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Buying a House or Property in France

French real estate is a complex area, so before you get in contact with local realtors or estate agents who have property for sale in Lyon or the Rhone Valley, you may find it helpful to get to grips with what's involved in French property purchases.

In this section:

Property Purchase Professionals
Financing a Property Purchase
Initial Costs in Purchasing Property
Finding a Property in France
The House Buying Process in France
Property Taxes and Charges

The process of buying any type of property or land in France is strictly regulated. The services of certain professionals is required for the process.

This section aims to give an overview what is involved in buying a property, and give you a step-by-step walk through the process, but it cannot deal with every circumstance. Professional advice should be sought with regard to personal situations.

Property Purchase Professionals

The Agent Immobilier (estate agent/realtor)

The Agent Immobilier is professionally qualified, and therefore has the right to a professional card (Carte Professionnelle), issued by the Préfecture. This card is the Agent Immobilier's licence to carry out property transactions (carte professionnelle de transaction sur immeubles et fonds de commerce). The Agent Immobilier also carries professional insurance, so that clients are protected.

Estate agents are usually local to an area with properties for sale within that area. The agent earns commission from the sale of the property and is obliged to do as best they can for both the seller and the buyer. The agent will try to obtain the best possible price for the property, but may often know what price the vendor will accept.

The agent should be able to give an estimation of all fees and the property charges the buyer will be responsible for when they become the owner.

Some agents contract independent sales personnel, Agent Commercials, to enable them to cover a wider area. Note these Agent Commercials are not Agent Immobiliers and therefore cannot perform the legal functions of an Agent Immobilier. Both Agent Immobiliers and Agent Commercials must carry an attestation professional referencing the Carte Professionelle number.

Property searchers/House hunters

Property searchers, as the title implies, search for a property which is within a price bracket and matches requirements of a buyer. Many offer a personal service, taking buyers to view the properties they have short-listed. Some charge a fee, while others take a percentage commission from the immobiler instead. Property searchers may perform no legal activities other than sourcing properties for sale.

The Notaire

The notaire is a public official, highly qualified in the French legal system, and is able to advise on property law, family and succession law, and corporate laws. The notaire has a title of Maitre.

The state confers powers on the notaire to legalise property purchase transactions, and provide security to the contracts they supervise. Notaries are liable for their professional acts.

The notaire is responsible for preparing the various documents, confirming the seller's title to the property, checking that there are no existing mortgages on the property, the final conveyance and the registration. The notaire has indemnity assurance, which provides a financial guarantee to the client.

The purchaser is free to choose their own notaire, but may use the same notaire as the vendor. The cost is the same regardless of the option chosen: if there are two notaires the fee is split between them.

For a list of notaires throughout France and a search facility for those who speak English see notaires.fr

Mortgage broker

A mortgage broker works with various French banks and mortgage providers and acts as the buyers intermediary with the lender. Mortgage brokers and advisers carry their own professional indemnity insurance and must be registered with each bank and mortgage provider they represent.

Mortgage brokers receive their commission direct from the bank or lender they introduce business to. Most of those who are registered in France do not charge fees for their services, but a buyer should check this.

Architects and surveyors

A property survey may be requested by the buyer - a survey it is not standard procedure in France.

An architect or surveyor should be used to examine an older property or one to be renovated. They have experience in obtaining required permissions and certificates, and can give an estimation of the cost.

Financing a Property Purchase

The three financing options are:

Buy for cash: a straight forward option, but once capital has been invested in a French property it can be difficult to release equity (although not impossible).
Re-mortgage a main house to raise the cash. A straight forward option and one that does not require dealing with French banks. Bear in mind the mortgage warning "Your home may be repossessed if you do not keep up repayments on your mortgage". This option may therefore be putting a main home at risk for the sake of a second property.
Finance the property with a mortgage from a French bank or mortgage provider. There are very strict rules imposed by the Banque de France on all French banks and mortgage providers. These rules govern the amount a person can spend each month on a mortgage.

Mortgage in France

All mortgages in France must be covered by life assurance; many French lenders insist their insurance policies are used and that all the terms of the mortgage are covered.

Note: certain types of properties are not acceptable for
mortgage finance.

Should a mortgage application be declined because of financial information, medical underwriting or the unsuitability of the property, the potential lender issues a letter which can be used to ensure a deposit is refunded (if this has been agreed in a let-out clause of the pre-sale contract, the Compromis de vente).

In this instance the letter must be given to the notaire or Agent Immobilier before the date stated in the Compromis de vente. Otherwise the buyer may be obliged to continue with the sale.

On receiving a mortgage offer, there is a 10-day cooling off period. This is a legal requirement and allows a buyer sufficient time to consider the terms of the mortgage before returning the documents to the lender by post.

Initial Costs in Purchasing Property

Whether you are buying for cash or with a mortgage there are some costs that must be funded by the buyer.

The deposit

In France, the payment of a deposit is not obligatory but in general it is asked for by the seller as a show of good faith. It is usually a maximum of 10 percent of the purchase price for older properties. The deposit does not have to be paid on the day the Compromis de vente is signed; it can be paid after the seven day retraction period has passed. The deposit can be sent either directly to the notaire or to the estate agency if it has the correct status to accept money on behalf of a client. It should not be sent to the vendor. The deposit is held by the notaire or Agent Immobilier until completion.

Notaire fees

For an existing property, expect to pay eight percent of the purchase price as the cost for the notaire/legal fees. Notaire fees can only be included in the mortgage of French tax payers. Those paying tax in another country have to fund the notaire fees themselves.

Agency fees

An amount between five and ten percent is charged and this amount is normally at the expense of the buyer; in some regions of France may be paid by the seller or split between buyer and seller. Either way, the price of the property to the buyer remains the same.

When raising a mortgage, these fees can be included in the mortgage.

Finding a Property in France

Much information is readily available from magazines and Internet websites advertising properties for sale in France; it is very easy to get an idea of what type of property is available and at what cost before beginning a search.

There are many ways to search for properties: estate agents, property magazines and house hunters. Popular or urban areas usually have estate agents who offer an English-speaking service.

The location and type of the property should be carefully considered based on whether it is to be a main residence, second home, holiday home to be let out on occasion or a property to be let as an investment for the future.

Make a list of the important elements: purchase price, overall size and number of rooms, requirement for a garden, terrace garage or cellar, or any other elements.

Property condition

The condition of a property is also an important consideration when buying with a mortgage. Certain types of property such as wood cabins, stone cabanons, derelict barns and properties with agricultural land are not acceptable. A property should be classed as "habitable" meaning structurally sound and having the basic utilities of electricity, mains water and sewerage system, all conforming to the current regulations.

Some lenders do not accept properties that have been registered for commercial use such as gîtes and chambres d'hôtes.

Renovations, alterations and additions

Buying to renovate or build a new property demands careful pre-planning. Certain French building regulations are very different from other countries and permission has to be granted from the local mairie (Town Hall). Detailed applications must be completed for the Certificat d'urbanisme (certificate of town planning/urban development) and other documents, which state what developments are allowable on the property and its land.

This might require the advice of an expert - an architect or surveyor. When relying on mortgage finance for renovation works, the works must be completed by tradesmen who are registered in France. Registered tradesmen have the correct insurances covering their work - it is the essential guarantee for the bank or lender.

The House Buying Process in France

Once a suitable property is found and an offer has been accepted by the vendor, the buyer signs a sales contract, the Compromis de vente.

Compromis de Vente

The Compromis de vente may be drafted by a notaire or Agent Immobilier (but not an agent commercial). It is written in French, but may have an English translation. If a mortgage is to be applied for, whoever is named as the purchaser(s) must also be named on the mortgage application. The compromis is a legal contract; read it carefully, make sure it's understood, and ensure all the details and conditions are correct, such as:

Details and identities of the vendor and buyer
A full description of the property
The surface area of the property and land
The purchase price, the breakdown of fees and who is to pay each fee
Details of the notaire and sales agent
Details of any fixtures and fittings included in the sale
Results of the legally required reports
Details of financing, the mortgage, the date by which the mortgage offer is expected
Any let out clauses (conditions/clauses suspensives) and the penalties that will be incurred by the buyer or seller if completion doesn't take place

The let out clauses

For the purchaser, the clause suspensives provide a way out of the contract while protecting the deposit. However be aware that the vendor must agree to the clause suspensives.

Examples of let out clauses are:

Subject to the buyer obtaining mortgage finance
Subject to permission for a specific use of the building is granted
Subject to the vendor carrying out necessary repairs

Other clauses can be added, but expert legal advice is needed to ensure the correct wording.

Cooling-off period

Once the sellers and purchasers have signed the Compromis de vente and received an authorised copy, there is a seven day cooling off period in which the buyer may change their mind. This is the right time to get a structural survey or inspection made and expert advice if required.

Note that even though there may be a clause suspensive in the compromis stating that the agreement to buy is subject to mortgage finance, the buyer should be careful to do exactly what is asked of them in the sale agreement. For example, some contracts state that a buyer must start the mortgage application process within a certain time limit and that they have a final date at which they must produce evidence of the bank's acceptance or refusal of the mortgage.

A buyer may be asked to prove that they have made reasonable efforts to obtain mortgage finance in time, or they will lose the deposit.

A few weeks before completion day

When the notaire has completed all the preliminary work, a possible date will be agreed between the parties who are sent a draft of the Acte de vente (projet de l'acte), the final Deed of Sale.

This contains much of the same information as in the original Compromis, but it should be carefully checked. It also states the date when the buyer may move into the property.

The following documents are required:

Buyers birth certificate and passport
Marriage certificate and/or divorce decree (if applicable)

If a buyer is unable to attend the meeting to sign the Acte de vente, they may give a trusted person their Power of Attorney (mandat) which authorises them to act on the buyer's behalf.

Completion day

Funds must be transferred to a special bank account held by the notaire before the signing can take place. It is the buyer's responsibility to instruct the notaire to request the mortgage funds from the lender.

Buildings insurance must be in place for the date of completion. The buyer may need to provide details of the insurance policy to the notaire.

The Acte de vente is signed by the buyer, the vendor and one notaire. If the buyer and vendor have different notaires, only one needs to witness the Acte de vente.

Once the Acte de vente has been signed and witnessed, the notaire pays all the taxes, settles all the accounts of the purchase/sale and registers the deeds and mortgage.

A few months later the buyer receives a certificate informing them that the title has been registered.

The original title deed is kept by the notary, although they may make and issue authorised copies.

Property Taxes and Charges

There are two taxes on all residential property. These are collected by the State for the local authorities. These taxes are assessed at individual rates according to location and can vary substantially. It is advisable to ask the estate agent for these details when looking at properties to buy.

Taxe foncière (land tax)

The owner of a property on the first day of January is liable for paying this tax which is due for payment by 15 October. Penalties or fines are added for late payment. A monthly payment scheme can be arranged at the outset.

On the sale of a property, the new owner is obliged to pay the vendor the balance of taxe foncière on a pro-rata basis.

Taxe d'habitation (local taxes)

This tax is only due on a habitable building. The occupant of the property on the first day of January is liable for paying this tax. If a property is furnished and supplied with water and electricity this tax must be paid (even if it is only used occasionally). The amount of this tax varies depending on location and according to the size of the property.

A tenant resident in a property on the first day of January in a year is liable for paying this tax.

Charges de copropriété (maintenance charges)

For those owning property such as an apartment within a complex there are maintenance and service charges to pay. These charges should be considered before signing the Compromis. The charges vary according to the size and quality of the complex, whether there are lifts, a swimming pool, gardens, tennis courts and other facilities.

French Succession Laws - the Law of Inheritance

French succession law applies to properties in France, even if the owners are not French nationals. Under French succession law a person may not leave their assets to anyone they please. Protected heirs come first, while the spouse or partner is treated very differently.

Advice should be taken from the notaire. This should be put into effect before signing the Acte de vente. It is difficult to make changes once the Acte de vente has
been registered; it can cause serious consequences.

SCI - Société Civile Immobilière

An SCI is a property company. Although it can be used to minimise succession tax by gifting shares to children during a lifetime, they are usually used by a group of unrelated people to purchase a property as co-owners. An SCI is meant to be non-trading, therefore it is not the right solution for those planning to run gîtes or chambres d'hôtes. From a UK tax perspective, the director of an SCI with free use of a property in France for holidays can become liable for income tax on the assessed benefits in kind. Taking professional advice is essential.

Capital gains tax

Capital gains tax only applies in the case of the sale of a secondary residence. There is no capital gains tax incurred in the sale of a main home to buy another. Calculating any tax due on the re-sale of a property is complicated and professional advice should be sought. The tax is applied to the difference between the sale price and that of the original purchase price plus the transaction costs. In other words - the gain.

Wealth tax

Individuals resident in France on 1 January of any year, and non-residents who have assets in France, are taxed on the basis of their assets as at 1 January each year. Wealth tax only affects those with assets over a certain rate and is calculated in bands above that figure.