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Initial Agreement
An agreement is negotiated between buyer and seller
and the initial contract which is called a Sous-seing
Privé, if drawn up by an French Estate
Agent, or a Compromis de Vente, if prepared by
the Notaire, is then signed by both parties. This
is a legal document, binding on both parties
and should not be taken lightly. At this stage
the buyer pays a deposit of a minimum of 10%
of the purchase price which remains `blocked'
in a special account at the Notaires office until
such time as completion takes place or the purchase
is aborted. At this stage the property is taken
off the market.
There are other kinds of less familiar contract
such as the Promesse de Vente where the contract
is not binding on both parties to the same extent
as the Compromis. By signing it the vendors still
commit themselves to selling the property to the
purchasers, but this commitment takes the form
of promising not to sell it to anyone else within
a stated period, usually 3 months. A deposit of
between 5% and 10% is again paid and again the
purchaser will usually forfeit the deposit if
they do not go ahead.
There exist other forms of preliminary contract
such as the offre de vente, offre d'achat and
an exchange de lettres - none of which are recommended
in preference to the Compromis or the Promesse.
Surveys of the condition of the property you intend
to purchase by professional surveyors or 'experts'
are unusual in France. It is more usual to request
local artisans to give an opinion as to the condition
of say the roof, or the walls and for them to
give quotations for the work. French buyers would
be more likely to approach an architect or 'expert'
but even then it is unusual for them to be asked
to prepare a detailed report as has become `de
rigeur' in certain European countries. It is certainly
prudent to carry all this investigative work before
signing the Compromis as once this agreement has
been reached - as mentioned above - it is binding
on both parties. Once the Compromis or Sous-Seing
Privé has been signed there follows a period
of generally 6 - 8 weeks in which the searches
are carried out to ensure that the property is
not subject to any imminent environmental changes
and during which time the purchaser will be required
to resolve the financing of the purchase. These
searches and the other contractual matters are
carried out by the Notaire. The Notaire is unlike
most European Solicitors/Lawyers as he is not
appointed to act for either party in the transaction
but as a public official whose duty is to the
State. Their function is to ensure that the transaction
is carried out legally and accurately and in accordance
with the proper processes and to give the transaction
absolute validity that cannot be contested. Accordingly,
it is unnecessary to appoint a second Notaire
to act for yourselves, although you may feel more
`comfortable' having your own Notaire or perhaps
European Lawyer to explain some of the points
that arise which may be unclear as it unusual
for Notaires to volunteer advice.
If the buyer intends to take out a mortgage then
it is necessary for this to be declared at the
time of the agreement and a substantive clause
in the Compromis protects the purchaser's interests
in the event that a loan is not made available.
In this event, the sale does not proceed and the
deposit is returned. In the event of the discovery
of a `planned nuisance' through the searches,
the buyer can withdraw and the deposit is returned.
Should, however, the buyer break the contract,
the deposit is paid to the vendor as an indemnity
- conversely, should the vendor break the contract,
the deposit is returned to the purchaser.
Final Contract
At the end of this period, which can be extended
at the agreement of both parties, the final contract,
the Acte de Vente is signed at the Notaire's office
and the property passes to the buyer, who must
pay the balance of the purchase price to the Notaire
who then pays the vendor. It should be noted that
the balance must be in the Notaire's possession
before the contract is signed. It will also be
necessary to provide to the Notaire before completion
a copy of your birth certificate translated into
French and, if applicable, a copy of a Marriage
Certificate also in French.
Early advice should be sought in order to understand
fully the complexities of French succession law
which does not allow you to leave your share of
the property to whom you wish - even if you have
an existing Will. There are ways of circumnavigating
these laws but if you wish to leave this French
property to your heirs, the cats' home or Great
Aunt Puddleduck, then it will be necessary for
you to take action before the purchase is completed.
From the signing of the Contract the purchaser
is responsible for the insurance of all the buildings
on the property.
Fees and Commission
The buyer pays the legal fees and registration
taxes which amount to approximately 7.5% of
the purchase price, including any geometrist's
costs that might have been incurred such as establishing
boundaries, repositioning boundaries and preparing
plans for the Acte de Vente. These fees are paid
to the Notaire on the day of signature
of the Acte de Vente and are paid as an 'all encompassing'
sum together with the balance of the purchase
price.
The notaire in France is actually a government
official responsible for the conveyancing and
represents both the vendor and buyer. It is therefore
advisable to have your own solicitor to protect
your own interests.
The vendor pays the Agency's commission.
Under certain exceptional circumstances these
are paid by the purchaser but if this is the case
this should be agreed in advance and included
within the Mandat, the official instruction from
the Vendor to the Agent, and made known to the
purchaser at the outset.
French Mortgages and how they work
All mortgages are full status and proof of income
& outgoings will be required. French mortgages
can be arranged for acquisition, renovation &
construction. Re-mortgages & Equity loans
are also available through specialist lenders.
A deposit of 20% of the purchase price is generally
required and you will also be liable for solicitor's
fees.
All loans are in Euros and mortgages are generally
on a repayment basis, however, interest-only products
may be available. Minimum loan amount is EUR75,000
or £50,000 equivalent. All mortgages should
be fully repaid by the age of 70 and French life
cover is required by most lenders.
The mortgage is secured on the property and the
mortgage funds will be released by the lender
to your notaire for completion.
French lenders assess eligibility for a loan
on the applicant's ability to service the loan
and not potential rental income from the property.
The general guideline is as follows: of an applicant's
net income 33% should cover existing outgoings
and the monthly repayment on the French franc
loan. If you are self-employed income is assessed
as the average of the last three years' net income.
A percentage of rental & investment income
will also be considered. If employed a lender
will base your income on your payslips and the
amount that is credited to your account monthly.
Outgoings considered are liabilities such as mortgage/rent
in the UK, personal loans & maintenance commitment.
For example - if you have a net monthly income
of £2000 with a UK mortgage of £500
and no other outgoings. Taking into account 33%
of the income, that is £660, a borrowing
with a monthly repayment of £160 could be
considered.
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