French Property News, January 2013

In the January issue of French Property News I offer a few tips on how to sell your French property in what is currently a slow market - up to 20% fewer sales than in 2011. My main advice is not to be panicked into reducing the asking price, as all the evidence shows that this does not guarantee a sale. Much depends on the type of property and its location, with the sale and purchase of second homes (which represent 70% of the housing stock in ly locality) particularly difficult. As a discretionary purchase, buying a second home is generally not what people do in times of crisis and the general uncertainty about the new fiscal and social policies of the French socialist government.

Good marketing tactics include choosing the right type of agent - if your property is likely to appeal to British buyers, then use an agency that is exoperienced in this market. Sales details should be written in English, with good photographs of the property and its location. You can also market the property yourself using the many websites addressed to international buyers.

The good news is that in line with the rest of Europe, France has an aging population, with large numbers (30%) coming up to retirement in the next few years - those born in the 1950s onwards when France was at its most prosperous and who enjoyed 30 years of job security during the post-war reconstruction boom.. Many are already home owners and have the necessary ressources to move south in their retirement. They could be just what is needed to revive a flagging property market.

Expulsions, re-possessions, forced takeovers....

While most of Europe is in crisis, the property market is suffering from a number of problems, some of them preculiar to France.

Currently the new socialist government, and in particular its extreme left wing housing minister Cécile Duflot, are making the usual noises about France's 'housing crisis' - in a country where 10% (3 million properties) of the housing stock comprises second homes, and at any one time up to two million properties are vacant (between tenants, awaiting sale, awaiting planning permissions etc). In addition, there an inumerable redundant properties on the market - including some 600 former convents and other buildings owned by the Catholic church, some on offer for a token 1 euro - belonging to the government (former law courts, libraries, regional offices), public organisations (former railwway stations, warehouses owned by EDF), the army (former barracks), banks and insurance companies etc.

Many of these buildings have reached the end of their useful life and require considerabl investmnt to convert them into acceptable dwellings, conforming to current norms for safety and comfort. Many also are in locations where people do not want to live (typically army barracks or former Church properties, industrial buildings), for lack of work opportunities and public transport and other facilities.

Surprising therefore that the housing minister has announced that the government is preparing to take over a number of redundant buildings belonging to 'personnes morales' (institutional as opposed to private owners), reportedly 'within a matter of days' in an effort to house the homeless. Certain key cities are to be targetted and also the affluent Côte d'Azur! Mme Duflot insists that everything will be done legally but given the cost of, say, converting a former office block into housing, questions must arise as to who will pay and how long the process will take.

More sensiblse for the French government to free up the existing traditional housing market, which is currently stagnating, with 20% fewer sales recorded in 2012 compared with 2011. Potential buyers are holding back, due to concerns about their job security and the lack of available credit - interest rates are low but conditions are more stringent, including the need for a substantial deposit. Owners who wish to sell, particularly in the case of second homes, are confused about possible favourable or unfavourable tax changes hinted at by the government, while prices remain generally stable as potential vendors are reluctant to reduce their asking price, even if a buyer can be found.

Paris - short-term rentals under threat

Owners of furnished apartments that are let out short-term to visitors and tourists are once again facing threats of prosecution by the socialist Mairie de Paris.

A recent article in the LeMonde tells the story of one such owner who, as a frequent user of furnished rental apartments on his visits to the capital, decided to invest an eye-watering 350 000 euros in a two-room apartment in the fashionable Marais district, paid for by a mortgate of 2 500 euros per month over 20 years.

Between the owner's visits the apartment was let furnished and rapidly produced an income of around 1 700 euros per week, less agency fees and charges for cleaning and changeover. All was going well until a fellow resident in the block where the apartment was located issued a complaint about noise and continual disruption caused by the comings and goings of short-term tenants, and threatened to report the situation to the Mairie.

The Paris Mairie has the unenviable task of trying to cope with the capital's perennial housing shortage and therefore discourages - and even forbids - such short term rentals, arguing that they deprive the resident population of affordable housing. Hoteliers concerned about their own livelihood have added their voice but are challenged by those anxious to encouarge tourism and offer an attractive form of accomodation that is popular with visitors to Paris - and incidentally many other European cities. Over 100 estate agencies are reported to be engaged in the short term rental business in Central Paris. There have so far been only 15 legal cases brought by the Mairie against owners.

Wherever apartments are let, particularly short term, conflicts can arise between resident owners and those who are virtually absentee landlords. This occurs in holiday areas, where second homes are left empty for 10 months of the year but can account for 70% of the local housing stock. Nationally, 10% (or 3 million) of French properties are classified as second homes, out of a total 30 million properties. Again the rental market is huge and encouraged by communes living off seasonal tourism. An active and vigilant owners syndic (management team) offers the most effective means of resolving any conflicts that may arise.

Potential buyers of property in resort areas should ideally inform themselves of current legilsation on short-term letting, local bye-laws and the policy of the building's managers.

Why properties remain empty?

Despite France's housing crisis, an estimated 200 000 apartments and houses remain unoccupied, sometimes for several years.

A recent article in the French newspaper 'Libération'* gave some clues. Aside from (private) landlords who have had bad experiences from tenants who did not pay the rent or left the property in a dilapidated state, many properties remain empty for long periods awaiting planning decisions. These can involve not only the local commune - such as a decision by the Mairie - but th consent of all the residents if the property is owned as part of a condominium (in French = 'copropriété'). Decisions of the owners can overule those of the local commune even when outline or full planning permission has been given - for example to change or extend an existing property. Many co-owners refuse to give their approval, in order to avoid the inconvenience of several months of building works, often prefering to 'leave things as they are'.

Where unused or surplus buildings are publicly owned or are the property of large corporations, it may take months or years to reach a decision about what to do with them. And even when a change of use is agreed, further time is need to secure the necessary planning permissions, consult with architects and put works out to tender, before any construction can begin.

In terms of revenues from renting, an occupied property is generally worth 10 or 20 per cent less on the market, so owners tend to leave them empty or un-let pending a sale. Buildings let as offices command higher rentals than if they are converted into apartments.

French law is highly protective of tenants, even bad payers, and there is a block on expulsions during the winter months. As a result many landlords prefer to keep their properties empty (in anticipation of a sale) or  for short-term furnished letting where the rules are easier, rentals are higher and the turnover of tenants more frequent.

A French TV investigation** into the housing crisis examined the situation in British cities such as Birmingham which has a policy of searching out empty properties and entering into an agreement with landlords, under which the local council agrees to bring the properties up to standard, find a suitable tenant from their waiting list, and recoup its costs for the repair works, usually over a period of five years, after which future rental income reverts to the building owner. Some 80% of owners agree to these arrangements when approached, enabling many otherwise derelict properties to be renovated and occupied to the benefit of tenants and neighbours formerly blighted by an unoccupied building falling into disrepair. Rentals charged are geneally below market levels and there is no shortage of tenants seeking this type of property.

Finally, a couple of interesting statistics - out of France's total 30 million households, around 3 million are second homes, mainly located in country or coastal regions, and occupied for just a few weeks of the year. And around 56% of French own their main or principal home, and prefer to rent, compared with Britain's 70% owner occupies (and 83% in Spain, 78% in Ireland).

* www.liberation.fr 13 November 2012; ** 'En quete des solutions' Channel D8 14 November 2012.

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Dry rot (la mérule)

In writing recently about 'vices cachés' - possible hidden defects that may only become apparent after you have bought your French home - I thought it might be useful to add some information about dry rot (la mérule) which can affect timber and other materials and is more common in parts of north-western France than in the warm south.

Dry rot attacks timbers and other building materials, frequently in older houses, and tends to propagate in dark, damp areas that may normally be concealed or inaccessible. As a result it is not easy to detect and the first sign may be the collapse of a timber structure such as a stairway or supporting beam.It is therefore of particular concern both to potential buyers, who may be faced with an expensive problem, and for vendors concerned about their responsibility regarding 'vices cachés'. Note also that it is rarely covered by building insurance policies - that is, specifically excluded!

The current technical surveys covering lead, asbestos, termites etc ('les expertises') are compulsory and paid for by the vendor, but exclude examination for dry rot. There is a proposal before the French parliament to add dry rot examination to the list of areas covered, and meanwhile if in any doubt potential buyers and current owner/vendors might be advised to call in a specialist firm. Dry rot spreads extremely rapidly and if left unchecked can be very expensive to eradicate. In worst cases, it may result in the demolition of all or part of a building.

There are various sites in French you can access on the internet, including maps showing which areas of France as most vulnerable.

French Property News, November

In this issue I have returned to the theme of sensible house buying, basing much of my article on material from the Slow Home Movement, and the excellent book by the two founders John Brown and Matthew North. In their book 'What's Wrong with this House?' they analyse a number of properties and rate them with a points scoring system out of twenty, for their efficiency, layout, suitability and so on. I have been able to reproduce plans of two similarly priced and sized apartments, with their comments.

See: www.french-property-news.com

While on the subject of smaller home buying, I would recommend the latest book in the French ArchiPasChère series called 'Bâtiments modestes réinventés' which has illusrated case studies, complete with plans and detailed costings, of fifteen property conversions, costing around 100 000 euros or less, where redundant buildings have been turned into attractive small homes. Full contact details of all the architects concerned are listed, including their websites, which can be consulted for examples of their recent projects.

See: 'Bâtiments Modestes Réinventés' by Olivier Darmon, Editions Ouest-France, price 15.90 euros.

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.