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Jan 19, 2015

Transaction costs are moderate to high in France


How high are realtors’ and lawyers’ fees in France? What about other property purchase costs?

Transaction Costs

Who Pays?
Registration Fees 0.60% - 4.89% buyer
Notary Fees 3% - 10% (+ 20% VAT) buyer
Land Registry Salary 0.10% buyer
Real Estate Agent’s Fee 1.50% - 5% (+ 20% VAT)
1.50% - 5% (+ 20% VAT)
buyer
seller
Costs paid by buyer 6.10% - 22.99%
Costs paid by seller 1.80% - 6.00%
ROUNDTRIP TRANSACTION COSTS 7.90% - 28.99%
See Footnotes
Source: Global Property Guide

How difficult is the property purchase process in France?

France villas and chateau

There are no restrictions on foreign ownership. Most property is likely to be freehold. Apartments are likely to be held in two forms of freehold: co-ownership (which has meetings of co-owners, with votes taken and accounts kept), and volumes, adapted mostly for mixed-use developments. There are also leaseholds, for up to 99 years.

Once the parties have agreed on the price and what the sale relates to, the parties will be required to sign a preliminary agreement.

  1. The preliminary agreement usually takes the form of (in the North) an option (promesse unilatérale de vente), with a 5% to 10% penalty if the option is not exercised, usually secured by a deposit held by the notaire. If the seller withdraws, the buyer cannot sue for specific performance, only damages, unless the option has actually been exercised. To be valid, the option must either be notarized, or registered within ten days. In the South, a sale and purchase agreement is more common (promesse synallagmatique de vente), i.e., an agreement which allows the other party to sue for specific performance if the other defaults, with conditions precedent.
  2. There is a 7-day cooling-off period, in which the buyer can change his mind.
  3. This is the best time to instruct a structural survey.
  4. If a mortgage is being sought, the compromise de vente must contain a clause confirming that mortgage financing is being sought, then, if the mortgage is declined, the purchaser will not lose his deposit.
  5. Once preliminary contracts have been exchanged, there are pre-completion searches: land registry searches, local authority searches, planning permission searches, etc. If the dwelling has been sold by a “property professional” or is less than ten years old, the seller has a statutory liability to all future owners within the ten year period for defects.
  6. On completion, the purchaser and vendor sign the Acte authentique de vente at the Notaire’s office. The notaire will see that the account is settled, will accept his fee, and land registry fees, if they are not included in the notaire’s fees.

Notaires often act as estate agents, and are likely to be less expensive than immobiliers.

It takes an average of 58 days to complete all the procedures needed to register a property in France.



Footnotes to Transaction Costs Table

The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

The use of French notary is mandatory for property purchases. There are several costs that are colletively called notary fees or "frais de notaire" because they are all paid via the notary. These costs include change of ownership fee (frais de mutation), charges of mortgage security (frais de garantie) and the notary fees or emoluments that also include various formalities and performance of certain acts. Most of these fees are fixed by the Chamber of Notaries and non-negotiable.

REGISTRATION FEES (Droits d´Enregistrement):
Property transactions are subject to registration fees (also called transfer fees) when they do not fall under VAT.

Duties on sales of real property are collected when the property is transferred.

Initially collected for appropriation to the State, tax on the registration of real property transactions has become a département resource for all real property transactions other than exchanges conducted since 1st January 1985. Its rate is now a single one at 3.6 %.

Apart from the tax on the registration of real property transactions, there is an additional tax of 1.20 % collected for appropriation to the commune or to a département equalization fund;

There is also another levy of 2.50 % collected for appropriation to the State, assessed on the amount of the département duty in respect of "assessment and collection costs".

Additional levy for the State at 0.2% normal rate or 0.1% special rate

VAT:
Value Added Tax (VAT) is levied at 20% of purchase price of a newly built property. Existing properties older than 5 years are not subject to VAT.

Notary Fee:
The use of French notary is mandatory for property purchases. The purchaser pays the notary’s fees, which is fixed by law and non-negotiable. The notary fees are around 3% plus VAT for newly built properties. The notary fees are generally around 7% to 10% plus VAT for existing properties or properties over five years old.

There are several costs that are collectively called notary fees or "frais de notaire" because they are all paid via the notary. These costs include change of ownership fee (frais de mutation), charges of mortgage security (frais de garantie) and the notary fees or emoluments that also include various formalities and performance of certain acts. Most of these fees are fixed by the Chamber of Notaries and non-negotiable.

If there are two notaries involved, there is no extra cost to the purchaser. The fees are shared between the two notaries.


Land Registry Fee (droits d’enregistrement)
Land registry fees vary but are usually around 0.10% of the property value.


Real Estate Agent’s Fee
Real estate agent’s fees are around 3% to 10% of the selling price of the property, plus VAT. This can also be split between buyer and seller. Most properties include the agent’s fee in the asking price, and are indicated by the letters FAI ("Frais d’Agence Inclus") following the price.






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