Acquisition for Non Residents
- Hélène Peisse, French notaire at Ducamp-Monod
Importants points of the procedure
You can locate a property for sale directly from owners or with the help of a real estate broker. Acquisitions are made in two steps: First, a signature is needed on a pre-contract, which is either an “undertaking to sell” or a “preliminary sale agreement”. This contract is signed with a Notary or with a real estate broker. At this stage, the buyer pays a security deposit, which is usually 10% of the selling price. After the pre-contract is signed, the seller is prohibited from selling to anyone else. The buyer has a cooling-off period of 10 days which begins with notification of the signed pre-contract and all annexes. With this initial contract, there are usually two waiting periods : The first one is to obtain financing, if needed. It is usually between 45 & 60 days. A second waiting period is to sign the final transaction (there is no mandatory waiting period, but it is generally between 2 & 3 months).
All property reports must be provided before the pre-contract is signed. The most important step is the first one, the pre- contract, as it legally binds the buyer, subject to any condition precedents mentioned in pre-contract, to purchasing the property subject to a 10% penalty fee. Therefore, before the buyer signs this contract, all due diligence relative to the property must be completed, and all provisions must be finalized with respect to the price, condition of the property, financing methods and closing date.
The sale itself, the second contract, only completes the transaction set out in the pre-contract. The Notary ensures that all conditions precedent are met and that the [title to the property] is secure and properly registered. The buyer pays the purchase price and the acquisition fees, which are set out by French law, at approximately 7,5%, of the price. The Notary, who is a legal specialist, has a central role as he/she verifies all the documentation required for the transaction.
Focus on taxes
The ownership of a property, its sale, or its transfer generates taxes, both in France and potentially in your country of residence. It is necessary to research any tax treaties that may exist between France and your place of residence. Tax consequences can also depend on the purpose of the acquisition: is it a secondary home or an investment property? For example, some non-residents are required by French law to have an accredited tax representative at the sale. This is a person or company who guarantees the capital gain tax payment at the time of the sale for a fee.
The pre-contract is essential, contact your notary before you make any commitments. Do not forget to include a substitution clause in the pre- contract: it allows you to purchase through a holding company if this option proves to be more beneficial in your situation. Be sure to anticipate the resale or the transfer of the property. Inform yourself on capital gain system. Ask which rules apply in the case of transfer on death (according to which law will the property be distributed, where will the taxes duties be paid and how much will they be). From a seller perspective, documents you need to gather in order to sign the pre-contract are numerous and quite long to obtain. Don’t hesitate to use an expert to help you from the beginning in order to avoid the risk of renegotiation by the buyer at time of signature.
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