Purchasing Costs and Ancillary Costs in Connection with a French Property
Whether or not a mortgage is to be raised against the French property, there will generally be two costs to consider when setting your budget: Selling agent commission and conveyance fees.
Selling agent commission (frais de négotiation)
Both notaires and estate agents sell property. However the treatment of commission by these two bodies will differ. Also it is important to note that if a French mortgage is required, the way in which the "Frais de négociation" is represented in the Compromis de Vente can have an effect on the amount that may be borrowed or the lender that can be approached.
Sale via an estate agent
Depending upon the region and sometimes the agent or vendor, the sale price (prix principal) may include the agent commission in that it is payable by the vendor. In other instances, the purchaser may be required to pay the commission, in which case such an amount will be itemised separately and added to the purchase price. Certain lenders will only lend a percentage of the purchase price as indicated in the Compromis, and will not include any such separately paid commission. Therefore, where the commission is not included in the prix principal, either a lower mortgage will be obtained or the number of lenders to whom an application can be made will be restricted. Consequently, where cash reserves are limited it is wise to ensure that in any negotiations the commission is included in the purchase price. Whilst estate agents are allowed to set their own levels of commission, this is unlikely to exceed 10% of the net purchase price unless the purchase price is relatively low, when agent commission can be higher.
Sale via the Notaire
If a notaire acts as the sales agent, the commission will be included via an increase in the conveyance charges ("Frais d'Acte"), i.e. the commission will not be included in the sale price. Most lenders will not make a provision for this. Consequently, in comparison with a sale via an estate agent the mortgage advance as a total percentage of the project cost is likely to be less. Notaire's commission charges follow an official charging scale and will tend to be in the region of 6% of the net purchase price.
Conveyance costs (Frais d'Acte)
The charges made via the notaire for the preparation of the Acte de Vente, (Frais d'Acte) include registered Transfer Duties, land registry fees, land registry searches, disbursements, publication of notice of sale, notaire's emoluments and VAT on these emoluments. The final figure for these charges cannot be predicted exactly until the completion document has been drawn up, (and frequently even then a refund 3 to 4 weeks after completion may be made once the property has been registered at the land registry and final debits from the account have been made).
The Frais d'Acte will vary according to:
- The sale price (prix principal)
- The property location
- The property type, description and use
- Number of buyers
- Number of pages in the completion document
- Age of the house
- Degree of specialist knowledge required during the transaction
However, Charles Hamer do calculate an approximation of these fees when providing a mortgage quotation. For property over 5 years old these fees tend to fall within a range of approximately 6.5% of the net price ("prix principal") for properties over 300.000 Euros, rising to 9.5% or so as the price falls towards 30.000 Euros.
Our mortgage illustrations show a precise estimation of these fees based on the price you choose to input, so helping you decide on your budget.
For the sale of properties less than 5 years old, that have not been sold, stamp duty doesn't exist, meaning that only the notaire's own remuneration and disbursements need to be met. This makes the fees around 1.5% to 6% depending on the price and number of new properties on site.
The downside of new properties however, is that the purchase price is liable to TVA, (VAT) at 19.6%. Usually this is included within the marketed price. If you enter into a contractual letting arrangement with the promoter, (usually known as a "leaseback"), the TVA can be recovered. There are consequences to this, which are beyond the scope of this introduction, but please contact us for more information.
Other costs, either compulsory or incurred consequently, should be considered:
Taxe Foncière: A local rate levied on developed properties based upon its rentable value and paid by the owner of a property.
Taxe d'Habitation: A community charge paid by the owner or tenant occupying a furnished property. Again this is based upon the income value of the property.
Both taxes are payable by the property owner or the occupier as of the 1st January in the year to which the tax applies. Often the Acte de Vente will contain a provision that the Taxe Foncière is apportioned between the buyer and the seller of the property upon completion. This is usually done by an adjustment to the sale price.
Alteration of boundaries
Occasionally a sale of property may involve partitioning of existing cadastre section numbers (registered land areas). Consequently, the plan cadastre has to be altered, usually via an "Expert Géomètre" or surveyor. On average, you should expect to pay between £300 and £600 depending upon whether the cost is shared with the vendor or not.
Powers of Attorney
Instead of completing the purchase in person (although this is recommended wherever possible), completion can take place via Power of Attorney, usually given to the notaire's clerk.
Creation of an S.C.I.
A Société Civile Immobilière is a specific legal entity established as a vehicle for holding the French property in lieu of direct ownership. Often used to bypass French Succession Law and Tax problems, the cost of setting up the S.C.I. and the potential tax consequences are complex.