Friday, April 29, 2011

French property transactions to rise in 2011?

According to a quarterly report from FNAIM, the estate agents' body, the number of French property transactions is expected to rise to 750,000 during 2011, compared with 850,000 during the best of the boom years and 570,000 during the worst.

Currently 50% of transactions concern existing property owners selling their property and trading up (or down?), and the remainder a mix of buy-to-let investors, second home buyers and first-timers - the latter given a boost by the revised PTZ (zero per cent loan) addressd to first-time buyers.

Estate agents fear a shortage of saleable properties as owners hold on in expectation of still higher price rises, which some commentators say may be of the order 5% to 6% by September this year.

Recent price rises for apartments have been highest in Paris, Lyon, Marseilles, Toulouse, Strasbourg and Cannes; and more 'modest' in Biarritz, Limoges, Nimes, Orléans and Poitier. Only Annecy, Chateauroux, Perpignan and Reims have registered price reductions.

Thursday, April 28, 2011

French property title deeds

Several clients have recently asked me about the 'title deeds' to their French property, as they have not received anything from the Notaire many weeks or even months after completion of the purchase of their property. This is at best unusual and could be worrying as it is the titre de propriété which sets out who is the owner and under what conditions the property was purchased.

When buying a French property, the Notaire handling the transaction will first prepare a pre-contract known as the compromis de vente which sets out the terms under which the buyer intends to buy the property, with details of how it will be financed (single payment, mortgage etc) and any conditional clauses (clauses suspensives) the parties may have agreed to - such as buying subject to a satisfactory survey or obtaining a mortgage. The buyer also has a period of reflexion before he is finally committed to buying.

If all goes well, the Notaire will proceed to the next stage - preparation of the acte finale which repeats much of the information contained in the compromis de vente but this is the final contract setting out the terms under which the buyer agrees to buy and the vendor agrees to sell. The transaction is completed once all parties have signed this document.

It is at this point that the buyer becomes the owner of the property and the Notaire will give him several originals of a signed attestation proving that he is the new owner. Meanwhile copies of the acte finale and supporting documents are sent to the nearest land registry (bureau des hypothèques) in order to register the sale and details of the new ownership. (The new owner will need the attestation for matters such as taking over the utilities, getting a phone installed etc.)

The process may take several weeks but once the transaction has been duly registered, the Notaire should send a copy of the titre de propriété (title deeds) to the new owner, together with his final account (fees and taxes associated with completing the transaction). If you have not received a copy of the titre de propriété after say, six months, you should contact your Notaire.

Further information about the procedures for buying French property is available from us (sent as an email attachment in Word) on request at no charge.

Friday, April 15, 2011

Relations with your syndic

Most French apartments and housing complexes are looked after by professional managers, known as the syndic, who are appointed for periods or one year or longer by the resident owners by vote at the annual general meeting. The syndic is normally aided by a small residents committee and will be responsible for overall day to management of the complex, in such matters as cleaning, maintenance and repairs, and for major expenditure for outside and internal painting, replacement of the lift etc. which occur periodically.

Each owner enjoys the right to occupy his own apartment and generally can decorate or alter any aspect within its four walls, provided this is not prejudicial to the building - such as removing a load bearing wall. Permission will normally have to be sought to alter an outside terrace or balcony, which forms part of the building's 'common parts' of which the owner has exclusive use. This distinction is important, as an owner cannot for example sell is terrace or balcony independently of the apartment, or decide to sublet it it to someone else.

Differences can occasionally arise where one resident is given permission for certain works and another is not, which may leave the dissatisfied owner in conflict with the syndic. In a recent case I have examined, an English resident has been refused permission to lay tiles on his ground floor terrace in what appears to be an exactly similar style to that of two neighbours living in the same complex. The area is currently a mix of pavement and rough ground, in the condition it was left by the developers, and clearly any improvement will enhance the quality of this space not only for its owners but also his neighbours. It is unclear as yet why permission has been refused and arriving at a solution will require an examination of the two previous cases (where permission was given) and the grounds on which the third resident was refused. Apparently only one neighbour is objecting, when normally such permissions are subject only to a majority decision at the annual general meeting and do not require unanimity. It will be an interesting case to follow.   

Buying agricultural land

Agricultural land - classified as non-constructible - in France is frequently offered for sale, and purchased by buyers in the hope that one day it may be re-zoned for building, or more commonly for use as leisure land (terrain de loisirs). In virtually all cases, the French organisation SAFER - which exists to protect agriculture and agricultural land - will automatically have a droit de pré-emption (right to buy) if they judge that the land is needed for farming.

SAFER's interest will trigger a delay in completion of the purchase of two months and in the absence of a reply within that time, the purchase can go ahead. This right is similar to that of the local commune to purchase land and buildings, if they are considered essential to the public interest - such as demolition for road widening. The existence of this option is written as a condition into every pre-contract (compromis de vente). The notaire handling the transaction will satisfy himself that this option is not exervcised before completing the sale.

If the local commune wishes to exercise their right of pre-emption they must normally agree a fair market price with the vendor, who is turn could decide to withdraw his property from sale.

The use of leisure land is restricted to occasional occupation and subject to strict local rules and guidelines that will be applied by the mairie or the departmental préfecture.

Monday, April 4, 2011

Spanish property woes and the French market

Reading the latest account of Spain's troubled property market can provoke comparisons with the relative security of the French property buying and selling system.

Writing recently in the Guardian newspaper, Rupert Jones has highlighted not only the surplus of properties empty and for sale - an estimated 600,000 new and 200,000 part completed - and the dramatic decline in sale prices. Official figures from the Bank of Spain talk of a 17% reduction since 2007, based on estimated values, but estate agents say that the real drop is prices can be between 20% and 50% in some areas of the country.

In addition to the banks holding thousands of repossessed properties which they are required to try and sell after two years, many Spanish owners are competing with foreign investors in trying to offload their holiday properties. In contrast with France's 10% of second home properties, an RICS study quoted in the article estimates that one fifth of Spanish households own a second property, often as an escape from an over-crowded urban apartment, which may be occupied by family several generations. In addition Spain boasts Europe's highest level of property ownership at 82% with a tiny rental market concentrated in Madrid and Barcelona.

A business consultant is quoted as saying that as a result "there is an entire generation of young Spaniards with a millstone round their becks. They will have to work their whole lives to pay for houses now worth half what they bought them for".

Could it happen in France? Certainly there are reported price reductions in some areas, but rarely more than 5 or 10 per cent, with price increases routinely recorded in inner cities (led inveitably by Paris), according to figures provided by Notaires de France and the estates agents' body FNAIM. France's traditionally cautious bank lending policies - based on the customer's ability to repay rather than the notional value of the property - while often crticised as inhibiting entry to the market, have prevented the rabid speculation witnessed in Spain. The property market has been given a fillip by the French government with schemes such as the zero per cent loan for first time buyers recently introduced.

In contrast also to the scandals of "illegally" contructed Spanish properties, France's system of property land registration, as well as zoning policies that forbid construction in areas of high risk from hazards such as flooding, ensure that property transactions are legal and transparent, and fair to both parties.

Source: Rupert Jones, The Guardian, 02 April 2011.  

Photo: AFP/P Dozo