Monday, April 22, 2013

Paying a deposit when buying French property

Buyers and sellers of French property are often confused about the implications of paying or receiving an initial deposit when buying or selling a French property. Note the following guidelines:

- There are no hard and fast rules or applicable laws, either as to a precentage or the amount requested/paid over - this can range from Nil to 10% of the property selling price.
- Some licensed French estate agents (not all) are authorised and insured to receive deposits from buyers, and this information should be posted prominently at their place of business, including the maximum amount they are legally permitted to receive and details of their appropirate insurance cover. Any sums received are paid into a special sequestered clients account.

- French Notaires  are authorised to receive deposits from buyers and these are paid into a special state-controlled bank account, which does not earn interest.

- Deposits can be paid at the time of signing an initial agreement (offer to purchase) but more often on signature of the 'compromis de vente' (initial contract) drawn up by the Notaire or an estate agent. Buyers however may prefer to wait until the end of the seven-day 'cooling-off' period, after signature of the 'compromis de vente', before handing over a deposit.

- In the event that the sale falls through - for example, the buyer simply changes his mind after signature of the 'compromis de vente' and after expiry of the seven-days 'cooling off period' - the deposit may be witheld as compensation to the vendor. This however is not automatic and normally requires the consent of the buyer.

- Where a buyer is purchasing a property and seeking a mortgage or loan, the 'cooling off' period is extended by a further 7 - 8 weeks to allow him to secure and agree a mortgage or bank loan to finance the purchase. During this period the buyer must prove 'due diligence' in actively seeking such a loan - he cannot simply sit back and do nothing and then withdraw from the sale. In such a case he could be at risk of losing any deposit paid, subject to the conditions noted abouve.

- The above are general guidelines only and not a substitute for appropriate legal counsel.

Sunday, April 21, 2013

Having confidence in your French 'notaire'

Recently on one of the popular French property discussion forums, a contributor stated that 'it would not surprise me if some French notaires told a foreign seller that capital gains tax was due on the sale and pocketed the money htemselves' - a statement for which no evidence was produced!

The discussion arose following a question about capital gains tax, which is applied to the sale of second homes in France which are not the owner's principal or main home. Whether a property is the owner's principal or second hime is relatively easy to established, and proof of the former is normally provided by annual tax returns, utility bills etc and other signs of continuous residence. Part of the Notaire's role is to ensure that any taxes due to the state are collected and paid over.

Clearly the Notaire has a great deal of power and responsibility in this situation, and as a result his/her role is highly circumscribed by legilsation and subjhect to unannounced annual checks by independent, external authorities. Monies collected are lodged in a special non-interesting bearing account in a French state-owned bank, and subject to continual scrutiny. Notaires are grouped under local Chambres de Notaires, who have considerable powers of control over their members. Many firms have been established for decades, and one of the ones I use is now run by the grand-children of its original founder and has been in business for over 50 years.

It might be useful to mention in passing that French estate agents are also highly controlled, licensed by the local Prefecture and also subject to unannounced checks by the police. Most belong to one of the professinal bodies FNAIM or SNPI who also exercise considerable control over their members.

Friday, April 5, 2013

French Property News, April 2013

In this issue I have looked again at some of the points to watch when buying into a co-ownership property, such as a block of apartments.

Issues include owners' rights and obligations under the typical co-ownership rules, the quality and cost of managing the property by the owners' 'syndic', and the average costs involved when exceptional work is required and voted by the owners - outside painting, lift renewal, indoor decoration etc - exceptional costs that may be inherited by a new owner.

I also explain the workings of the owners annual meeting and the voting rights of each individual owner, each of whom owns a number of shares in the building according to the size of their apartment (the latter being owned outright, with the right to sell at any time).

French Propeerty News is sold on subscription and in newsagents (£3.99); for further information.

French property prices in 2013

The regional chambers of Notaires de France have recently published statistics of property transactions in 2012 and their forecasts for trends in 2013.

- Overall sales of older properties were down by 12% in previouis years, with prices reflecting an average 6% drop (well within the usual margin for negotiation between vendor and purchaser).
- Within Pyrénées-Orientales (French Mediterranean coast) average price reductions were 6% for apartments and 8.6% for houses. This contrasts with the 'unrealistic' rise in prices witnessed since 1990 of 87.6% for apartments and 69% for houses!
- Notable variations within the region include properties in and around Perpignan and on the Mediterranean coast, where prices have generally stayed firm.
- Smaller properties such as studios can cost up to 5000 euros per square metre, and two-room properties average around 3000 euros.
- Sales of some 'second homes' - particularly small apartments located in older buildings - have slowed down but prices have not reduced significantly.
- The Report blames the uncertainties about the Hollande governments taxation policies - still undecided - on the purchase and sale of holiday homes, as both vendors and potential purchasers adopt a wait-and-see attitude.

Source: Chambre des Notaires des Pyrénées-Orientales

Note that in some sectors, such as Perpignan centre, there is a shortage of larger apartment properties suitable for 're-composed' families (after divorce or separation), where each partner may have one or more children from a previous marriage, and need three or four bedrooms, as well as larger living areas. P-DdeR.

French Property News, March 2013

In this edition I have taken a look at the advantages of converting older buildings into attractive houses and apartments, based on a number of illustrated cases studies from another book in the ArchiPasCher series, by author Olivier Darmon and titled 'Bâtiments Modestes réinvenrés'.

Darmon describes a number of town and country properties - from dilapidated cottages, old workshops and former industrial buildings - which have been converted and restored by their owners, sometimes at minimal cost. One of my favourites is a former garage and workshop situated in a gated mews in Bordeaux, which architects and the owner redesigned to create an attractive 40 square metre apartment.

Another triumph of design is a former garden summer house located in the shared grounds of a co-owned complex in central Paris. Although planning permission was given by the local authority to add two more storeys, this was overruled by the syndicate of co-owners (who have the last word). Saddened but unbeaten, the young owners decided to make the best of the situation and succeeded in installing a mezzanine (made from builders scaffolding) within the confines of the existing 40 square metres, which they were not allowed to extent. The result is a low-cost, attractive home in central Paris.

Each case study includes photographs, plans and detailed breakdown of costs. 

'Bâtiments modestes réinventrés' by Olivier Darmon, Editions Ouest-France, 15.90 euros.