The notary plays a fundamental role during the process of buying a property in France. The notary is the person in charge of verifying that the deed of sale takes place in a transparent manner and in full compliance with the law. In order to have a general framework from a legal point of view and to clarify the rules that can be encountered during the process of buying a property in France, we decided to interview Laura Pecchioli, French notary of Italian descent who works at the DDA notaries associès studio in Paris.
What is the procedure to buy a property in Paris?
Once the purchase offer has been accepted, the first stage is that relative to the signing of a preliminary contract. If it is stated by the notary, we incur in a one-side sale promise, where the owner commits himself definitively and irrevocably until the date set for the signing of the deed. The beneficiary of the promise (potential buyer), has an option that is open until the date set for the signing of the deed. As a counterpart to the owner’s commitment, an asset allowance equal to 10% of the price is stipulated, which the beneficiary pays in whole or in part (together with an advance payment of € 500). The payment is made exclusively by bank transfer to the account of the notary of the beneficiary who transmits it to the notary of the owner- To guarantee its eventual return, the sum paid is blocked on a special account, making it temporary unavailable for the seller. Once the promise is signed, the copy of the deed is notified to each of the signatory beneficiaries who then have a faculty of retraction for 10 days, if this option is exercised, the sum paid would then be repaid fully. After the 10 days of withdrawal, the beneficiary can always renounce the purchase but losing the stipulated indemnity. Under the terms of the preliminary contract, the possible conditions are stipulated, (for example the non-municipal pre-emption or of a tenant, the mortgage or urban situation, or the attention of a bank loan) and the deadline date for signing the deed of sale is determined. Before the signing, the buyer will have to pay the whole amount of price and the expenses related to the deed.
What are the costs for the purchase and sale of a property in Paris?
The expenses inherent in the real estate purchase deed are totally charged to the buyer. The expenses comprehend:
• The registration fee of the sales promise: € 125.
• The fees (“émoluments”) of the notary (if each party solicits his notary, the amount is subdivided among them) of the order of 1% of the price stipulated in the deed (including VAT).
• The fees (“émoluments”) of formalities for around € 660.
• The mutation fee which amounts to 5.81% of the value of the property.
• The contribution of real estate security which amounts to 0.10% of the value of the property.
• The cost of administrative documents necessary for the sale that are usually estimated to be between € 500 and € 1000. Overall, expenses can be assessed around 7.5% of the price of the whole property. For what concerns the sale of real estate, the costs borne by the seller are those that correspond:
• All the costs of copies of documents: (title of ownership, condominium regulation, floorplants) that the seller would no longer have in his possession after the closure of the deal.
• All the costs of the documents requested from the condominium administrator (seller’s financial situation and information on the condominium)
• Any commission stipulated against him and included in the price.
Regarding taxation, it is up to the seller to pay any additional tax on capital gain. According to the provisions which are currently in force (and except for certain exemptions such as the main residence), the total exemption takes place only after 30 years of detention. The imposition comprehends an income tax (with a reduction by year of detention between the 5th and the 22nd year) and a part of social contributions (with a reduction per year of detention between the 5th and the 30th year). Currently the rate of global taxation on capital gains is 36.2% (19 %+ 17,2%). As far as the calculation is concerned, the purchase costs are added to the costs related to the deed (real expenses or flat rate of 7.5% on the purchase price) and other than 5 years of detention, it is present a forfeit for “works” of 15% of purchase price. The gross taxable base is the difference between the sale price and the revalued purchase value. The rate of taxation is applied on the gross taxable basis, deduction made of the amount corresponding to the duration of detention. The final tax is levied on the sale price and paid to the fiscal administration at the time of publication of the deed at the Registry Office.
What is the role of the notary in the purchase process?
In order to draw up and sign the deed, the notary must proceed to investigations concerning:
• The economical capacity of the parties.
• The hypothecary situation: the notary must verify that the seller is effectively the owner, that there have been no irregularities in subsequent mutations over the last 30 years and that no hypothecary restrictions are present. If there were any (usually in form of mortgage registration taken as security for a bank loan) it is the duty of the notary to reimburse the sums due (withdrawing them from the selling price) and proceed with the cancellation of the registration.
• To the condominium situation: if the owner owes money to the condominium (arrears of expenses or allowances relating to voted works), one proceeds as in the hypothecary situation, it is the notary that pays by withdrawing on the sale price.
• To the urbanistic and environmental situation of the property.
• To the origin of the property.
• To the seller’s fiscal situation (Taxation on capital gains) Signing the act, the notary gives to it the authentic character, the notary must ensure that the contract reflects the will of both parties, and that the conditions stipulated against and/ or in favor of the parties are balanced, as well as compliance with legal and regulatory provisions, in particular compliance with the rules relating to the information of the beneficiary, all to guarantee the buyer against a possible challenge to his right to property.
What guarantees / risks does the buyer have for purchases from private or constructors?
“possession” for the its totality (the fact that his property right is not contested or contestable) and the surface warranty (which only applies to apartments). Furthermore, the notary must produce a certain number of documents to the potential buyer (diagnostics, information related to the condominium) to fill his information obligation and complete it by making statements about the property and about the information he is possession that could interest the potential buyer. Regarding to other factors, the sale is permitted without any specific guarantees from the seller, the potential buyer will take the property in its actual state. In the context of a sale permitted by a manufacturer, the seller is instead required to guarantee the property sold; it must therefore justify the signing of an insurance that covers any damage to the structure, it is an insurance on damages can be activated - for 10 years from the end of the works - without having to first research who is responsible for the damage. The procedure for the purchase of assets under construction is subject to specific regulations, with obligations of:
• To notify the prospective buyer specific documents: (draft of the act, planimetry, financial guarantee of construction work, and dommage ouvrage insurance)
• To stipulate the payment of the price in a fractionated manner, based on the evolution of the work program, and the justification for the edification of the new construction site (established in terms of the deed of sale through the lawyers).
Is it simple to obtain a mortgage for foreign citizens? Which are the steps to follow?
Objectively, obtaining a mortgage in France when you are not resident is more complicated, the legal provisions in this regard are of public order. The mortgage offer is issued only when the conditions are met. The offer (particularly the signing of an insurance in the event of death, the general conditions to which the amortization table must be attached, the conditions of the insurance...) must be sent by post, before you can accept it and send it back to the bank, the reflection period is minimum 11 days and maximum 30, while the validity period is typically 4 months. To guarantee the repayment, the banks require a mortgage registration and often a deposit as a security. In order to be able to confer the mortgage guarantee, it is therefore necessary to stipulate the deed of loan by means of a notary deed, allowing an executive copy to be issued to the bank. Finally, it should be stated that some banks do not agree to allow loans to French non-residents.
Is it possible for an underaged citizen to own a property in France?
Yes, an underaged citizen can be the owner of a real estate asset. Regarding the purchase, are legal representatives (parents) who sign the deed on behalf of the underaged. Regarding the resale, one must instead obtain the agreement of the tutelary judge of minors.