C A B I N E T A L D E R L I E S T E
Immobilier de Prestige International
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Whether you are considering buying a holiday house, a "pied à terre" for your trips to France or an investment property, or are planning to settle permanently in France, you will need professional advice on every stage of your purchase of residential property in France: buying a property, finding financing, setting in, as well as insuring and protecting your property. As a foreign investor you will need to be aware of the particularities of the French system in terms of the different stages of the purchasing process, how you can finance your purchase, the practical formalities you may need to complete and the taxes you will be expected to pay. PLANNING YOUR PURCHASE If you wish to invest in a French property you need to be aware of the particularities of the French market. For instance, when you determine your budget you will need to take into account acceptable debt ratios in France as well as the impact of your status as a non-resident on the down payment you will be required to make. You also need to understand the roles of the various professionals involved and the rules governing the sale and purchase of property. Proper preparation is therefore essential. DETERMINING YOUR BUDGET The house price you can afford will depend on how much you can offer as a down payment and how much you are able to borrow. You will need to calculate these sums separately. CALCULATE YOUR DOWN PAYMENT ("APPORT PERSONNEL") As a non-resident, French banks will tend to require a minimum down payment of 20 % of the purchase price. This may rise to 50% on your circumstances. (If you are not salaried employee, if you do not have any assets in France, etc.).You may use your savings (Cash, savings accounts, life insurance products, securities) or borrow funds from family members to pay the down payment. Remember that you will also be expected to pay the related legal fees (frais d'acquisition), generally called frais de notary, as the bank cannot include these in your mortgage. They will amount to between 2 and 8 % of the price of the property, depending on the type of property you purchase. CALCULATE HOW MUCH YOU CAN BORROW Calculate your regular annual income: salary, pension(s), rental income, etc.Then calculate your regular financial commitments: repayments on your mortgages and all other existing loans, rent, child support and maintenance payments, etc. French banks use the formula reproduced below to calculate dept ratios. As a general rule, your financial commitments should not exceed 30 % of your regular income
The bank will tell you how much you can borrow on the basis of this ratio and in view of your plans. THE PURCHASING PROCESS For any sale of property in France a deed of sale, called the acte authentique must be drawn up by a notary and registered with the Mortgage Office ("Conservation des Hypothèques").First a potential buyer will look for the right property. Once the buyer has found the property he wishes to purchase, he must sign a preliminary agreement (preliminary sales agreement, promise to sell or reservation contract), which will state the price and the terms and conditions of the transaction. The sale will only be completed when the deed of sale has been signed in the presence of a notary. THE PRELIMINARY AGREEMENT (AVANT-CONTRACT) If you wish to purchase a completed property (new or period), CABINET ALDERLIESTE will draw up a preliminary sales agreement or promise to sell. PRELIMINARY SALES AGREEMENT (COMPROMIS DE VENTE) In this agreement the buyer and the seller undertake to respectively buy and sell the property at a set price. PROMISE TO SELL (PROMESSE/COMPROMIS DE VENTE) In this document the seller offers to sell you his property and gives you right of first refusal for a clearly defined period. CABINET ALDERLIESTE will ensure that the seller provides all the necessary documents When the preliminary agreement is signed you will be asked to pay the deposit, which is usually 10 % of the purchase price. You will forfeit the deposit if you withdraw from the sale after the cooling-off period. However the deposit will be refunded, if your withdrawal is due to one of the conditions precedent not being satisfied. COOLING-OFF PERIOD (DELAI DE RETRACTION): Once you have signed the preliminary agreement, you have a seven-day coming-off period. After this period the agreement cannot be modified, unless a condition precedent is not satisfied. CONDITIONS PRECEDENT (CONDITIONS SUSPENSIVES) These are contractual conditions which, if not satisfied, render the agreement null and void. Some of the usual conditions precedent included in conveyance agreements are:
THE DEED OF SALE The signature of the deed sale, 2 or 3 months after the signing the preliminary sales agreement in the presence of a notary is mandatory. Usually the seller's notary draws up the preliminary sales agreement and the buyer's notary draws up the deed of sale. The same notary may act for both the seller and the buyer, although you can always decide to appoint a different notary The notary is responsible for ensuring that the transaction is legally sound, and will carry out a number of formalities with the administrative authorities, the tax authorities and the Mortgage Office. Before the parties sign the deed of sale, the notary will check the documents evidencing Origin of title, verify the existence of any mortgage or charge on the property, the existence of any easements affecting the property etc. CABINET ALDERLIESTE is always in contact with the notary LEGAL FEES (FRAIS D'ACQUISATION) (ALSO CALLED FRAIS DE NOTAIRE) You must pay certain legal fees and costs to the notary in addition to the sale price They are:
Legal costs usually amount to between 2 and 3 %of the sale price for new properties and between 6 and 8 % for second-hand properties. THE RIGHT FINANCING You can borrow from a French bank to finance your purchase of property in France. If you apply for a mortgage in France, the bank will ask you to open a non-resident's account. You should be aware that very strict rules govern mortgages in France covering, in particular, the time you have to consider the quotation, security, mandatory insurance, etc. FUNDING FOR YOUR PROJECT You can borrow funds in order to:
TYPES OF MORTGAGES You can use property loans to finance the purchase of your property or for any major renovation work, irrespective of the type of property (permanent home, holiday home, rental property).Their duration is usually between 7 and 20 years. The main types of loan are:
SECURITY When you apply for a mortgage the credit institution will almost certainly ask you to provide security Allowing it to sell the property should you default on your repayments. It may also ask for additional security, particularly from non-residents (surety bond, pledge of assets, etc.) CONTRACTUAL MORTGAGE (hypothèque conventionnelle) or le privilège de prêteur de derniers These two types of security enable the bank to sell the mortgaged property should you default on your repayments. PRIVILÈGE DE PRÊTREUR DE DERNIERS The privilege de prêteur de derniers(PPD), which costs less than a contractual mortgage, is registered as security when land or a second-hand property is being purchased. It will be registered for the term of the loan+ a further 2 years. It covers the capital borrowed + 3 years interest at the rate specified in the agreement. It is registered with the Mortgage Office by the notary. CONTRACTUAL MORTGAGE (hypothèque conventionelle) The legal effects are the same as the PPD .Contractual mortgages are registered when:
Contractual mortgages can be registered on the property being purchased or on any other property belonging to the borrower. INSURANCE Whenever you borrow funds, you must take out insurance .This gives you financial protection should anything prevent you from making the monthly repayments. Group insurance is mandatory, and covers you against death, permanent total disability and temporary to capacity to work ( décès, perte totale et irréversible d'autonomie et incapacité de travail ) You may take out this insurance as the borrower or joint borrower, provided you are aged under 70. When you take out the insurance you can opt to extend cover beyond the 70-year age limit stipulated in the agreement .This means you will remain insured after your 70 th birthday and until your 75 the birthday at the most. THE MORTGAGE QUOTATION (offre de prêt) AND THE FRENCH CONSUMERS'CODE French regulations require that when you apply for a mortgage and the bank accepts your application it must send you a quotation by post. The quotation must include certain mandatory information and documents. The quotation will consist of:
The bank will remain bound by the quotation for 30 days from the date you receive it; You may accept it from the 11 the day after receipt. In such case, in order to accept the quotation, you must return the acceptance form, dated and signed, by post, along with all the documents asked for by the bank. THE MAIN PROPERTY-RELATED TAXAS As a non-resident, you will be required to pay certain taxes in France on your French property.
PROTECTING YOUR PROPERTY When your property is a holiday home, rental property or "pied-a-terre" you will need to seriously consider how to protect your property particularity when you are out of the country. Insurance policies often contain specific clauses covering this eventuality. You would also be well advised to install an effective security system to prevent intruders and burglaries. You should arrange to insure and protect your property as soon as you purchase it. WHY YOU SHOULD INSURE YOUR PROPERTY Building and contents insurance is essential in order to receive compensation for any loss or damage Such a policy will cover your property against damage or loss caused by adverse weather conditions (storm, frozen pipes etc.). Theft, water damage etc. This type of policy also provides third party liability insurance, covering any damage to property or bodily injury sustained by third parties and caused by the insured or any member of the insured's family. If you fail to take out adequate insurance cover you will have to bear the financial consequences of any such loss or injury. WHEN YOU SHOULD PURCHASE INSURANCE You are advised to take out insurance as soon as you become the owner of the property. If you house in under construction, you should check what is covered by the architect's and builder's insurance policies. To avoid finding yourself out of pocket if a problem arises during construction (storm, fire natural disaster) you should consider taking out insurance as soon as construction work starts. HINTS ON FINDING THE RIGHT INSURANCE Your insurance policy will be based on the number of rooms in your apartment or house. When counting the number of rooms you should not include the kitchen, bathroom, toilets, corridors or entrance hails. Bear in mind that very large rooms such as living rooms may count for more than one room. KNOW THE VALUE OF YOUR PROPERTY You should arrange for your home and contents to be valued, as the insurance company will calculate any payments on this basis and will not pay out any sum over and about the predetermined value even if the loss is greater. You should make a detailed inventory of your belongings and keep the invoices. The insurance company will ask for these in the event of a claim. VERITY INSURANCE COVER AND EXCESS The excess is the amount you will not be able to claim back on your insurance policy: you need to be aware how much this it. You also need to know the basis on which any insurance claims will be calculated less wear and tear, or at replacement value ? CHECK YOUR PROPERTY IS SAFE AND SECURE You are responsible for ensuring your property is safe and secure, as specified in your insurance policy's terms and conditions. The risk of any loss or damage will be reduced and your right to claim compensation will be safeguarded if you take a few simple precautions. -Check for example, that the locks comply with current standards and don't forget to lock doors and windows when you leave the property. -Remember to drain your heating appliances and pipes before the winter and arrange for your chimneys to be swept at least once a year -Insurance claims should be submitted before the deadline set by the insurance company. This is 5 days for all claims except theft (48 hours), from the time you become aware of the occurrence. -Ring your insurance company before committing yourself to any expenditure.
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