YOUR ESSENTIAL GUIDE TO BUYING IN FRANCE

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1 YOUR ESSENTIAL GUIDE TO BUYING IN FRANCE

2 CONTENTS Since 2002, Allez Francais have been helping families, couples, individuals and investors find their ideal property abroad. With our website being updated daily with new properties, we are sure you will soon find your ideal property in France. Over the past years we have built up a close relationship with leading overseas property agents and we work hard with them to ensure that we are able to showcase their properties to genuine interested buyers. We place utmost importance on assisting our buyers to find the right property, and if required, guide them through the buying/sales process. Our website is updated daily with new properties and we are sure you will soon find your ideal property. Over the past 13 years we have built a close relationship with leading currency exchange company Foremost Currency Group. We ensure that not only our overseas buyers find their ideal property but that they receive the best exchange rate on their money, coupled with the guidance of their dedicated and highly experience brokers. Together with Foremost Currency Group we have created this buying guide, which we hope you will find helpful and informative, without making the process of buying in France too daunting. We wish you success with your property search. Peter Elias, Founder - Allez Francais & Adam Bobroff, Director - Foremost Currency Group FINDING A PROPERTY Create your brief 7 1. Property Location 7 2. Type of Property 9 3. Your budget 12 Currency Exchange 12 Start your search 15 Estate Agents Allez Francais 15 Viewings 16 BUYING THE PROPERTY THE LEGAL PROCESS Notary Notaire 17 Preliminary Sale Agreement Compromis de Vente 18 Cooling Off Period Délai de Rétractation 18 Surveys 20 Completion Acte de Vente 20 FINANCE Inheritance 21 Mortgages 23 Taxes 25 Property Tax 25 French Income Tax 25 Capital Gains Tax 25 Wealth Tax 25 CASE STUDY

3 ALLEZ FRANCAIS - FOREMOST CURRENCY GROUP: FRENCH BUYING GUIDES Buying a property abroad is an exciting time, something that you may have dreamt of doing for years but it can be riddled with challenges particularly if you go into the process underprepared. At Allez Francais we speak to property buyers every day and while our customers mainly have good experiences when buying abroad, we have also heard of a multitude of issues that they have experienced. To help our customers through this journey we have put together this essential guide to buying properties in France. The property buying process is different in every country and there can be an overwhelming amount of information on the web for you to sift through. We hope this French buying guide is a useful resource to ensure that your property buying adventure is a successful one. GUIDE TO BUYING IN FRANCE In France the property buying process is strictly regulated and clear cut. If you understand what to expect before beginning your search and through every step along the way, the process should be reasonably straightforward. However, unlike the UK, you can secure a house much earlier by signing a binding contract soon after viewing a property, with the whole process typically taking up to 3 months. We found a number of properties we liked on the Allez Francais website. Once we enquired about the properties we were contacted by very helpful English speaking agents. The agents were very professional and they quickly understood our property needs. Three months later we had found our property in Dordogne, opened a bank account and transferred our deposit money with a very knowledgeable and friendly Foremost Currency broker. I was surprised how easy the whole process was, from finding my property to transfering my funds to buy it. Thank you Foremost and Allez Francais. A Stewart,

4 FINDING A PROPERTY Nord-Pas-de-Calais Picardie Normandie (Normandy) île-de-france Alsace Champagne-Ardenne Lorraine Bretange (Brittany) Centre Val de Loire Aquitaine Limousin Poitou-Charentes Languedoc-Roussillon Midi-Pyrénées Bourgogne Franche-Comté Auvergne Rhône-Alpes Provence Alpes Côte d Azur CREATE YOUR BRIEF The key to a successful and stress-free property search is the ability for you to answer the following questions: Where do you want to buy? What are you looking for in a property? What is your budget? Step 1: Property Location France is made up of different regions, each with its own features, climate, culture and characteristics. The North/North West Easily accessible from the UK offering a variety of coastal and inland tourist attractions. Brittany the northern coast has rugged cliffs and sandy coves. The southern coast can be hot in summer, but like England this region can be rainy in any season. There are good cycle routes throughout and the inland areas are rural. Normandy the region offers sandy beaches, rocky cliffs and wonderful small towns and villages. Mont St Michel is the most visited historic site in France outside of Paris. Central France Île-de-France the Paris region is the most popular tourist location in France and the Eurostar makes it easily accessible with train journeys taking less than 3 hours from central London. Versailles and Chartres are easy daytrips from Paris. Burgundy France-Comté famous for its wines. Rich in places to visit including Dijon and Beaune. The Saône plains are fairly flat with lots of lakes and rivers, perfect for anglers and bird watchers. The rest of Burgundy is hilly with small towns and villages steeped in history. Centre Val de Loire the Loire is the longest river in France and covers the area from the coastal plain of Vendee with well-known sandy beaches through to the Loire Valley famous for its mild climate, chateaux and vineyards. The countryside has gentle undulating hills and flowing rivers

5 FINDING A PROPERTY FINDING A PROPERTY North East France Nord-Pas-de-Calais Picardy only 2-3 hour drive from London this undulating attractive countryside offer plenty of history, cathedrals and monuments from WW1 and WW2. Alsace Champagne-Ardenne Lorraine this sparsely populated attractive region on the German/ Belgian border has many historic cities, forests and vineyards. It s famous for its cellar visits and champagne/wine tasting. South West France Is a very popular tourist region. From the Atlantic coastline through to the Mediterranean. Aquitaine Limousin Poitou-Charentes offers long expanses of sandy beaches and away from the towns there are long sections of unspoiled coastline. Inland, the mainly flat and agricultural region, is famous for its historic churches. Around Bordeaux are miles of famous vineyards, and the Dordogne is renowned for its pretty villages and towns. The climate along the Atlantic coast is generally mild to warm for most of the year. Languedoc-Roussillon Midi-Pyrénées the inland part of this region is famous for its medieval fortified towns with the Pyrénées providing high mountain terrain to the Spanish border, offering ski resorts through the winter months. In areas of the historical Languedoc some locals still speak Catalan. The coastline is characterised by long sandy beaches, (except where the Pyrénées meets the coast) and old coastal villages built around rocky cliffs and small coves. Southern France Provence-Alpes-Côte d Azur one of the famous regions of France renowned for its lavender fields, olive trees and dry rocky coastline that winds its way through Cannes and Nice to the Italian border. The Alps Auvergne Rhône-Alpes Lyon, France s 2nd largest city makes this one of France s most populated regions. This area is characterised by the high peaks of the Alps with its outdoor pursuits as well as old towns and villages and rich historic heritage. Step 2: Type of Property If you are not in a rush to buy, keep an eye on the property market over a period of a few months to see if houses sell well in the area you have chosen. This information could put you in a good negotiating position later. Consider what sort of property you want: permanent, holiday home, investment or business; accessibility from the UK; the amount of time you intend to spend there and of course your lifestyle. We recommend you start by creating a list that is divided into three categories: Essential (factors that you re not willing to negotiate on) Preferred (features you would like to have a wishlist) Must not have (factors that would knock a property out of the running e.g. being on the flight path of a busy airport) There are a number of other factors to consider. If relocating to France employment, schools, shops and healthcare services will be equally as important. You may want to consider what the local community is like. If you want to fully integrate into French life you will want to speak, or learn to speak, French fluently. Check the orientation of the property for sun. If you are near the mountains and want to have your balcony drenched in sun you will need to work out if this will be possible all year round. Will you be inundated with tourists during the peak months? It is worth visiting the areas during these months to see how congested it can become. Did you know that for some properties hunting is permitted on the land? You can apply for your land to be designated an animal sanctuary (un refuge)

6 FINDING A PROPERTY Buying a new build Buying an off-plan property in France is strictly regulated and is designed to protect the interests of the buyer. French developers must have a bank guarantee in place for each development and this guarantee is provided in the Deed of Sale to ensure that the development will be completed to the advertised standards even if the construction company gets into financial difficulty. Seek professional advice before commencing a new build. Buying a farmhouse, barn or period property The majority of our UK buyers search for older types of properties, the dream to own a period house or do up a dilapidated barn is still on many buyers wish list. Whilst the price of unmodernised property is cheap in rural France, building costs can be expensive, and are generally higher than building costs in the UK. Don t fall into the trap of believing that all French property is cheap, prices in many cities, especially Paris and Marseille, are equivalent to those in the UK. Period properties in remote rural areas can be cheaper because they are less popular with French owners. 11

7 CURRENCY EXCHANGE CURRENCY EXCHANGE Step 3: Your budget If you are not a cash buyer, you will need to determine the amount you can afford as a deposit as well as taking into account what your mortgage repayments will be. There are a number of costs that come with buying property such as taxes and fees. As a guide the costs involved in buying a property are 7-10% of the cost of the property and 2-3% on a new build. Generally the purchase price includes the estate agent s commission. There are also costs associated with renovating and maintaining the property. Take into account service charges when purchasing apartments. Owners pay for the upkeep of shared areas such as lifts, gardens etc. Finally, consider what your maximum purchase price is taking all the above points into consideration. One of the biggest mistakes buyers make is using the exchange rate at the point in time they start their search to determine their budget. The smallest fluctuations can have a huge impact on affordability. CURRENCY EXCHANGE Make sure you obtain the best exchange rate when it comes to exchanging sterling to euro for your deposit and completion payments, as well as any ongoing mortgage payment and savings transfers. Speak with our currency partner Foremost Currency Group in the early stages of your purchase. Your own dedicated broker can guide you through a range of contract options and find one that offers you a host of advantages depending on your situation. The different options include: Spot Contract The spot contract is the fastest way to exchange currency. As soon as you have found the property you want, you can contact Foremost Currency Group, agree a rate of exchange and instruct your dedicated broker where to send your euros. You then have two working days to transfer the sterling to Foremost Currency Group, then your euros can be sent. When your notaire requests your property deposit, a spot is normally used. Limit Order The limit order contract helps you get the rate you want. If you know what exchange rate you will need to buy that cottage in Brittany, you can instruct your Foremost Currency Group broker to purchase the euros automatically as soon as the market achieves this rate. A great option if time is on your side and you can afford to wait until the market moves in your favour. Stop Loss Order The stop loss order protects you against a drop in the exchange rate. It allows you to buy currency if the exchange rate drops to a pre-determined minimum level. Combine it with a limit order and you can hold out for a better rate while protecting yourself from a sudden fall in the market perfect for budgeting and forecasting. Forward Contract The forward contract allows you to set the rate for up to 2 years. When your property price has been agreed but the completion date is still a few weeks or months away, a forward contract guarantees Length of Time FX Rate Fixed the price as the formalities are concluded, protecting you from any market volatility. Or if you feel that the exchange rate is at a high but you haven t quite found the right property you can use the forward contract to hold that rate of exchange for up to 2 years with just a 10% deposit (payable within two working days) and then settle the balance before the contract expires. Most customers choose to use both a spot and a forward contract. This is beneficial as you can pay for your deposit and any fees using a spot contract, but you can also use a forward contract to secure the currency for your property further down the line. This combination of contracts provides peace of mind and the ability to budget accurately. Purchase Date FX Rate Amount Saved

8 YOUR SEARCH START YOUR SEARCH Allez Francais website is the perfect place to start your search with thousands of French properties for you to choose from. Through our website you will be able to see the types of properties available in the region, the price and the number of bedrooms. You will also be able to make a shortlist of properties that are of interest to you. When you enquire about any of these properties, your enquiry is sent directly to the agent and they will contact you about your property search. You will also receive a phone call or from our FX partner Foremost Currency Group, and one their currency brokers will introduce the range of options available to you if you require assistance with transferring funds abroad. Estate Agents Allez Francais When you choose an estate agent, look for experience ask how long they have been in the industry and operating in the region you are purchasing in. Determine at the beginning, well before your first viewing, if your agent is going to be reliable, enthusiastic and helpful. This can be determined by how quickly they respond to your s before any viewing trips to France. It is a good idea to use an agent who belongs to a professional association such as FNAIM, SNPI or UNPI and we recommend you view properties through licensed Agent Immobiliers. These agents, who are professionally qualified, also hold a Carte Professionnelle and have professional indemnity insurance so that you are protected. The Carte Professionnelle is the agent s licence to carry out property transactions. Some estate agencies contract independent sales staff called Agent Commercials to cover a wider area. These Agent Commercials don t have the same level of regulations as the Agent Immobiliers and whilst they can t perform the same legal functions they can still provide a comprehensive service. Many estate agents offer documentation in English although these translations must not be used as part of the formal sales process. The prices displayed in an estate agent s window should include the agent s fee of around 4-10% of the property price. If this is the case, the price should be followed by the letters FAI. Always ask if the price quoted includes all fees and taxes and if it doesn t, ask for an estimate of how much extra you might expect to pay all of the fees are subject to 20% TVA (French VAT). 15

9 YOUR SEARCH BUYING THE PROPERTY Viewings Using an estate agent who knows the region well and can take you to multiple properties in a day is how most overseas buyers find their property in France. Some choose to buy privately. If you find a property through a private seller, ideally get a second valuation done from a reputable agent to ensure you are paying a fair price for the property. Book a trip during the off-season as this is often a slower time for the estate agents, and sellers are more likely to negotiate a lower price when demand is low. Let the estate agent put an achievable viewing schedule together to make the most of your trip and see the best properties. We recommend up to 5 viewings a day and make sure you ask a lot of questions while the estate agent is taking you around. Find out about the local amenities, climate, crime rate etc. Take photos of the property and the surrounds and make sure you talk to the locals to get as much information as you can. BUYING THE PROPERTY THE LEGAL PROCESS Notary Notaire Every property purchase in France must be administered by a notaire who is a public official, highly qualified in the French legal system, and impartial to the transaction. The French system makes the legal process relatively quick and efficient as the notaire often manages the purchase on behalf of both the buyer and seller. The notaire is similar to a solicitor in the UK as they do the conveyancing of the property. They are responsible for overseeing the legal work connected to the sale including preparing the contracts and conducting searches. These include confirming the seller s title to the property; an asbestos; lead; and termite survey; checking that there are no outstanding mortgages against the property; establishment of boundaries etc; collecting the taxes due on the transaction and holding the money for the property in their bank account. Unlike the UK there is no requirement for the notaire to make comprehensive searches for you. The notaire has indemnity assurance, which provides you with a financial guarantee. Normally both the buyer and seller use the same notaire due to the impartiality of the notaire to the transaction. But if you wish you can choose a different notaire to your seller. This may be advisable if the seller is local as although notaires are impartial, in a small town personal relationships may have developed which may work against you. If you do appoint your own notaire, costs remain the same as they simply split the work. Notaires will charge between 2% and 8% of the property s net buying price (the higher the price the lower the percentage). The price of their service includes local and government taxes and the equivalent of stamp duty in France. For an existing property, it is normal to pay 8% of the purchase price as the cost for the notaire/legal fees. These fees can only be included in your mortgage if you are a French tax payer. If you pay tax in the UK you will have to pay for the fees yourself

10 BUYING THE PROPERTY Preliminary Sale Agreement Compromis de Vente Once you have found your ideal property, ensure that your offer includes a clause to say that it is subject to the signing of the Compromis de Vente otherwise your offer may be binding sooner than anticipated. Your notaire will draw up the Compromis de Vente binding both parties to the sale and purchase of the property. Make sure the Compromis includes any conditions of sale that you have agreed with the seller and ensure you have covered any issues such as access and right of ways, utilities, boundaries, planning consents, survey, obtaining finance etc. Your notaire should include a clause suspensive which allows you to withdraw from the purchase if these conditions are not met. Insist that any clause that frees the seller from hidden/latent defects is not included in the contract. If you are buying a new property you will be required to sign a different form of contract called a Contrat de Reservation, which will also have clauses suspensives. You will need to supply legal documents such as birth certificate, wedding certificate and a photocopy of your passports so ensure you take these with you. Cooling Off Period Délai de Rétractation You now have a 10 day cooling off period (previously 7 days) during which time you, but not the seller, can withdraw from the contract without explanation. You must do this by registered letter. The cooling off period is not available for the isolated purchase of any other land, including a single building plot, a garage or other ancillary buildings. Once the cooling off period has passed, a deposit is then paid, which is normally 10% of the property price (this can sometimes be negotiated down). Remember it is worth speaking to one of our currency brokers before you transfer your deposit, so they can discuss the options available to you. Once your deposit is paid the contract is legally binding on both parties and the house is taken off the market. The deposit can be sent either directly to the notaire or to the estate agency (if it has the correct status to accept money on behalf of the buyer). It should not be sent to the seller. The deposit is held by these parties until completion of the purchase. Ensure all documents are translated independently and never sign anything you don t understand. 18

11 BUYING THE PROPERTY FINANCE Surveys Most French property buyers don t normally have the property surveyed as there is no building surveying profession in France. There is a list of tests that the seller must pay for and have carried out by professionals. Up to eight surveys must now be undertaken for asbestos, electricity, energy efficiency, gas, lead, natural or industrial risks, private waste water drainage (septic tanks) and termites. Most sellers wait until they have an offer agreed before commissioning the reports, as some are only valid for a short period before they need to be carried out again. If you would like a more comprehensive survey, the Royal Institute of Chartered Surveyors (RICS) have a list of professional building surveyors from the UK working in France. Ensure that the RICS surveyor is registered as a business in France, and that they carry professional indemnity insurance (PII) for building surveys in France. Completion Acte de Vente The completion will typically take around 3 months after the Compromis has been signed. You should arrange to view the property on the day of the signing as there is a clause saying sold as seen on signing date. You sign the Acte de Vente at the notaire s office and they will confirm the time to meet with you a short time beforehand. Ensure that you transfer the balance of the funds to them well in advance. You must also provide proof of purchase that the house is insured. If you can t get to France to sign the Acte de Vente check to see if you can use a solicitor in Britain or arrange for your notaire in France to have Power of Attorney. Once signed you will receive the keys and you are now a proud owner of a house in France! FINANCIAL MATTERS Inheritance Until August 2015, French property was subject to forced-heirship inheritance provisions. This means that protected heirs, usually children, would have had a fixed right to at least a minimum interest in the estate. The new legislation, EU regulation 650/2012, also known as Brussels IV, now means that any British national who has property in France, or any other participating EU state (and who has taken appropriate action before their death) can choose either the law of the country of their habitual residence, or of their nationality (if you have multiple nationalities, then you choose one) to govern the devolution of their French estate. If you do not have any estate planning measures in place and you live in France permanently, all your property (even real estate properties abroad) will be subject to the French inheritance rules. If you live in the UK permanently (or in another country in the European Union) all of your estate, including property in France, will be subject to the inheritance law of the country where you live. In this situation, the new regulations mean that property in France won t be subject to French law. If you don t live in France permanently but you have a holiday home in France, the French law will apply to that house only with the same restrictions. If you seek specialist advice and plan the settlement of your estate, the new regulations mean that you can choose which national law will be applied to the settlement of your estate. This can be done by making a will. Each situation is different and we recommend you contact a specialist in order to take advantage of the new regulations

12 FINANCE Mortgages Mortgages are available from all major French banks for both residents and non-residents as well as many foreign banks. Otherwise you may wish to remortgage your UK home to get a sterling (UK) mortgage. French mortgage interest rates are often more competitive than British ones making it cheaper to purchase your property with a French mortgage, rather than remortgage your existing home. However currency swings and devaluations can wipe out any interest rate gains. Shop around and compare interest rates, terms and fees from a number of banks and financial institutions both in the UK and in France. When choosing between a euro loan and a sterling loan, be sure to take into account all costs, fees, interest rates and possible currency fluctuations. We recommend that you seek professional advice through mortgage brokers or your bank and speak to our currency partner, Foremost Currency Group, to see how you can reduce any exchange-rate risks. The most important element when borrowing in France will be the ability to prove your income. As a general rule, the mortgage repayments cannot exceed 33% of net income. Fixed and variable loans are available, but you will find that interest only and buy-to-let products that are standard in the UK are generally not offered in France. You will not be made a formal mortgage offer from a French lender without first signing a sale and purchase contract for the property, but you should try and obtain a pre-approval mortgage certificate, which may be useful in price negotiations. All mortgages in France must be covered by life insurance. Some lenders insist on you purchasing their life insurance products. It is also useful to open a bank account in France as soon as possible to deposit funds into on a regular basis, as this will go down well later with the bank in any future mortgage applications, and is likely to speed up the mortgage application process. 23

13 FINANCE Taxes Property Tax There are two types of property taxes taxe d habitation (local tax) and taxe foncière (regional tax). Taxe d habitation is payable by the occupier of a French residential property who was occupying the property on 1st January. Even if the property was empty, if it was capable of occupation, the tax is also payable. Taxe foncière is payable by the occupier of the property on 1st January. The tax is also payable on undeveloped land. There are exemptions for agricultural land. French Income Tax If you are a resident in France, then you are liable to French taxation on your world-wide income. The level of taxation for expats who have taken early retirement, or who are of retirement age, is generally very modest. Non-residents are obliged to make an annual return for income tax if they receive income from letting property in France. You can offset a proportion of your liability against any income tax paid in your home country. Capital Gains Tax If you sell your property in France then capital gains tax is payable at 16% on the capital gain. Residents are also liable for social charges of 11%. There is an exemption if the property is your main home, and it is levied on a reducing basis if you have owned it for more than 5 years. Wealth Tax Wealth tax is payable on an annual basis by any household owning taxable assets worth over the threshold on 1st January. Payment is due in June. There is no wealth tax for those with wealth below 1,300,000 in assessable assets. We highly recommend that you seek independent professional advice on the best way of managing your tax obligations from specialist firms. Visit our website wwww.foremostcurrencygroup.co.uk/partners/ for a list of recommended tax specialists. NB: Speak to Foremost Currency Group for a list of recommended tax specialists. (+44(0) ) 25

14 CASE STUDY We trust this property guide will help your property purchase abroad go smoothly. If you have any concerns relating to your purchase or sale of a property in France, please do not hestitate to contact us on contact@allez-francais.com. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam mauris nisl, sodales at vulputate id, pellentesque et lorem. Etiam metus diam, venenatis et turpis a, convallis eleifend erat. Duis nec risus lorem. Fusce id sodales lacus. Curabitur efficitur orci et odio venenatis accumsan. TRUST WHEN MOVING MONEY ABROAD, YOU WANT TO TRUST THE COMPANY YOU CHOOSE TO GET YOU A GREAT EXCHANGE RATE AND TIME YOUR TRANSACTIONS n Trusted by over 15,000 customers n Dedicated knowledgeable currency brokers n Segregated client accounts n Fast and secure transfers Call today to speak to one of our currency brokers on or visit our website foremostcurrencygroup.co.uk to open a free trading account today The Foremost Currency Group Limited is authorised by the Financial Conduct Authority (FCA) for the issuing of electronic money under the Electronic Money Regulations 2011 [FRN ]. Registered in England: No We are supervised by the FCA for compliance with the Money Laundering Regulations (MLR) 2007.

15 MAKE THE MOST OF YOUR CURRENCY Foremost Currency Group Phone: +44(0) Allez Francais Phone: +33(0) Disclaimer. This guide is provided for general information purposes only and none of the information represents formal advice. Foremost Currency Group cannot be held responsible for the consequences of decisions or actions you take throughout the process of purchasing a property. We strongly recommend that you seek independent advice at all stages of the buying process. Copyright The Foremost Currency Group Ltd, No part of this document may be reproduced, stored or transmitted in any form or by any means, electronic, photocopying or otherwise, without permission of The Foremost Currency Group Ltd (Company No ). 28