All about the money. Who, what and when?

Whether you are buying or selling a property in France, you will inevitably have to part with your money at some stage, so forewarned is forearmed!

Monies Payable by the Buyer

As a Buyer you will of course be parting with the lion’s share of the monies being paid out during the course of the sale and purchase transaction. The payments you can expect to make will include the following, although as you will see not all these categories of payments apply to every transaction.

1.Deposit

Once both the Seller and the Buyer have signed a preliminary sale and purchase contract (a “compromis de vente”) the Buyer must pay a deposit to secure his commitment.

As regards resale properties, traditionally a deposit of 10% of the purchase price has been the norm. However where a property is of a higher value it is increasingly the case that Sellers will accept a 5% deposit. Ultimately the amount of the deposit stipulated in the contract is a matter for negotiation between the parties.

Occasionally, where the contract has been drawn up by an estate agency (rather than by a Notary’s office), the deposit is stated to be payable into the estate agency’s bank account. More often, however, the contract will specify that the deposit is payable into the Notary’s account. You should never be asked to pay a deposit directly to the Seller and if so you should always refuse.

The deposit will be held by the Notary’s office (or Estate Agency) until completion of the transaction, when it will constitute part of the purchase price. Deposit payments in France are never interest bearing.

As regards off-plan purchases, a deposit of 5% is payable on signature of the Reservation Contract if the contract provides that legal completion of the purchase (at the Notary’s office) must take place within 1 year, reducing to 2% if legal completion is to take place within 2 years. However, if legal completion is not due for more than 2 years, no deposit is payable at all.

2. Money on account of Notary’s fees

Increasingly, where a contract has been drafted by the Notary’s office, Notaries require a payment of around 300 Euros on account of costs to be added to the Buyer’s deposit.

Notaries then use this money to pay any expenses incurred on the Buyer’s behalf (e.g. cost of local searches, land registry searches etc). If the transaction completes, this money will be considered to be on account of the Notary’s overall fees. However, if the transaction does not complete, the Notary will keep that money in compensation for his fees incurred.

3. “Géomètre’s” fees

“Géomètre” can loosely be translated as land surveyor. A land surveyor’s fees are not payable in every sale and purchase transaction. Generally they are only payable where either (a) the Seller is selling part only of his land to the Buyer and so a land division has to be effected or (b) the Buyer wants the boundaries of the property to be officially defined. In situation (a) the parties usually split the land surveyor’s fees between them, whereas in situation (b) it is usually the Buyer who pays. However, the parties are free to negotiate between themselves as to the responsibility for these fees.

4. Estate Agency’s commission

The price of a French property being sold via an Estate Agency is usually stated to be “Frais d’agence inclus”, meaning that the agency’s fees are included in the price. However, whether it is the Buyer or the Seller who is obliged to pay those fees depends on the terms of the agency’s mandate (with the Buyer or Seller) and the position will be confirmed in the contract.

5. Notary’s fees

The Notary’s fees are payable by the Buyer – unless the price agreed between the parties is stated to be “Acte en Mains”, meaning that – as an exception to the rule – the Seller has agreed to pay the Notary’s fees instead.

On a resale transaction, the Notary’s fees will amount to around 7-8% of the price. The fees include (1) stamp duty, currently at a rate of 5.09% irrespective of the price of the property and (2) the fees of the Notary himself, which are fixed by law and generally amount to around 2 – 3% of the purchase price (the higher percentage usually applying to lower value properties).

On an off-plan transaction, the Notary’s fees are considerably less because the stamp duty is much reduced, amounting to Notary’s fees of around 2-3% in total.

With the exception of money on account of the Notary’s fees (see section 2 above), the Notary’s fees are payable prior to legal completion and so must be in his account at least the day before the agreed completion date. In practice, the Buyer should transfer the fees to the Notary’s account at the same time as the balance of the purchase price (see section 6 below).

6. Balance of purchase price

As with the Notary’s fees, on a resale transaction the balance of the purchase price is payable by the Buyer prior to legal completion and, once again, must be in the Notary’s account at least the day before the agreed completion date.

On an off-plan transaction, the Buyer will be required to pay the balance of the purchase price in installments as the build progresses. Consequently on legal completion the Buyer will pay the part of the price that corresponds to the stage the build has reached. He will pay the remainder of the price in installments between legal completion of the transaction and handover of the completed property.

Since 1st January 2013 payments on account of the purchase price, including the deposit, must be made by bank transfer (via a currency dealer or direct from your own bank, for example), rather than by banker’s draft.

The Buyer must also supply the Notary with a copy of his bank or currency dealer’s confirmation of transfer, as proof of the origin of the funds.

7. Mortgage

If the Buyer is purchasing the property with the aid of a mortgage to be secured against it, once the Buyer’s Lender has received his signed mortgage acceptance and has received the Notary’s draft mortgage deed, the Lender will transfer the funds direct to the Notary’s account in time for completion.

Monies Payable by the Seller

As well as the instances explained above where the Seller may be required to contribute to the Géomètre’s fees or pay the Estate Agency’s commission, when selling you should be prepared to pay some or all of the following:

1. “Diagnostics Techniques”

The Seller must pay the cost of the Technical Surveys (“Diagnostics Techniques”) of the property (e.g. asbestos, termites, gas, energy efficiency, drainage, etc – as required). This will generally amount to around 500 Euros.

2. Notary’s fees

Other than the example of the “Acte en Mains” given above, the only other instance in which the Seller may be liable to pay some Notary’s fees is if the transaction does not complete due to a legal or contractual obstacle preventing him from freely disposing of the property.

3. Fiscal Agent’s fees

If the Seller is not resident in France he must appoint a Fiscal Representative (“Représentant Accrédité”) to calculate and guarantee his Capital Gains Tax liability – unless the sale price is equal to or less than 150,000 Euros or he has owned the property for over 30 years.

The Fiscal Representative’s fee will be in the region of 1% of the sale price and is deductible from the capital gain. The Notary usually transfers payment to the Fiscal Representative out of the proceeds of sale.

Monies Payable by Both Seller and Buyer

1. Apportionment of Service Charges

When the property being sold is part of a co-ownership (“une copropriété”), for example an apartment in a Residence, it is common practice for the Seller and Buyer to apportion the current quarter’s service charges (“charges de copropriété”) between them, pro rata to their respective periods of ownership.

2. Apportionment of “Taxe Foncière”

Whilst the Seller alone (or his tenant, where relevant) must pay the occupancy tax (“Taxe d’Habitation”) for the entire calendar year in which the sale takes place, it is standard practice for the Seller and Buyer to apportion the land tax (“Taxe Foncière”) between them, pro rata to their respective periods of ownership.

As the Seller may well not have received the current year’s land tax bill, the apportionment is generally calculated based on the previous year’s bill. In practice the bill for the year of sale will most likely be addressed to the Seller, who will often not receive it until after the sale has completed. The Seller must then pay the entire bill, having been reimbursed by the Buyer, on completion of the sale, for his pro rata share.

•By Sally Dilks, Consultant Solicitor for Heslop & Platt
Heslop & Platt

This article is for general information purposes only and does not constitute legal, or other professional advice. We would advise you to seek professional advice before acting on this information.