Selling and buying real estate, guide in 5 key steps

SELLING AND BUYING REAL ESTATEGUIDE IN 5 KEY STEPS

FROM STRATEGYTO DEEDS

Buying and selling real estate are important transactions in somebody’s life,which require careful thought and planning. This general rule is all the morerelevant as real estate transactions have become extremely complex, due tothe very wide range of laws and regulations governing such transactions, witha combination of public interests (town planning, social diversity, creditcontrols, etc.) and private interests (property rights, tenant rights, construc-tion rights, etc). In addition, the legislator’s determination to grant buyers asmuch protection as possible is reflected in the formal, binding requirementsapplying to the sale process (cooling-off period, handwritten reference toScrivener law, etc).The ALUR law of 27 March 2014 has introduced even more constraints: it re-quires a large number of documents to be gathered at the pre-contract stage,and this can sometimes be a particularly daunting task. At the beginning ofthe last century, deeds of sale contained a handful of pages. Nowadays, thesmallest such deed often runs to more than 200 pages, if the numerous appen-dices are included.At a time when it is possible to purchase anything with 3 clicks online, the “notarial procedure” may seem very long. However, it is surely worth taking alittle longer to ensure the legal certainty of a real estate transaction, conside-ring what is at stake.The purpose of this guide is to set out the five keys steps to be followed whenselling and buying real estate, in other words what buyers and sellers need toknow in order to be fully prepared and understand the work carried out “behind the scenes” by Notaires for the completion of the transaction.

THE 5 KEY STEPS IN SELLING ANDBUYING REAL ESTATE

STEP 1: THE DECISION TO SELL OR BUY

STEP 2: THE PRE-CONTRACT

STEP 3: BETWEEN THE PRE-CONTRACT AND THE SALE

STEP 4: THE SIGNATURE OFTHE SALE

STEP 5: AFTER THE SIGNATURE

Contents

N° 2.5

The ALTHÉMIS Group newsletter, notaries network // N° 2.5 // January 2017

2 // FROM STRATEGY TO DEEDS // The ALTHÉMIS Group newsletter, notarial network // N° 2.5 // January 2017 //

THE DECISION TO SELL OR BUYSupply and demand meet during the so-called «pre-contractual» period. Thisstep begins with the owner’s decision to put a property on the market andends when the buyer’s offer is accepted.

STep 1

THE “FAIR” VALUATION OF THE PROPERTYThe question of the property’s valuation is obviously a key concernfor both the seller and the buyer. Onthe one hand, the seller’s objective isto obtain the best possible price, without scaring off potential buyers,whereas the buyer wants to get thebest possible deal, without havinghis or her offer rejected.It is therefore essential that bothparties are familiar with the real es-tate market at the time of the trans-action. In this regard, there arenumerous possibilities: real estateadvertisements (paper form and/orsubscription to email alerts), real estate market statistics provided byNotaires, websites and, of course,advice from real estate professionals.

FOR THE SELLER: ORGANISING THE SALEchoosing how to put the property on the marketWhile France is among the countrieswhere there is still a very high pro-portion of direct sales between homeowners, the constraints in this

type of choice should not be underestimated. Unless the seller hasthe necessary time and motivation,it is preferable to use the services ofan estate agent: placing and rene-wing advertisements, answeringphone calls, showing the property to potential buyers, involving sometimes several visits for the sameperson, answering a very wide rangeof questions, distinguishing betweenserious and less serious offers requiregenuine professional expertise.

preparing a full file to sell theproperty as quickly as possibleat the best possible priceAlthough a large number of documents are needed, they are essential in order to provide thebuyer with all relevant information,thereby reassuring the buyer andspeeding up the decision-makingprocess. These documents includenot only the documents related tothe ownership, but also technicaldiagnostics.This can take time, and may involveobtaining copies or regularising cer-tain matters. For example:

you cannot find your title of ownership (authentic copy of thetitle deed) and you need to obtain acopy from the land registry, you have acquired possessory titleto a common area (“partie com-mune”) with the consent of the co-owners, but the situation has notbeen regularised with the land registry.It is therefore necessary to be proactive and consult your Notaire assoon as possible in order to antici-pate any unexpected difficulties andavoid a situation where the buyermight try and renegotiate the priceon the grounds of information notavailable at the time of his or heroffer.For the sale of property in co-ownership buildings, it is preferableto contact the Notaire before putting it up for sale, because of the constraints of the ALUR law.

Making an initial capital gainstax assessmentAny capital gain will, if applicable,be subject to flat-rate income taxand social security contributions.

The exclusive mandategives a single real estateagency the sole right to sellyour property and, natu-rally, in such a case, the es-tate agency in question ismore motivated.

You can also sign an exclu-sive shared mandate(two agencies) for diversifi-cation purposes or givemandates without exclu-sivity clauses, in whichcase you can give as manymandates as you wish.

However, be careful not tochoose too many agenciessince, from a commercialpoint of view, this may “un-dermine” the sale of theproperty and discourageagencies.

Whatever type of mandateyou choose, you can alsofind a buyer directly byyourself, provided that youinclude this option in thecontract.

THE DIFFERENT TYPES OF MANDATE

// FROM STRATEGY TO DEEDS // The ALTHÉMIS Group newsletter, notarial network // N° 2.5 // January 2017 // 3

However, some exemptions aregranted, in particular where theproperty is the seller’s main resi-dence, or in the case of propertyowned for a certain length of time.To calculate the purchase price, youmust take account of the costs in-curred at the time of purchase (re-gistration fees, notarial fees, estateagent’s fees, etc.), as well as the costof any improvement work carriedout on the property. These amountsare therefore deducted from thegross capital gain calculation.The amount of the taxable capitalgain could be reduced at a ratewhich depends on the period of ownership.For sales made since 1st January2013, an additional tax is now paya-ble on real estate capital gains, ifthe amount of the taxable capitalgain exceeds EUR 50,000. Its rate va-ries according to the amount of thetaxable capital gain.

It should be noted that these rulesapply only to sales made in Franceby French tax residents. For non-residents, each case is dealt withspecifically, depending in particularon the owner’s tax domicile.For more informations, please referto our Le Point Sur n°5 devoted tothe taxation of real estate capitalgains. You can also consult the observations of the tax authoritieson the taxation of real estate capitalgains via our website ww.althemis.frunder Useful Links.

FOR THE BUYER: THE CRUCIALQUESTION OF FINANCINGfinancing a propertyFrom the buyer’s viewpoint, themost important issue is that of financing: personal funds, borro-wing capacity, family help in theform of a loan or gift.Obviously, a purchase involving several buyers (married couple, couple living together under a civilpartnership (“PACS”) or simply co-habiting, family purchase, etc.)requires special arrangements.

The total budget needs to includethe purchase price, plus registrationfees (unless the property is subjectto VAT), notarial fees and any bor-rowing and guarantee costs (mort-gage or guarantee) and, of course,the estate agent’s fees.

Simultaneous buying and selling or a bridging loan ?When you already own a propertywhich you need to sell in order to finance your new acquisition, ideallyyou should try and coordinate thetwo transactions, but in practicethat is often difficult.This raises a dilemma: should yousell before buying, with the risk offinding yourself temporarily home-less, or should you wait until youhave bought another property before selling? While there is no

perfect solution, both options havedefinite pros and cons.Selling before buying gives youprice security, whereas if you opt forthe other solution you need to “buytime” by taking out a bridging loan,which has certain inherent risks, especially in a difficult real estate market.In this regard, it is clear that theexistence of an undertaking to sellin respect of the property to be soldwill make it easier to get the bank’sagreement. However, if the pro-perty is not sold before the agreeddeadline, you will come under verystrong pressure to reduce your sel-ling price.If there are alternatives to sellingthe property (redeeming a life insu-rance policy, selling another property, etc.) this risk is reduced. n

Althémis’ adviceIf you want to transfer part of your assets

to your children, it may be appropriate to give them

the property before the sale

in order to eliminate the capital gains tax.

When a property is sold,

the buyer must pay the

Notaire an amount (in-

correctly called “notarial

fees”) corresponding to

various taxes, amounts

due to third parties (sur-

veyor, property manage-

ment firm) and the

Notaire’s remuneration.

The Notaire’s remunera-

tion is established on

the basis of a scale of

charges set by the State

and identical for all

Notaires.

For example, for the sale

of a property in Paris

worth one million euros,

the total amount of

these expenses is

around 7% of the selling

price (84% of this

amount goes to the

Treasury). The remunera-

tion paid to the Notaires

is less than 1% of the

total price.

ACQUISITION EXPENSES


UNILATERAL UNDERTAKING TOSELLThere are two types of pre-contract:a contract containing unilateral un-dertaking to sell and a preliminarysale agreement. Although they arevery different in philosophy, the twoformulas have become very similarover time. Moreover, they both pro-vide for a seven-day cooling-off period and the condition precedentof the buyer obtaining a loan.

The contract containing unilate-ral undertaking to sell (“pro-messe unilatérale de vente”)In the unilateral undertaking to sell,the seller gives an undertaking whilethe buyer has the option whether ornot to buy until the expiry of the op-tion. If the buyer decides not to com-plete the purchase he or she mustpay the seller the reservation depositspecified in the contract (generallybetween 5 and 10% of the price) inconsideration for the seller agreeingto “reserve” the property for him orher during the period of the option.The advantage of the unilateral un-dertaking to sell is that it is lessconstraining for both parties: for thebuyer (who loses the reservation de-posit, but who can never be com-pelled to buy if he or she choosesnot to exercise the option) and forthe seller who can find anotherbuyer more quickly if the option tobuy is not exercised.

The preliminary sale agreement(“compromis”)On the other hand, the preliminarysale agreement is a bilateral contractwhich is binding on both parties: moreover, the French Civil Code sti-pulates that a preliminary saleagreement “has the effect of sale”.

The buyer is required to completethe purchase “unless one of theconditions precedent has not beensatisfied”, and if the buyer refuses tocomplete the transaction he or she isliable for compensatory damages(which amount is set up in thecontract on the basis of 5 to 10% ofthe price) as well as the judicial en-forcement of the sale (with an obli-gation to pay the purchase price).

The criteria for deciding whichtype of pre-contract to chooseBoth types of pre-contact have advantages and disadvantages. Ingeneral, estate agents use the preli-minary sale agreement.

Regarding notarized pre-contracts,there is in general a geographical di-vide (partly linked to real estateprices) between, on the one hand,Parisian Notaires, who tend to fa-vour the unilateral undertaking tosell and, on the other hand, Notairesin the provinces who often preferthe preliminary sale agreement.

DOCUMENTS REQUIRED FORTHE PRE-CONTRACTThe party drafting the undertakingto sell or the preliminary sale agree-ment needs a number of documentsin order to have a good overview ofthe transaction. The list of docu-ments required varies according tothe nature of the property and its legal situation: title deed, civil status of the sellers and buyers (including any marriage contract)

THE PRE-CONTRACT When the seller and buyer have reached an agreement on the property andits price, this agreement needs to be formalised by signing a pre-contract,which is a key part of the transaction. In essence it establishes the final fra-mework for the transaction and that is why it is very important to call on theassistance and advice of a real estate professional for its drafting. We believethat a Notaire should be involved from the outset, especially when dealingwith complex transactions: selling land for development, large properties,properties with specific legal difficulties, etc.

STep 2

Pursuant to ALUR law, it is mandatory

to provide, at the pre-contract stage, a

large set of documents: all the deeds

amending the co-ownership regula-

tions, maintenance manual, accoun-

ting information to be provided by the

property management company, etc.

The information about the financial

state of the co-ownership are provi-

ded to the Notaire in a document cal-

led «pré-état daté».

This new requirement may, in some

cases, considerably extend the time

needed for drafting the pre-contract.

Do not hesitate to contact your

Notaire as soon as you have put your

property on the market. Any failure to

provide these documents may consi-

derably complicate the sale process

and prevent from starting the 7 days

cooling-off period.

Documents requiredfor co-ownership


SETTING UP A FRENCH REAL ESTATECOMPANY TO MAKE A PURCHASE

If you want to set up an

SCI to make your pur-

chase, you need to

include a right of substi-

tution in the pre-

contract. Furthermore, if

bank financing is used,

the bank must be infor-

med rapidly of the for-

mation of such an

acquisition vehicle. A

copy of the company’s

draft articles of associa-

tion must also be sent to

the bank.

As regards the loan,

there are two possible

solutions: either the

bank lends to the SCI or

it lends to the sharehol-

ders who in turn make a

contribution in cash to

the SCI, either via the

shareholders current

account or as capital, in

order to finance the

acquisition. This type of

company can be used to

meet a number of objec-

tives: to avoid joint ow-

nership, to separate

“ownership” and

“control”, to optimise

the transmission of the

property, to provide the

spouse with better pro-

tection, etc.

However, it is important

to note that if the SCI

lets the property purcha-

sed on a furnished basis

(even temporarily), it will

be subject to corporation

tax, with all the relevant

tax consequences.

Althémis’ adviceIf you are a seller, rather than accepting an offer

from a potential buyer (its represents a real

commitment), it is preferable to sign a pre-contract

which involves agreeing on aspects other than

simply the price.

and compulsory technical diagnos-tics. If the property is or has beenrented: a copy of the lease, vacationnotice sent by the tenant or noticeto vacate constituting an offer forsale. Other documents may includethe last property tax notice, the co-ownership rules and/or the specifica-tions of the sub-division as well asthe last three minutes of the gene-ral assembly of co-owners. If the pro-perty is owned by a propertyinvestment company, it is essential toprovide a copy of the company’s ar-ticles of association. If work has beencarried out on the property it willalso be necessary to provide a copyof the planning permission (buildingpermit or declaration of work) and acopy of the “structural damage” insurance policy in the case ofconstruction work, extensions (inclu-ding upwards extensions) or trans-formation work carried out withinthe last ten years.

CONDITION PRECEDENT OF OBTAINING A LOANThe French Consumer Code specifiesthat when a buyer intends to rely onone or more loans to finance an ac-quisition, the sale is agreed subjectto the said loan(s) being obtained. Inconcrete terms, this means that ifthe loan is not obtained, the buyermay be released from the pre-contract without any penalty. It is

therefore understandable that thisclause needs to be strictly regulated:description of the terms and condi-tions of the loan (duration, type,maximum rate of interest excludinginsurance), with a deadline for obtaining the loan. The law providesfor a minimum period of 30 days,but it is more realistic to allow for 45 days. If the buyer does not intend to relyon a loan, this must be specified inthe form of a handwritten note inthe contract, in order to ensure thatthe buyer is aware of the effects ofsuch a choice, if the deed is not notarized.

COOLING-OFF PERIODIn the case of residential property(for use as the buyer’s main or

secondary residence or even for letting), the buyer has a period of 10 days (from the delivery by handor notification by registered letter ofthe pre-contract) to exercise the option to withdraw from the transaction.

RESERVATION FEE (OR SECURITY DEPOSIT)As part of the pre-contract commit-ments, the buyer will pay a “reserva-tion fee” in the case of a unilateralundertaking to sell or provide a security deposit in the case of a pre-liminary sale agreement. It is customary to pay 10% of theprice, but for large amounts it is becoming increasingly common forthe parties to agree on the paymentof only 5% at the time of the pre-contract.This amount is paid to the Notaireand placed on an escrow account. Ifthe sale is completed, the amountpaid is deducted from the sellingprice. If, on the contrary, the salefalls through, everything dependson the reason: if the buyer cannot complete be-cause his or her loan application hasbeen rejected or a condition prece-dent has not been satisfied, theamount is returned to the buyer; if the buyer is at fault, the contractprovided that the agreed amountmust be paid to the seller (who mustask the buyer for the payment of thebalance if only a fraction of theamount was paid at the outset). n


STEPS TO BE TAKEN BY THEBUYERThe buyer must take the necessarysteps to ensure that the suspensoryconditions applying to his or her pur-chase are fulfilled. These mainly re-late to obtaining financing and anytown planning approvals needed forhis or her project.

obtaining financingThe buyer must comply with thedeadline specified in the pre-contract for obtaining financing.If, on the agreed date, the loan ap-plication has not been approved,there are two possible scenarios: either the buyer’s loan applicationhas been rejected, and in such a casethe law stipulates that the contractsigned between the parties is void.The buyer then recovers his or herreservation fee or security deposit,while the seller becomes free to sell

the property to another person; or the bank has not yet notified itsdecision, in which case the seller mayask for the contract to be declaredvoid. However, if the buyer sowishes, and with the seller’s agree-ment, the deadline may be extendeduntil the bank has given its decision.

It is possible to provide in thecontract for a third party substitutebuyer. In such a case, where obtai-ning financing is a condition prece-dent, it is advisable to anticipate thissubstitution possibility as early as thepre-contract stage in order to enablethe third party to prepare a loan application in a timely manner.

obtaining a building permit orauthorisationIf completion of the transaction iscontingent on the buyer obtaining abuilding permit (or other town

planning authorisation) the period between the undertaking and thesale enables the buyer to: file his or her application for a permit, obtain a response from the com-petent authorities (depending onthe circumstances, this can take between 3 and 5 months), take account of the time limits al-lowed for third party appeals (2 months) and for the authorities towithdraw the permit (3 months).The time limit for third party appeals(2 months) runs from the date onwhich the building permit is dis-played on the land. The permit mustbe displayed continuously on theland throughout the two-month pe-riod. The best solution in this regardis to have an affidavit drawn up by abailiff at the beginning, in the mid-dle and at the end of this period.

During this period, the parties must take a certain number of steps to ensurethat the transaction is successfully completed. The Notaire analyses and pro-cesses the elements that are necessary for the signature of the deed of sale.

BETWEEN THE PRE-CONTRACT AND THE SALE

STep 3

CHOOSING A NOTAIRE

Both the buyer and seller

are free to choose their

Notaire (no territorial exclu-

sivity). They are not requi-

red to use the same

Notaire. However, when

there are two Notaires, this

raises the question of who

drafts the contract, in other

words who draws up the

pre-contract and the deed

of sale. This is determined

according to the rules of

the notarial profession,

which vary between cham-

bers of Notaires and are so-

metimes fairly complex. To

simplify matters, we can

say that it is generally the

buyer’s Notaire who draws

up the deed of sale, in

which case the seller’s

Notaire then transmits to

the buyer’s Notaire an

“information pack”, contai-

ning the necessary informa-

tion on the property. When

the seller’s Notaire is loca-

ted in the same judicial dis-

trict as the property being

sold, and the buyer’s

Notaire is in another judi-

cial district, then the seller’s

Notaire draws up the deed.

The notarial fees are borne

by the buyer and are shared

between the seller’s Notaire

and the buyer’s Notaire.

Therefore, the use of two

Notaires does not create

any additional cost.


PREPARATION OF THE FILE BYTHE SELLER’S NOTAIREIn order to finalise the sale, it is ne-cessary to collect a number of docu-ments which are examined by theNotaire.

Mortgage checksThe aim is to check whether the pro-perty is encumbered with a currentmortgage. If so, it is necessary tocontact the creditor to arrange forthe mortgage to be released, withthe cost being borne by the seller(e.g. the simplified release of a mort-gage corresponding to an originalloan of EUR 500,000 costs aroundEUR 1,400).If the mortgage is not released, theproperty will continue to be encum-bered despite the change of owner.If there is still an outstandingamount to be settled the creditorwill give its consent, subject to re-payment in full of the amount inquestion.In practice, any such amount is set-tled by the Notaire who deducts itfrom the selling price.

obtaining information from the land registry and urbanplanning informationThe aim is to provide the buyer withgeneral information on the propertywith regard to planning regulations(easements, the possible existence ofpre-emption rights, absence of a

dangerous structure notice, infor-mation on quarries, etc.). For thispurpose, the Notaire usually ap-points a surveyor.However, the buyer may only with-draw from the transaction if this in-formation reveals previouslyundisclosed defects or easementswhich would prevent the propertyfrom being used for its intendedpurpose or which would have a significant adverse effect on its

market value: expropriation, theproperty has been declared dange-rous or unfit for occupation, it is in areserved area, infringement of pu-blic highway specifications, etc. Theinformation which is provided whenthe sale takes place is very general.If the buyer has a specific project, heor she should contact the local townplanning department in order to en-sure that the project is feasible.Furthermore, the information provi-ded relates to the actual site and notits environment.Here too the buyer should contactthe competent authorities directly if he or she wants more detailed information on potential projectsnear the property (building of a newroad, new public facilities, etc.).

pre-emption rightsThe law provides for various pre-emption rights which enable theright-holder to acquire a propertyinstead of the original buyer: themunicipality’s urban pre-emption right, the SAFER’s pre-emption right in rural areas, thetenant’s pre-emption right (if the te-

Althémis’ adviceAllowing the buyer to take early possession

of the property in order to live there or

carry out work is very risky for the seller

and buyer alike. Between the undertaking

and the sale, many things can happen and

compromise the transaction: the exercise of

a pre-emption right by the municipality, fai-

lure to obtain a loan, death of the seller or

buyer, fire, etc.

For property lending,

banks generally require

a guarantee, which may

take several forms. The

first is a mortgage (in

the case of property fi-

nancing, this takes the

form of a lien benefiting

the lander “privilège de

prêteur de deniers”). It

allows the bank, if the

borrower defaults, to

seize the property and

use the proceeds of the

sale to reimburse the

loan.

The other solution is to

ask a specialised mutual

guarantee company,

which will charge a fee

for its services, to act as

guarantor. In the event

of a default, the said

company will reimburse

the bank and then take

action to seize the

debtor’s assets in order

to recover the amount

disbursed by it.

Both solutions have

advantages and disad-

vantages which should

be discussed with the

lender and the Notaire.

MORTGAGE OR MUTUAL GUARANTEE

nant has been given notice to vacatefor the sale of the property or if it isthe first sale after the creation of aco-ownership property), right of co-owners, etc. There may also becontractual rights of pre-emption,between family members of neigh-bours for example. The formalities that need to be com-pleted to ensure that no such rightswill be exercised are sometimes com-plicated (for example, the need to“eliminate” several cumulativerights) and often long. For example,municipalities have two months inwhich to respond with regard tourban pre-emption rights. Moreover,since the ALUR law, this two-monthperiod may even be dependent onthe production of additional docu-ments, or even require an inspectionby the municipality’s services.These formalities are nevertheless in-dispensable to ensure the legal cer-tainty of the sale and cannot beneglected, otherwise the sale maybe void.

checks regarding the parties to the deed of saleThe Notaire gathers the necessarydocuments from the municipal au-thorities in order to check the civilstatus and legal relationship of theparties (civil partnership, marriage,etc.) and to ensure that there is noentry in the civil register limiting thecapacity of any of the parties (ope-ning of a guardianship procedurefor example). If the property to besold was acquired by way of a gift,the agreement of the donors andthe other children will generally berequired in order to avoid the risk ofthe sale being challenged subse-quently on the grounds of an infrin-gement of the rights of forced heirs.

Moreover, pursuant to the ALURlaw, Notaires handling the sale of re-sidential property are required toconsult the national criminal recordsin order to check whether the buyerhas been convicted by a court of a“slum landlord” offence. If such a

conviction exists, the sale cannot becompleted unless the buyer certifiesthat he or she is purchasing the pro-perty as owner-occupier.

Information from the propertymanagement companyWhen the property is in a co-owner-ship building, the Notaire mustcontact the property managementcompany (using a questionnaire called a co-ownership account state-ment - “état daté” ) to obtain infor-mation on the co-ownershipsituation (unpaid charges, work, pro-cedures, amount of working capitalor insurance to be reimbursed by thebuyer to the seller, etc. ).A fee is paid to the property mana-ger (“syndic”) in consideration ofthis information. The amount is setby the general assembly of co-owners and varies between EUR 150and EUR 650, depending on the ma-nagement companies.The law considers that this cost is tobe borne by the seller and theamount is generally deducted by theNotaire from the selling price inorder to avoid the need for any dis-bursement in this regard before thecompletion of the sale.This dated statement also providesinformation on any ongoing co-ownership legal proceedings. Thedeed of sale generally provides insuch a case for a subrogation of thebuyer. This means that the buyer, asa new co-owner, must replace the

seller in such proceedings: pay thelawyer’s fees, bear the cost of anycontributions, but also participate, if applicable, in any compensatory damages received.Since 1st January 2017, co-owershipshave to set up a repair work fund.The money paid to this account is attached to the co-ownership unit,not to the owner. However, a reim-bursement can be provided from thebuyer to the seller, for the moneythat has not yet been used for repairworks. It is advisable for the buyer toenquire about, in order to includethis reimbursement in his or her financial plan.If a general assembly is held bet-ween the pre-contact date and thesale, it is generally accepted that thebuyer will contribute to cost of anywork approved by the said assembly,provided that the buyer was in a po-sition to participate in and vote atthe said assembly under a power ofattorney granted by the seller.Otherwise, the seller will remain lia-ble for the cost of the work.Moreover, Notaires now have anobligation, prior to the completionof a sale, to ensure that the buyersare not already co-owners in thebuilding and, if they are, that theyare up-to-date with the payment oftheir charges. If the buyer is a legalentity, this information dutyconcerns all the shareholders andtheir spouses. n


The law allows the

individual entrepre-

neurs (which excludes

those acting via a com-

pany) to protect their

private real estate

assets from claims from

future trade creditors.

For debts contracted

since 8th August 2015,

the main residence is

automatically protec-

ted. The other real

estate assets that are

not used by the entre-

preneur for his or her

work activity can be

protected by a declara-

tion of exemption from

seizure by French

authentic notarial

deed, in particular

when acquiring such

property.

The protection is effec-

tive only for the real

estate properties

owned directly, ie not

owned through a real

estate company.

An entrepreneur may

waive all or part of this

protection at any time

in favor of one or more

of his or her creditors.

INDIVIDUAL ENTREPRENEURS : the declaration of exemption from seizure


THE SIGNATURE OF THE DEED OF SALE

STep 4

The signature of the deed of sale -the completion of the property acquisition,records the payment of the price and the transfer of ownership.

THE FINANCIAL ASPECTSpayment of the priceSince 1st January 2015, for real es-tate transactions, Notaires may onlymake or receive payments by credittransfer when the global operationexceeds EUR 3,000. Therefore, abuyer must pay the reservation fee(or security deposit), his or her per-sonal contribution, or the amount offees and costs relating to the deedof sale by credit transfer. All pay-ments must be made in good time toensure that the funds are in the Notaire’s bank account on the day ofcompletion of the sale. Thus, theamounts paid must be credited atleast 24 hours before the scheduledsignature date. Otherwise, there is arisk of completion being delayed.The origin of the funds transferredmust be proved by a bank certificate,since it is important that the fundsare transferred from an account inthe buyer’s name.If the price is paid using a loan, se-cured by a mortgage (notarizedloan), the Notaire will handle the re-lease of the loan funds. On the otherhand, if the loan is not secured by amortgage (by private deed) it is forthe buyer to contact his or her bankto ensure that the loan is released,by providing, if applicable, a copy ofthe letter from the Notaire confir-ming the meeting for the signatureof the deed of sale.

origin of the funds in the eventof a purchase by several partiesIf two people married under the re-gime of community of property decide to acquire a property, it maybe advisable to make a declaration

of reinvestment (“déclaration deremploi”), assuming that the pur-chase if primarily financed by one ofthe spouses with his or her own ca-pital funds or using funds from thesale of property owned by him or her (property owned before marriage or received during marriage as a gift or an inheritance).In all cases, a reminder of the originof the funds will enable a record ofthe financing information to bekept. If the spouses are marriedunder the regime of ”séparation debiens” or “participation aux ac-quêts” their ownership proportions

must match their respective contri-butions. Otherwise, the funding byone spouse of all or part of the pro-portion registered in the name ofthe other spouse could lead to com-plexities in the event of divorce ordeath. Is it a loan, a gift (subject inprinciple to gift tax), a contributionto household expenses, or even aform of remuneration (when thespouse does unpaid work in thecompany or gives up work in orderto bring up the children)? All theseinterpretations are possible and re-present endless sources of conflict.

Althémis’ adviceIf the property is purchased by partners who have

entered into a civil partnership (“PACS”) or are co-

habiting, when one partner wants his or her share of

the property to pass to the other partner, it is indis-

pensable to draw up a will.

“OFF-PLAN“ PROPERTY SALES

This type of sale (for

buildings under

construction) is very

tightly regulated when

it concerns residential

property in order to

offer buyers as much

protection as possible.

Payments are made ac-

cording to the progress

of work in accordance

with a schedule laid

down in law. Similarly,

property developers are

required to provide gua-

rantees of completion or

repayment in the event

of difficulties in comple-

ting the construction.

Lastly, a number of com-

pulsory statements must

be included in the deed,

otherwise it may be

declared void.


reimbursement of property taxProperty tax (“taxe foncière”) ispayable by the owner on 1st January. In the case of a purchasemade during the year, it is generallyaccepted that the buyer reimbursespro rata temporis to the seller theproportion of property tax corres-ponding to the amount from the day of the sale up to 31 December.Reimbursement is made at the timeof the sale and is calculated on the basis of the last known amount,which is sometimes lower than theamount which the seller actually hasto pay. Nevertheless, the main ad-vantage of settling this matter in ad-vance is that it avoids the need forthe seller to re-contact the buyer af-terwards in order to obtain reimbur-sement. As regards housing tax(“taxe d’habitation”), this is not

prorated and each party has to bearthe tax charge for their residence on1st January of the current year.

THE EFFECTS OF THE TRANSFEROF OWNERSHIPTransfer of risksThe transfer of ownership also en-tails the transfer of risk to the buyer.It is therefore necessary for thebuyer to be insured from the day ofthe sale in the event of any damageto the property.If a mortgage loan has been takenout it will be necessary to provide aninsurance certificate to the Notaireso that he or she can inform the in-surance company of the existence ofa mortgage, since in the event of aninsurance claim any insurancepayout will be made to the bankwhich holds the mortgage ratherthan to the owner.

Transfer of leasesIn the case of the sale of tenantedproperty the law provides for thebuyer to replace the seller vis-à-visthe tenant.The amount of rent for the currentperiod is generally reimbursed on apro rata temporis basis. Similarly, theseller must transfer to the buyer theamount of the tenant’s security deposit.

The seller’s guaranteesIn principle, the buyer acquires theproperty in its current state: he orshe has visited the property and isdeemed to accept it with its advan-tages and disadvantages.Therefore, unless the seller is a realestate professional, the buyer is notcovered against hidden defects. However, if the property is boughtnew or if major work has been carried out in the last ten years, the buyer may in some cases be able to invoke the liability of thebuilders. Regarding the surface area, the so-called “Carrez law” measurementcertificate is only mandatory in the case of co-ownership. If it trans-pires after the sale that the surfaceis more than 1/20th less than that indicated in this certificate, thebuyer is entitled to claim a propor-tional reduction in the price.On the other hand, the seller has no such right if the surface area is bigger. n

If the property is in a co-

ownership building it is ge-

nerally accepted that the

buyer will reimburse the

following amounts to the

seller on the day of the sale:

charges for the current

quarter, from the day of the

sale up to the end of the

quarter;

working capital.

However, some property

management companies

choose to reimburse the sel-

ler directly and claim an

amount for working capital

from the buyer.

The cost of work, where

such cost is to be borne by

the seller, and which has

not yet been the subject of

a call for funds at the time

of the sale, is deducted

from this amount.

These amounts, paid di-

rectly between the parties

on the day of the sale, are

considered as final settle-

ment. No adjustments will

be made subsequently for

any difference between the

estimated budget used as

the basis for the payments

made and the final budget.

Therefore, there is a risk of

a potential gain or loss for

the buyer and vice versa for

the seller.

Althémis’ adviceTo avoid any unpleasant surprises (non-vacated pro-

perty, furniture left on the property or water damage)

it may be advisable for the buyer to ask to revisit the pro-

perty the day before signing and take the opportunity

to agree the electricity and water meter readings

with the seller.

SPECIFIC CHARACTERISTICS OF THE SALE OF CO-OWNERSHIP PROPERTY


AFTER THE SIGNATUREDuring this period, the Notaire will accomplish a large number of formalitiesin order to enable the client to receive the title deed and settle the closingaccount balance.

STep 5

FORMALITIES ACCOMPLISHEDBY THE NOTAIREThe Notaire completes numerous for-malities, including in particular:

publication of the deed withthe land registryThe Notaire is responsible for publishing the deed with the land registry of the district where the property is located. This actually involves amending the property fileto make the sale binding on third par-ties and ensuring that no new mort-gages have been registered on theproperty in the meantime by the seller’s creditors.While expecting the completion ofthe formalities, certificates are provi-ded to the parties on the day of thesale: certificates of ownership for thebuyer, and sale certificates for the seller.If the buyer has taken out a mort-gage, the Notaire will register thisnew mortgage over the property. Thepublication of the deed will alsoconstitute notification of a change ofownership to the tax authoritieswhich will thereafter levy local taxeson the new owner.Most deeds are now published electronically by Notaires.

payment of registration fees or VATThe Notaire is also responsible for paying the taxes owed by the buyer.These involve mainly transfer dutieswhich total between 5.09% and5.81% (except in the case of an ac-quisition accompanied by an under-taking to resell or build by a VATtaxable person).

It is also necessary to pay the land re-gistry’s fees (0.10%). The region Ile-de-France collects anadditional tax when properties soldare used as professional places (of-fices, commercial spaces ot storagerooms). Its rate is 0.6% of the saleprice.

Transfer taxes are not payable on mo-vable property. If furniture is soldwith the house or apartment, it maybe advisable to detail the value of thefurniture in relation to the value ofthe property: this enables the buyerto avoid paying transfer taxes on thisamount, provided of course that thiscan be justified. However, you shouldbe aware that, in general, banks donot finance the cost of furniture, bea-ring in mind that the value of the fur-niture may be subject to capital gainstax at the time of sale.Moreover, VAT may be payable bythe seller if the latter is liable to VAT.

payment of capital gain taxThe Notaire is also responsible for calculating and withholding from the sale price the capital gains taxdue by the seller and, if applicable,the tax on the disposal of construc-tion land.The net amount of real estate capitalgains must be included in the seller’sincome tax return.

The capital gains tax is always paya-ble at the time of the sale but itsamount is taken into consideration inthe taxable base and may in somecases give rise to an additional taxpayment in respect of the ”contribu-tion exceptionnelle sur les hauts revenus”.

notification of the sale to theproperty management companyThe Notaire must inform the pro-perty management company of thesale and pay any outstanding balanceby deducting it from the selling price(otherwise the property manage-ment company is legally entitled tooppose the payment of the proceedsof the sale).

From receipt of this notification, theproperty management company willbill all charges to the new co-owner.

TRANSMISSION OF THE TITLEDEED AND CLOSING ACCOUNTBALANCEWhen all the formalities have beencompleted (which in some cases maytake several months) the Notairesends the “title deed” to the buyer.In practice, this is an authentic copyof the deed, since the original is keptby the Notaire who executed it. TheNotaire also provides the client with adetailed statement of all the amountspaid on his or her behalf and thosealready credited to him or her. If theaccount has a debit balance, an addi-tional amount will have to be paid(rare in practice). Any credit balanceis obviously returned to the buyer.

The original deed is kept by the Notaire for 75 years. After that, it isfiled in the departmental archives.The safe-keeping of this deed is aguarantee of legal certainty of ow-nership of the property in the eventin particular of the buyer losing thetitle deed. n

12 // FROM STRATEGY TO DEEDS // The ALTHÉMIS GROUP newsletter, notarial network // N° 2.5 // January 2017 //

MANAGING EDITOR: Paul-André SOREAU // EDITOR IN CHIEF: Sophie GONSARD // EDITORIAL COMMITTEE: Muriel CARPON // Sylvie JULIEN SAINT AMAND -HASSANI // Jean-Pierre KAPLAN // Frank THIÉRY // Bertrand SAVOURÉ // Pascal JULIEN SAINT-AMAND // Guillaume LIGET //DESIGN: surunnuage.com

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NOTARIAL NETWORK85 NOTARIES AND COLLABORATORS

5 specialised departments to accompany you from strategy to deeds

weALTH MAnAGeMenTn Tax optimisationn Separation of titlen Stock optionsn Giftsn Adaptation of the

matrimonial property regime

n Life insurancen Family companies

corporATe And TAx AffAIrSn Transfers of businesses (sale,

purchase, gifts)n Sale of business goodwilln Commercial leasesn Company incorporation and

restructuring (mergers, demergers)n Assets of business owners

fAMILy And SucceSSIonn Marriage contractsn PACS and cohabitationn Divorcen Protection of spousesn Willsn Successionsn Reconstituted families

FROMSTRATEGYTO DEEDS

www.althemis.fr

reAL eSTATen Acquisition and Salen Construction

and urban planningn Real estate developmentn Business propertiesn Financingn Leasesn Leasingn Construction leases

InTernATIonAL cLIenTSn Cross-border acquisitionsn Estate planningn International successionsn International marriagesn Expatriation, relocationn Trusts and trust companies

Althémisis a member of the Lexunioninternationalnetwork

ANDRÉSYYour correspondentsSylvie JULIEN SAINT AMAND -HASSANIJean-Pierre KAPLAN

19-21, rue de la Gare78570 ANDRÉSYTél. : +33 1 39 27 10 10Fax : +33 1 39 27 10 [email protected]

PARISYour correspondentsPascal JULIEN SAINT - AMANDBertrand SAVOURÉPaul-André SOREAUMuriel CARPON

79, rue Jouffroy d’Abbans75017 PARISTél. : +33 1 44 01 25 00Fax : +33 1 44 01 25 [email protected]

LE VÉSINETYour correspondentsFrank THIÉRYSophie GONSARDGuillaume LIGET

75, rue Henri Cloppet78110 LE VÉSINETTél. : +33 1 30 09 42 00Fax : +33 1 30 09 42 [email protected]

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