Vices cachés

The concenpt of 'vices cachés' (hidden defects) can be troubling for both buyers and sellers of French property. Vendors may be worried they will be later pursued for defects in a property they have sold which unwittingly contains 'vices cachés', while dissatisfied buyers may try and seize on this possibility as an excuse for litigation. However, French law and jurisprudence are fairly clear on the matter.

- In order for a buyer to establish a case of 'vice caché' he would need to prove that the vendor acted in bad faith and deliferately concealed the presence of a fault or defect of which he was aware. The vendor cannot be held responsible for defects in a property of which he was not aware.

- Nor can the vendor be held responsible for defects which are obvious or visible - they become 'vices apparents' rather than 'cachés'. The vendor cannot be held responsible also for defects accepted and agreed by the buyer at the time of purchase.

- French courts have ruled that a 'serious buyer' should take all reasonable steps to assure himself that the property he wishes to buy is free of defects, for example by employing an expert or surveyor to examine and report on the state of the property.

- Any legal action started by a dissatisfied buyer must be within a 'bref delai' - failure to act promptly may persuade the courts that the buyer accepted a 'vice caché' and this his claim is frivolous.

- French law also talks of 'vice grave' - serious defects which prevent the normal use and enjoyment of a property. As with all claims for damages, a litigant must establish a (financial) loss resulting from the fault about which he is complaining.

- It should be borne in mind that purchase agreements stipulate that the buyer accepts the property 'in the state in which he finds it' and the onus is upon him to satisfy himself about the state of the property before commiting to purchase.

- In the case of new-build properties, they are covered by guarantees and insurances against defects, which will be witten into the purchase contract. 

Tax on sale of second homes - update

Since I posted the information below, the French government of François Hollande has announced that it is studying the question and - 'in the interests of getting the property market moving again' - may introduce proposals some time in 2013.

There is some talk of shortening the 30 year 'no CGT' ownership period to 22 years, and possibly lowering the capital gains tax threshold. However the government's vague talk of reforms has had the opposite effect - instead of stimulating the market, more second home owners are sitting back and waiting to see if they will pay less CGT on sale some time after 2013.

Finally, a reader has pointed out that in my earlier post I omitted to mention that non-EU owners of second homes pay even higher rates of CGT than French and EU nationals, totalling around 50%.

French Property News, October 2012

In this month's issue I have looked at the option of investing in furnished buy-to-let properties in France. This can be an attractive option, using secure annual rental agreements, compared with letting unfurnished long-term or relying on seasonal holiday rentals (a market that is dying in some areas due to the growing popularity of modern campsites featuring chalets and all facilities).

Short-stay furnished studios and small apartments located in city centres appeal largely to single people who may be mature students or on temporary assignment for their employer. They are prepared to pay higher rentals for attractively furnished properties, and there is less risk for the owner than may be the case with long-term unfurnished rentals, where tenants have rights of security of tenure backed by French law.

I have drawn a number of illustrated examples of before and after property conversions in Paris and Lyon, undertaken by Elise Franck, who has witten a book on the subject and has an interesting website (www.elise-franck.com) which includes actual costings - purchase price, fees, conversion costs, rent charged and rate of return, as a useful guide for anyone thinking of investing in this type of French property.

TGV Perpignan - Barcelona at last !

It seems that the fast TGV international train link between Perpignan and Barcelona will be operational from the third quarter of 2013 - that's about one year's time.

This is the first time I have seen a firm date given, after numerous delays, the most recent involving problems of tunnelling under parts of Barcelona close to the famous 'Sagrada Familia' still unfinished cathedral.

Journey times are estimated at 45 - 50 minutes, which will bring Barclona within easy commuting distance of Perpignan, for work, shopping or entertainmen and for using Barcelona's inyternational airport.. Currently it can take two to two and a half hours to drive. Barcelona is also notoriously difficult to get around by car and to park, though the public transport system - including the Metro - is excellent. 

Additional taxes on sale of French second homes

Since the middle of August, the French government is now applying an additional tax on the sale of second homes in France by non-resident owners. The current tax of 19% of any capital gain enjoyed, after deductions, is now increased to just under 35% with the addition of the 'social charge' currently paid by resident owners of second homes. The exemption previously applied to non-resident owners has finally been recognised as an anomaly, and the new law brings foreign owners into line with resident owners of second homes in France.

The new has come as an unwelcome shock to owners who were in course of selling their property before the law changed and now find themselves paying a further 15% on any capital gain. This follows on from the recently introduced abolition of capital gains exemption (after 15 years of ownership) on French second homes and the introduction of a modified system of reductions extending over 30 years ownership of the property before CGT is finally reduced to zero (after 30 years when it was previously 15).

An analysis of sales involving second homes reveals that the majority are in fact sold by their owners within 10 years of intiail purchase. Among the reasons cited are changing holiday habits, children growing-up and wanting to take holidays away from their parents, travel to cheaper foreign destinations, and the declining holiday rental market.

In many  holiday destinations, as much as 70% of the local housing stock can comprise second homes - typically apartments and villas designed for summer occupation, which can be difficult to sell in times of crisis. Many date from the early tourist boom of the 1960s and are now in need of modernisation, to improve sound and heat insulation, and plumbing and electrical installations which need to be brought up to current norms. Summer resorts can be deserted in winter and may lack essential services needed for year round living.

Fast house or slow home?

As part of my own personal property search, I have recently discovered the 'Slow Home Movement', a Canadian based organisation set up by two pioneering architects, and inspired by the idea of the 'slow food' movement - the antithesis of fast food! The two founders argue that in seleting your home you should also be aware of what they call 'fast houses - houses that are designed to be sold rathered than lived in'.

They set up the Slow Home Movement after organising a huge team of volunteers who between them looked at nearly five thousand new housing developments in nine north American cities, using a 12 point questionnaire and a points scoring system (out of a total 20), to determine how each property surveyed scored in the slow home test. Their questionnaire can be applied to your own searches and can be downloaded from the Slow Home website.

The Slow Home Test looks are twelve different aspects of the property, the first four relating to its environment (location, size, orientation, environmental friendliness); while the remainder concern the inside of the property, looked at room by room,  and finally how all the elements fit together. The results of their researches showed that only 11% of the homes surveyed achieved scores of between 17 and 20 points (the maximum) and the majority (47%) achieved poor ratings of just 7 to 12 points (out of twenty).

The researchers highlight four main areas of criticism: first, what they call 'Colliding Geometry' - dramatic features such as a huge stairway or awkwardly located fireplace, that clash with the rest of the property, and which 'end up fragmenting spaces in a floor plan, causing serious disruption to the way the rest of the house works'.

Under 'Redundant  Spaces' they cite parts of the house that are awkwardly designed or located, and invariably given 'False Labels' - names such as study, linrary, home office etc - design to flatter the ego and convince a buyer that they are adding value.

Their fourth main criticism was what they called 'Super-sizing' - the creation of rooms that were cheap to build but simply too large for their purpose. Frequent among these were master bedrooms and en-suite bathrooms.

Their main criticisms of the propertis' external environment included numerous cases of poor orientation in relation to other properties, and most commonly to sunlight - typically south facing bedrooms that heated up during the day and have to be cooled at night, while kitchens and living areas faced north and lacked sunlight during the day.

The Slow Home Movement is also critical of the excessive size of many American homes - 213m² (2300 square feet) compared to 76m² (818 square feet) in Britain and 113m² (1216 square feet) in France. The founders, who are architects, report that many of their clients are people who have bought large properties but after two or three years complain they have run out of space. According to the American National Association of Realtors, 20% of buyers move out of their homes within three years of purchase, victims the architects argue, of the fast house syndrome.

Interestingly, many purchasers are now adopting a different approach to property buying - investing, say, 70% in the purchase price, and spending the remaining 30% on converting the property to their particular requirements.

There is a wealth of information to be found in the Slow Home Founders' book and on their website which can be applied to your property search in France.

Sources: Website www.slowhomestudio.com for a copy of the Slow Home questionnaire and report.
'What's wrong with this house' by John Brown and Matthew North showing examples of houses and apartments and how they can be made more user friendly. Available from www.amazon.com

French Property News, August 2012

In this month's issue I have looked buying a new-build property in France. The advantages include having access to the latest building norms - such as the new BBC classification (highest level of energy efficiency), and new rules (NF C 15-100) for electrical installations in new-build properties and total renovations. I point out that French housing estates ('lotissements') are very different from their British counterparts, as most are made up of individually designed homes, each one different from its neighbour.

Many new owners also choose to self-build all or part of their new home, and in Languedoc-Roussillon where I live, builders often the complete the main works ('les gros oeuvres') leaving the owner to complete the internal finishing - partition walls, insulation, plumbing and electrics. Innovative architects are willing to help with all of this process, from initial design through to completion.

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