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French Property Law Aims To Protect - Part 1

Sep 3, 2008
In France the house buying process starts with an initial agreement that sets out the terms and conditions of the sale. Although a provisional contract until the notaire, a state official who acts for both sides, has prepared the title deeds, the preliminary contract is legally binding on both the buyer and seller. It is therefore strongly advised to have the contract drafted by a professional (avocat or notary).

The preliminary contract can take various forms:

* A unilateral undertaking to sell: the vendor alone commits him or herself to selling within a defined timescale and at a given price; the purchaser does not commit him or herself to buying but must pay a deposit which can be lost if if the purchase does not go ahead for a reason other than those which have been agreed with the vendor from the outset (conditions supensives).

* A unilateral undertaking to purchase: the purchaser alone commits himself to buying a property under specific conditions; the vendor is held by no obligation.

* A compromis de vente (bilateral agreement - most widespread): the seller agrees to sell and the buyer to buy except if specified conditions (called conditions supensives) and only if all these conditions are complied with. The property transfer only becomes effective if all the conditions are fulfilled. The condition supensive can be obtaining a loan: if a purchaser cannot gather the funds necessary to the operation, there is no more obligation to purchase and the deposit is returned. Conversely, the deposit can be kept by the vendor if the sale is not carried out and the responsibility falls with the purchaser.

Do not pay any money before signing the contract. And when paying, it is best to pay the notary or the estate agent, but never pay the vendor directly.

Once the notaire has carried out the relevant checks and searches and all the conditions are met, the title deeds (Acte Authentique) are signed at the notaire's office. This can be done by proxy if you cannot attend but your signature on the power of attorney allowing this must be authenticated by the French Consulate or a solicitor or notary public in your country of origin. The purchaser is given a provisional ownership certificate whilst the Title Deed is being registered. The notaire pays the vendor the balance of the price and hands over the keys to the purchaser.

In French law there are only two situations where gazumping can take place. In property transactions, a pre-emption right may arise in favour of one or several authorities. The 'SAFER' is an agricultural organisation that can have pre-emption rights over rural properties and agricultural land offered for sale. Furthermore, in agricultural matters, there is often a pre-emption right in favour of a farmer who has worked the land. The DPU (Droit de Preemption Urbain) allows a local authority to buy in urban areas as and when land and properties are offered for sale. Under French law, all purchases made by joint owners can be subject to the pre-emption right of the other joint owner.

There is no direct counterpart to building surveyors in France. Since the 1 September 2002, a survey mentioning the presence or the absence of building materials containing of asbestos (walls, posts, beams, floors etc) must be carried out before the sale of those buildings whose planning permission was delivered before 1 of September 1997. For dwellings built before 1948 and located in designated areas, another survey must be carried out by a qualified technician in order to establish the risks of lead poisoning. In other designated areas, a further compulsory survey reveals whether or not the property is infested with termites. The expert's report must be less than three months old at the time of completion and is attached to the title deeds.

Whilst structural surveys are rarely carried out by most French purchasers, it is highly advisable to do so, especially when buying older properties.

Where apartments or parts of buildings are being bought, parts of the building can be the property of several owners and intended for the use of all: roof, walls, staircases, corridors, floors. These common parts are managed by a factor on behalf of all co-owners. Important decisions are taken in assembly, according to various rules of majority. Other parts of a building are reserved for exclusive use: this is the case with individual apartments for example. They constitute the privative parts. The law of 10 July 1965, which has been recently updated, provides the legal framework for relationships between co-owners.

Prospective purchasers should familiarise themselves with the co-ownership's statutes (Reglement de copropriete), as these provide detailed information about what is or not permitted in the building and the way the building's common charges (for example lift costs, general maintenance) are to be split between all co-owners.

Leasebacks, bring the benefit of tax rebates, equating effectively to a 16.4 per cent reduction in cost are available on new build apartments in designated areas. They can be an attractive formula for rental investment. The investor acquires an apartment in a residence and management is entrusted to a development company during a period ranging between nine and 11 years.

The purchaser is completely exempted from paying VAT. The management company assures the purchaser of a clear annual return throughout the rental contract(around 4.5 per cent on the purchase price net of tax).

It is the management company which deals with the furnishing and the equipment of the apartment and rules all the inherent expenditure (insurance, maintenance, collecting rents and the like.

Purchasing an apartment in a 'residence de tourisme' costs between 25 per cent and 35 per cent less than a traditional property, but will not always turn out to be the bargain it seems.

The costs associated with the purchase of a French property break up into three distinct elements:

* Sums due to the Treasury
These vary according to the type of property sold, the area where the property is located and the date of its construction.

* The notary's fees
The notary's fees are regulated by a Decree of 8 March 1978 (modified in 1981, 1985 and 1986). They are calculated according to the following scale (and are subject to VAT):

Purchase price 0 to 3,049 euros: 5 per cent
3,049 to 6.098 euros: 3.30 per cent
6.098 to 16,769.40 euros: 1.65 per cent
above 16,769.40 euros: 0.825 per cent

* Miscellaneous disbursements
These include surveyors' fees, register searches, and excise tax, and may be paid up front by the notary. They usually vary between 458 euros and 1,525 euros.

Buildings will need to be insured. There is a multitude of insurance products whose price and services depend on each case. It is thus necessary to define the various guarantees to which you can or must subscribe.

When a property is already insured at the time of its sale, the policy cover automatically extends to the purchaser. The vendor must give the buyer the insurance policy and contact the insurer to inform him about the transaction.

Property and contents can be insured against a number of risks: fire, water damage storms, explosions, natural disasters and acts of terrorism. Insurance cover against fire hazards will include a guarantee against storm damage. Most insurers offer an electric damage cover which insures you against a dysfunction of the electric system and its consequences (provided the damage does not arise from a lack of maintenance).
About the Author
For more information on buying homes overseas and purchasing property abroad visit Fly2let.net.

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