The Purchasing Procedure for France
French administrative formalities are bound up in "red tape", and a property transaction is no exception.
However, the system is in many ways better and safer than that applying to most other countries, including England, and "gazumping", for example, is extremely rare since, once a sale has been agreed, the parties are committed to the deal with financial penalties for defaulting.
All normal property transactions must pass through a "notaire" (notary) who is the only person who can make the title searches and obtain certain legal documents necessary to make the transaction possible. The purchaser may choose the notary he wants to handle the transaction, (which I strongly recommend). If an owner wants to impose his notary - which is allowed under French law – your notary will work in collaboration with the owner’s notary. In fact, it is not unusual to have two notaries working on the same transaction, with no additional cost to the purchaser as fees are shared. However, the delay may be longer as the two notaries have to transmit various documents to each other.
The purchaser is responsible for the payment of the notary fees which, depending on the selling price, can be as much as 10% on small old properties (though around 7% is more usual), or as little as 1.5 % on newly built properties, with an additional cost of around 1 % if a mortgage is to be registered on the property.
One should note that prices of property in the south of France are generally advertised exclusive of these charges. The notary fees are determined by the French state (on a scale which is the same for all notaries). However, that which we rather loosely call « Notary Fees », are for the majority, government taxes. The notary only receives about 1.5% for himself. The real estate agent's fee is normally included in the advertised price in the south of France, though always good to verify this when meeting an agent for the first time.
Let us take a hypothetical example of a property transaction. A client has visited some properties and decides to make an offer on a resale property listed at one million Euro. He makes an offer of say, 950,000 Euros. He will be required to make a written offer and put down a deposit cheque (French or Monagasque – not a foreign one), or make a bank transfer to the notary's escrow account for 10% of the offer (Can be negotiated down on larger transactions). Clauses may be inserted into the offer, such as obtaining finance or subject to survey. Do remember that the offer is binding even at this stage when it has been counter signed by the owner. You have a seven day cooling off period where for no reason you can simply walk away and recuperate your deposit, but after this period you will lose your deposit unless there is justifiable reason. For example if you did not get your mortgage or the survey showed a serious defect in the property.
The notary will require two or three months from the signing of the compromis to prepare all the necessary paperwork before getting the parties together to sign the title deed (acte definitive). During this period it is wise to consult with the notary or a tax lawyer to decide what is the best way to purchase in order to avoid future difficulties. Click here for more information.
When both the parties have signed and the client has paid the notary the balance of the purchase price as well as the notary fees, the notary settles any debts the owner may have (typically to a bank), pays the real estate agent's fee and then gives the balance to the owner.The client becomes the legal owner of the property and receives the keys and immediate occupency.
If the client is buying a new property “off plan”, the procedure is slightly different with a reservation contract being signed and a deposit of only 5% . As with a re-sale property the final deed is signed with a notary but this will probably be before the property is completely built, in which case a detailed payment schedule, linked to the work’s progress, is attached. This method of purchase is called VEFA (Vente en Etat de Futur Achevement ), and by law all French new builds carry a ten year warranty on all major works.
The Purchasing procedure for Monaco
Purchasing in Monaco is similar to purchasing in France except there is:
1) No cooling off period
2) No S.R.U. Law
and
3) The purchaser contributes 3% towards the estate agency fee.
However, there are some huge advantages to buying in Monaco as opposed to France.
For example no income tax, wealth tax or capital gains tax. For more information click here.