After a few years in France, you may decide the time has come to sell your French property. Whatever the reason, there are several things to consider before you stick up the à vendre sign in your garden, namely whether you want to sell privately or via an estate agent, your responsibilities as a vendor and French capital gains tax (plus value).
Selling a property in France is not always straightforward as the process is different from the UK. There are a few pitfalls to avoid, and we are going to look at the various issues which need to be considered.
You can sell the property privately or via an estate agent. If you choose the former it is a cheaper option for both you and your purchaser. You can advertise the property on specialised websites and in magazines. You can also ask your local notaire to market the property on your behalf. His charges will form part of the notarial fee and will usually be paid by your purchaser. However, privately marketing your property can mean that it will take more time for a sale to take place.
If you appoint an estate agent, his fees are likely to be between 4 and 10 per cent of the sale price. You will be asked to sign a mandat (written authority) by which you authorise the agent to sell the property on your behalf for a minimum price and upon specific conditions. It is important to obtain legal advice on the term of the mandat, as it can give exclusive rights to the agent to sell the property. This means that even if you sold the property privately you would still be liable to pay his commission. Furthermore, some mandats can grant power to the estate agent to sign a contract on your behalf. You also need to be aware as to whether the mandat can be renewed automatically, and how you can terminate it.
Higher offer
Once you accept an offer you are bound by it, even if you later on obtain a higher offer. Otherwise, it could be considered as a breach of contract (even for a verbal agreement), and you may be liable to pay an indemnity to the first purchaser.
The purchase price has to be in euros as the property is situated in France, and French taxes will be due when the transaction is complete. Many disputes would be avoided if the purchase price were first agreed in euros as it is the amount in euros which will be taken into account by the notaire and not any agreement for a price in English pounds. Furthermore, problems caused by fluctuations in the exchange rate will be avoided.
As with a purchase, there will be two sale contracts, the first one being (usually) the compromis de vente and the final deed being the acte de vente. The compromis de vente is a binding contract, subject to specific conditions for your purchaser’s sole benefit.
If your buyer is financing this purchase with a loan, the contract can be subject to obtaining that loan. Your purchaser will benefit from a seven-day cooling off period during which he can withdraw without having to give any reason. At the end of that period your purchaser can only withdraw if the conditions of the contract are not fulfilled. Unless the contract states otherwise, you give a 30-year implied warranty that your property is free from latent defects, even if you are not aware of them.
At the signing of the compromise de vente, your purchaser will be requested to pay a deposit to the notaire of between 5 and 10 per cent of the sale price. The deposit will be held by the notaire in a holding account and will not be paid to you. It is important that you receive legal advice on the compromis de vente so that you understand its implication and your obligations.
You will be liable for appointing, at your own expense, a surveyor to carry out compulsory surveys. Depending on the age and situation of the property, asbestos, termite and lead surveys may be compulsory. It is best to have these three surveys carried out prior to the purchaser signing the compromis de vente so that they cannot later withdraw if some asbestos, lead or termites are discovered on the property.
A survey called a diagnostic de performance énergétique, which is an energy efficiency audit, is compulsory for all properties except those without any heating or hot water system. These surveys are usually carried out on the same day by the same surveyor and its total cost is usually between €500 (£377) and €800 (£603). The results of these surveys will have to be made available to your purchaser prior to signing the compromis de vente. Two new surveys have become compulsory, namely electric and gas surveys, to inform the purchaser whether the property complies with the current legislation.
If all the conditions of the contract are not fulfilled, your purchaser can withdraw from the contract and have their deposit returned. However, if the purchaser wants to withdraw despite the fact that all the conditions have been fulfilled, he would lose the deposit and you could try to enforce the sale – a process which could be expensive and lengthy.
Legal expenses
When you sell your French property, you may be liable for French and UK capital gains tax. French CGT is calculated on the gains made (ie sale price minus purchase price). Furthermore some legal expenses, estate agent’s fee and building work costs can be deducted from the gain. You will have to provide all original VAT receipted invoices. If you have owned the property for more than five complete years, you can claim a standard 15 per cent allowance for building works. After five years of ownership the gains are reduced by 10 per cent for each following complete year, thus after 15 years there is no French CGT.
After the reduced gains are calculated, a fixed CGT rate of 16 per cent is applied and if the sale price is at least €150,000 (£113,216) you will have to appoint a fiscal representative (un représentant fiscal accrédité). They will thoroughly calculate your French CGT taking into account any allowances you are entitled to and discarding any that you are not. If there is an error made by your fiscal representative it is them who will be held responsible. Their fee will be deducted from your gains thus reducing French CGT.
If your property was built or entirely renovated less than five years ago you will be liable for paying French TVA (VAT) of 19.6 per cent. It is important to take that into account if you are planning to renovate an old barn for a quick return on the sale.
It is important to keep all invoices relating to major building works, as you could be held responsible by your purchaser in case of major defects appearing within ten years. With the invoices, your purchasers will be able to contact the builders so that they can put right the defects free of charge. Alternatively you may consider taking out insurance covering such responsibility if you have fully renovated a property.
The notaire will draft the acte de vente once he obtains the results of all the searches. It is advisable to seek independent legal advice on the acte de vente so that you are aware of your obligations. Once the notaire receives the funds from the purchaser, completion can take place.
The notaire will then pay the CGT as well as any outstanding loan registered against the property prior to sending you the proceeds of the sale. This can take up to six weeks.