintenance or replacement. Buildings with extensive grounds and amenities such as a pool or tennis court will naturally attract higher annual charges than, say, a small building divided into flats.

As an owner you have a right to attend and vote at the annual general meeting, and if your French is up to it, you could consider putting yourself forward as a member of the residents' committee ('conseil syndical'). At the very least, you should exercise your right to vote, which can be done by proxy if you are not free during the months of July and August when most AGMs seem to take place.

Monday, March 8, 2010

Selling a tenanted property

Selling a French property with a tenant in place is not quite as straightforward as offering you house or apartment with vacant possession on completion.

There are few circumstances in which you can ask your tenant(s) to leave, for example unless you require the property for your own use or for a close member of your family, or if you need to undertake urgent building works. Tenants occupying your property as their main or principal home or who are of advanced years have additional protections under French law.

If you decide to sell, you must offer your tenant(s) first refusal to buy the property, at market value, and giving at least six months notice in advance. Tenants are allowed a period of reflexion, as well as additional time to secure a loan or mortgage if required.

If you are selling a property with tenants in place (and they do not wish to buy), then you need to agree with them reasonable times during which prospective buyers, agents etc can visit the premises. Evenings, weekends and holidays may be excluded, and tenants may insist that visits are by appointment and only while they are present in person.

Failure to reach an agreement can result in tenants becoming obstructive and making visits difficult, sometimes to the extent that agents aware of the difficulties of viewing the property may refuse to take it onto their books, or are geneally relucant to offer it to prospective purchasers.

However, buyers looking for a longish term investment with a secure income, should not be discouraged. Studios and smaller apartments generally have a higher occupancy turnover (and suffer more wear and tear) than, say, larger three and four bedroom properties occupied by families, who are seeking long term stability.

Prospective purchasers should take advice about the potential rental markets - short, long and medium term; seasonal etc - in the locality where they are thinking of buying property.

Thursday, March 4, 2010

French property sales up but property shortage

Recent discussions on one of the French property forums (www.totalfrance.com) and in the British press have highlighted the fact that suddenly and to many people's surprise, the French property market appears to have picked up during the first few weeks of 2010, with the notable return of British buyers to southern France and the Mediterranean.

In a curious twist however to this encouraging news, several of my local estate agent colleagues report a dearth of correctly priced, good quality houses and apartments. Some have even been unable to locate suitable properties for serious buyers, with upwards of 400,000 euros to spend.

It seems that many vendors have simply withdrawn their property for sale, while the market was slow and in anticipation of a revival in 2010. Prices have however not fallen significantly and many French vendors are still reluctant to spend money presenting their property for sale - a process that can cost as little as two or three per cent of the sale price and dramatically improve their chances of attracting a buyer.

Finding the right property may take a little longer, as buyers becoming increasingly discerning in their choice.

Sunday, February 28, 2010

Property finders not always independent......

In a revealing article in Britain's Daily Telegraph, many of the country's largest estate agents are creating susidiary firms which act as property searchers, or 'buying agents', and which charge a fee and 'act independently for the buyer'. Among the firms cited are Private Property Search (Strutt & Parker), The Buying Solution (Knight Frank) and Prime Purchase (Savills).

Search fees can be as high as one or two percent of the property purchase price, usually with a minimum payment, in addition to any commission charged by the estate agency handling the transaction.

Among the advantages claimed by property searchers featured in the article were their in-depth knowledge of the local market, prices and property values - all of which, some commentators argue, should be the stock-in-trade of a competent estate agent; and leading potential users of such services in Britain to question where precisely is the added value?

Buying property in a foreign country such as France is a different matter, due to the language and a different system of law. In France, the estate agency sector is rigorously controlled, with estate agents licensed by the regional Prefecture and governed by the Loi Hoguet of January 1970.

One of the weaknesses of the French system however is the widespread use of 'commercial agents' - self-employed individuals attached by contract to an estate agency, who rely in turn for their legitimacy on the employing agency's licence and through which they obtain their personal 'carte professionnelle'.

The system can be open to abuse when an 'agent commercial' operates independently - as a property searcher or negotiator - and may have only a tenuous link with the employing estate agency, which could be one licensed in another Département. Some national networks rely on this method of working, and the estate agency professional body FNAIM have been critical of the system.

The status of property searchers working in France was clarified by a ministerial reply of 12 August 2008, which stated that an independent property searcher can legitimately act on behalf of a client, outside the provisions of the Loi Hoguet, provided he was paid a fee by the client and did not rely on a commission from the sale of a property (Journal Officiel Q. 20525, p. 6987).

This is the position adopted by my firm, and enables us to remain completely independent, when advising our clients on all aspects of living, working and buying property in France.

Source: (UK) Christopher Middleton, Daily Telegraph 26 February 2010

Saturday, February 20, 2010

French Property News February 2010

In this month's issue I look at the emerging organic movement in France and in particular my own region Pyrénées-Orientales, which has seen a doubling of organic producers in just 12 months. It seems that one of the effects of the economic crisis has been to encourage people to grow their own vegetables, explore local markets and not simply rely on supermrket standardised products that have been imported or travelled long distances, when they can be found locally.

I explain the different European labelling systems including the reliable French 'AB' symbol, and how to avoid meaningless descriptions such as 'farm fresh' or 'natural' which have no real validity.

French Property News is available on subscription and in newsagents. See www.french-property-news.com

The British are back! Daily Telegraph



According to the Daily Telegraph, British buyers, who have become increasingly wary of investing in "emerging hotspots" (nonetheless heavily promoted by the British media at the time!) are now returning to the tried and tested French property market, with particular interest in Gascony, the Dordogne, the Loire Valley and the Mediterranean. This comes just months after an 80% drop in purchases by British buyers overseas during 2009, who own an estimated 430,000 holiday homes outside Britain, according to a report published by Savill's estate agency.

"The big news is the Brits are back" according to Knight Frank's French department. "It's a good time to buy. French property prices have fallen (not unversally true!) and there is a nice supply of good-quality properties at the right price on the market". More than 70% of the firm's enquiries so far this year have been from Britons with greatest interest in the south, the south west and the Alps.

As well as France's traditional attractions, potenial buyers are now citing proximity, including the option to drive or take the train, in addition to using low-coast flights and regional airports (80% of holiday homes are sited within easy driving distance of a regional airport). The warm southern weather, after a particularly severe British winter, is another plus, with the Mediterranean attracting the highest number of short break visitors to France, Spain and Italy. The survey estimates that 25% of holiday homes are located in France, 25% in Spain and a further 25% elsewhere in Europe.

Although some overseas owners felt their properties had lost some of their value, this was compensated for by the increase in rentals, some owners letting out their properties for the first time. Three and four bedroom houses proved particularly popular with seasonal renters during 2009. The report also notes that period properties are increasing in popularity, provided they are ready to move into and do not require renovations; in contrast to recent trends for purpose-built resorts. Three-quarters of holiday homes cost less than £300,000 and just under half less than £200,000 - easily achievable in my region of Languedoc-Roussillon.

Here we have escaped the worst of the winter weather, with the Pyrénées-Orientales Mediterranean region particularly well protected by its sourrounding hills - the Albères to the north, Mont Canigou to the west and the Pyrenees to the south, in line with the traditional boast of 300 days of sunshine a year. And remember, we are less than two hours drive across the Spanish border to the Costa Brava!

Property prices have generally remained stable in contrast to the 10 to 30 per cent drop in some areas, particularly inland Spain, where some owners who purchased on a 75% mortgage are now in negative equity, according to the survey.

My local estate agency colleagues report an increase in enquiries from both British and French clients in the first two months of 2010 and I am currently advising a number of clients who are in the process of buying property in the region.

Sources: Zoe Dare Hall, Daily Telegraph, Friday 19 February 2010; Graham Norwood, Daily Telegraph, Friday 26 February 2010; Rebecca Gill, Savill's estate agency, UK, author of the Report.

Saturday, February 13, 2010

D I Y home valuations



As part of Britain's growing anti-estate agent movement (according to the Daily Telegraph), property owners are now turning to the internet and logging onto sites such as the Land Registery or zoopla.co.uk to get an instant online valuation of their home.

Criticis of this approach argue that such sites are only as good as the data they contain, based mainly on price comparisons of 'similar' properties recently sold, and therefore not much use in the case of an isolated rural property in an area where nothing has sold for the last 20 years. Here where I live on France's Mediterranean coast, I know the average value of a two-bed beachfront apartment, but would have more difficulty giving a spot appraisal of a detached house with garden, located 5 miles inland.

The owners of Zoopla admit that their estimates rely mainly on data supplied by the user along with a 'confidence index' and advise getting a second opinion. And one English estate agent is quoted as saying 'you may as well rely on a clairvoyant'.

When the author of the article, Anna Tyzack, called in half a dozen estate agents to value her 'tiny London flat', estimates varied by as much as £150,000 and when the flat was sold seven months later it reached the mid-point of the various estimates but higher than the figure suggested online.

All the agents however were familiar with the sale prices achieved for other flats in the same street, showing once again that - as with property searching - there is no substitute for local knowledge from the person on the spot.

French estate agents will at best offer an 'estimation' which is often less than the price a vendor hopes to achieve, and may choose not to take a property onto their books knowing that it is impossible to sell at the asking price demanded.

French property prices on the whole have not dipped dramatically even in recent months, and where there is a sudden large reduction it is invariably the result of a hard-pressed vendor coming to his senses and finally accepting the agent's estimate. 'Properties simply do not sell if they are incorrectly priced' one local French agent confirms, 'but vendors often have their own ideas and we can do little to change that until they find their property stuck in the market place'.

Source: Daily Telegraph, 12 February 2010