What the vendor leaves behind....

A recurring problem between vendors and purchasers is reaching an agreement on what is or is not included in the sale of a property - in terms of furniture, fixtures and fittings that are not strictly part of the building fabric.

Over the years, vendors have been accustomed to removing virtually anything that could be unscrwed - from light fittings to door furniture - to the surprise and chagrin of the buyer when he took over the property. As a result, some  notaires are now insisting that an explicit list of contents is drawn up and agreed by all parties, at the time of signing the compromis de vente (pre-sale contract). Sometimes in the case of a house that is sold empty and uninhabited, the notaire will include an 'indicative' list of what must not be removed by the vendors, without explicit consent of the buyer, between the signature of the compromis de vente and the acte finale.

It is advisable for buyers to re-visit the property shortly before completion in order to verify that the property has remained in the 'state it was at the time of signing the compromis de vente' as in signing the acte finale the buyer agres to accept the property 'as is' and has no further recourse against the vendor.

These general rules also cover issues like make alterations or changing the decor between signature of the initial and final sales contracts.

Trying to avoid paying agency commission

The rules governing the payment of commission to an agency responsible for selling your French property are strict and offer considerable legal protection to the agent. Confusion sometimes arises where the vendor reserves the right to sell privately (in this case signing a 'mandat simple' with the agency) and is approached by a potential buyer who has been previously introduced by the agent - with the objective of concluding a private deal and avoiding paying the agency commission.

Sales mandates - the document agreed between vendor and agency authorising the latter to market and sell the property - can have an active life of two years. This means that if a potential purchaser, originally introduced by the agency, approaches the vendor and attempts to conclude a private deal, the agency can claim its commission on the sale, according to the terms of the mandate, if this happens within two years of signing the original sales mandate.

In order to protect themselves and avoid any confusion, French estate agents ask potential buyers to sign a form known as a 'bon de visite' to prove that it was they who first introduced to them to the property offered for sale. 

If a potential buyer finds him/herself visiting the property a second time, through a second agency,  they should immediately inform both agencies, to avoid confusion. For their part, vendors should be aware of the legal consequences of trying to avoid paying an agency's commission. French courts invariably enforce the agent's rights in such cases.

Curious side effects of new CGT rules....

Following the French government's recent announcements (see below) on the changes in CGT applied to second homes, the estate agency group Century21 has stated that it received 500 cancellations of compromis de vente (pre-sale contract) and 1,500 cancellations of sales mandates (instructions to sell) from their clients within hours of the original announcement. The figures represent some 5% of their usual 75,000 annual property transactions.

Overall, sales of second homes represent just 7% of the French property market, although in most coastal/tourist areas - where the percentage of second homes can be as high as 80% of the local housing stock - the figure can be much higher. Nationally sales of second homes account for around 56,000 transactions annually our of a total 700,000 to 800,000 changes of property ownership.

CGT rules - final amendments

Further to my earlier post below, the French government has announced a final (hopefully) revised version of the proposed changes to the rules on Capital Gaisn Tax (CGT) applied on the sale of a second home in France, that is not classed as 'your main and principal residence' for tax purposes. The new proposals are as follows:

- 2% abatement of CGT for each year if the property is sold between 5 and 15 years since first purchased
- 3% abatement  each year during years 15 to 25
- 10% abatement each year during years 25 to 30

This replaces the former 10% per year applicable after five years of ownership, in years 6 to 15 inclusive, making the property free of CGT after 15 years of ownership. This is now effctively after 30 years of ownership.

The rate of tax (and a special social charge) is 32.5% of the capital gain - the difference between what you paid for the property and the price at which you sell it.

The new rules will apply for all notarised transactions after 01 February 2012 (and not earlier as announced).

If you are tax resident in France (for example, file an annual French tax return) and your property is classed as your main or principal residence, no tax is paid on the 'profit' (capital gain) when you come to sell.

Source: LeParisien, 07 September 2011.

Vendors - give your agent a chance!

A recent post on one of the French property forums prompted this note. A British vendor had set very strict rules relating to visits, on the grounds that he owned two large dogs who were albeit friendly somewhat intrustive, and likely to distract potential buyers. He insisted that viewings were by appointment at a fixed time - when the owners would then leave the property with the dogs - and after the visit, the agent was to telephone them with an 'all clear' at which point the owners would return. The system had broken down within days, the vendor complained. In my reply I tried to point out that while his intentions were undoubtedly laudable, arranging property viewings is not always straightforward for the following reasons:

- Almost all buyers leave too little time for viewings, sometimes unaware of the distances involved, and want to rush off to another appointment (with a rival agent!) instead of completing a series of pre-arranged visits.

- Buyers can turn up late without warning, arrive unannounced and without an appointment, and still expect to be taken immediately on a series of visits.

- Many vendors prefer visits by appointment, with adequate notice, and may refuse to receive visits during meal times, evenings, weekends etc.

- Visits may take longer than anticipated, resulting in a series of delays and sometimes the need to re-schedule appointments en route. 

- Vendors sometimes "forget" they have arranged an appointment and are not at home when the agent arrives with his potential client.

- Keys are not always where they should be! Some vendors insist on giving out only set of keys to be shared among a number of different offices or even different agencies. If a negotiator has arranged a series of visits he may be holding several sets of keys which will not be available until he returns to the office - perhaps some hours later.

These are just a few of the hazards drawn from my time as a negotiator inside a busy agency, with four offices, and eight or ten negotiators. The rule was that keys would be held at the office nearest to the property and returned as soon as possible after a viewing. Human nature being what it is, this did not always happen.

Vendors should try to understand the practical difficulties involved in arranging property viewings and be as flexible as possible in what is still a very competitive property market;