FAQs2018-01-31T14:03:25+00:00

See Below Frequently Asked Questions…

French Reservation Contract and Final Deed2018-05-02T08:28:15+00:00

Prior to the definitive sales contract with deed, you sign a reservation contract when you purchase a French property off-plan.

The French property reservation contract contains at least:
A description of the property layout: number of rooms, location of property in the building or chalet, living surface according to Carrez law …
A brief technical description of the development presenting the nature and the quality of the materials used, the construction techniques, the elements of equipment of the apartments and the common areas, the insulation …
The selling price of the property and any conditions of price revision
The date of conclusion of the exchange of deeds
The time of completion/delivery of the building
A reminder of the legal conditions allowing the buyer to recoup his deposit in case of problems (for example in case of French mortgage refusal, the buyer is refunded his deposit (usually between 2-5% of the property price).
A copy of the reservation contract signed by the French property developer is sent to you by registered mail (or now by registered electronic mail) with acknowledgment of receipt. You then have a withdrawal period of 14 days (10 days for residents) from the day you receive your copy. This allows you to cancel your reservation, without any penalty.

The draft of the final deed of sale for your French property is sent to you by the developer’s notaire or by your own French notaire several weeks before the planned date for signature of deeds and exchange of contracts. At Findhomeabroad, we provide independent notaire services (English-speaking) to represent you better at no extra cost. Most of our clients also use a power of attorney to avoid having to travel to France to sign the deeds.

The final act of sale needs to go through a French notaire service. This document contains:

An accurate and detailed description of the French property.
The date of completion of the building and the date of delivery.
Financial guarantees of completion of works and construction insurance (biennial, decennial …).
The administrative authorisations obtained by the French property developer (building permit …).
The price and payment stages based on the construction timeline.

The stage payments for an off-plan French property can not exceed:
35% of the price upon completion of the foundation stage,
70% of the price at watertight stage (walls and roofing completed …)
95% of the price at the completion of the building and the balance of 5% of the price upon delivery of the property, unless the purchaser has reservations about its compliance with the sales contract.

The costs when owning a freehold property in France2017-12-29T09:23:36+00:00

When you purchase a French property (freehold) you will have several costs each year, see below:

1) When you own an apartment which is part of a building (apart from chalets this is the case for apartments in French ski resorts), you will have to pay the ‘charges de co-propriété’ (service charges) in the region of average €15 per m2/year (based on your apartment living surface). This will cover the conservation charges (walls, façades, stairs, cables/conducts/sewage, roof, hallways and common areas), the maintenance charges (cleaning products, cleaning of common areas in general, lawn and landscaping in general, water/electricity/gas counters, rubbish), the owner’s syndicate costs (syndicate functioning fees, owner’s assemblies, fire building insurance, rubbish tax and housekeeper’s salary if need be).
There can also be special charges like lift maintenance, heating or hot water production if collective, cold water, entry-phone and any Satellite/Cable/TV aerial (only the owners that benefit from these services do have top pay their share. For example if your apartment is on ground floor you do not have to pay into the lift maintenance). For a 50m2 apartment, you will pay 750€/year in service charges on average.

2) All property owners in France have to pay the Taxe Fonciere (land tax) which is in the region of €15 per sqm per year per property. You benefit from a big discount on this land tax for the first two years when you buy a newly-built French property. This was created to encourage construction of new properties in France. For a 50m2 apartment you will pay average 750€/year in land tax.

3) Most property owners in France have to pay the Taxe d’habitation (council tax) which is around the same as the land tax at 15€/m2/year. For a 50m2 apartment you will pay 750€/year in council tax.

If you rent your property as a holiday let, a small cost will be required to engage an accountant to take care of your apartment rental income (tax-free in most cases) to prepare your books for French Revenue, cost is around 300€/year and we are happy to introduce you and explain in more details. In some cases, developers offer for you to claim back the 20% VAT that you paid on your new French property if you agree to let your property through a rental management agency (usually a limit of 8 weeks of personal use each year). Contact us for more details on how to claim back VAT on your new purchase.

To recap nowadays you usually have 3 costs each year: service charges + land tax + council tax, each around 15€ per your apartment square metres. Optional: 300€ for the accountant to optimise rental income so that it is tax-free and potentially to claim back VAT.
Example for a 50m2 apartment: 2,250€/year in charges and tax.

Taking delivery of your property – La remise des clefs2017-12-14T14:54:11+00:00

As with any property purchase, the final stage of the process is when you are given the keys to the property. With French off-plan purchases this stage normally coincides with the last stage payment as per the terms of the VEFA contract (off-plan purchase). You will then have a period of one month to take possession of your home and inform the developer of any snagging issues in your property.

What is the payment schedule when buying a French off-plan property?2017-12-14T11:58:00+00:00

When purchasing a French property off-plan the schedule is typically the following:
• 5% on reservation
• 25% on signature of title deed and start of building work and excavation.
• 5% on completion of foundations
• 15% on completion of ground floor
• 15% on completion of ground floor ceiling
• 5% when building is made water-tight (roof)
• 15% when building is made air-tight (windows & doors)
• 10% on completion of partition walls
• 5% on delivery

Off-plan French properties can be purchased using a French mortgage, of course, so once you have paid the reservation deposit with your own funds, you will have to pay your personal contribution  towards the purchase as well as the legal and mortgage fees when you sign the deeds (and after deduction of your already paid deposit). Your personal contribution will always be paid first and once you have paid it, any additional sums required (“calls for funds”), will be drawn down from your French mortgage. When you purchase a property under the French leaseback scheme, you stop making payments when you reach 83.33% of the total property price as VAT is paid by developer.

Do I have to open a French bank account to receive my French leaseback rental income?2017-12-14T11:54:38+00:00

Most of our clients usually open a French bank account either online (Britline for example from Caisse d’Epargne or on site in a local French bank near their property). If not owner can have rental income from French leaseback property paid into a foreign account usually.

When do I receive VAT back on furniture pack when I had to advance it?2017-12-14T11:52:12+00:00

The accounting firm selected for the French leaseback development can only apply for VAT refund on furniture pack only once the property has been delivered. It is common for buyers to have to advance the VAT on furniture as this is not real estate unlike apartment or parking where the VAT is advanced by French property developer in most cases (when buying into a French leaseback scheme of course).

What happens if my apartment doesn’t rent for a particular week or more?2017-12-14T11:50:47+00:00

The rental income is set in the commercial lease (Bail commercial). Even if your property is not rented out for a particular week, your rental income will never be affected as the rental income is clearly stated in the commercial lease.

Does my rental income stay the same over the life of rental agreement?2017-12-14T11:49:25+00:00

The rental income is linked to the French index of rental variation (which can be found at www.insee.fr).
This ensures that rental figures increase by up to 2% per year. Most developers cap this at 1.5% or 2%. This rental increase is applied every 3 years giving you +15/20% in income towards end of rental period.

What are the stage payments for French leaseback properties, a French mortgage and VAT deduction?2017-12-14T11:47:08+00:00

Stage payments explained when buying a French off-plan property with a French mortgage.
Example of the stage payment process when buying a French leaseback property off-plan with an 80% LTV mortgage at French bank (20% own funds)
Based on a 300,000 euro property including VAT (stage payments are always based on property price VAT inclusive).
-Reservation deposit 5%: 15,000€
-Exchange (for example when foundations are completed) 30%: 90,000€ (total 30% property price). You pay 45,000€ (20% of property price as agreed with bank: 60,000€ and you deduct 15,000€ already paid in deposit: 45,000€. You pay 45,000€ + exchange fees and bank makes the first payment equivalent to 10% of property price: 30,000€. Bank will then make all remaining payments as you have agreed an 80% Loan to value.
-1st floor completion: 20%: 60,000€ (total 50% property price). Bank makes payment.
-Watertight (roof) stage 20% (total 70% property price): 60,000€. Bank makes payment.
At this stage you and the bank have paid 70% of the property VAT inclusive. Next stage payment you will stop at 83.333% as you pay until you reach the property price without VAT.
-Air tight (windows and doors)15%: 45,000€ (total 85% property price). Bank makes payment. As this is a French leaseback property, bank makes your last payment now but only for 13.333% instead of 15% as you have reached the price without VAT at 83.333%. You do not pay VAT on properties under the leaseback.
Same payment process wether you purchase an outright property with VAT or a French leaseback without VAT, just that with French leaseback properties you stop making payments when you reach 83.333% of price with VAT when with outright property you pay 100% of property price including VAT. Stage payments can slightly defer depending on development, please contact us for a specific property. Stage payments by law are stated in all reservation contracts.

Do I need a French accountant to deal with this tax-optimised property investment?2017-12-14T11:44:08+00:00

Eventually yes. Initially one will be appointed for you by the developer in the first year (it is mandatory to use them as they are also in charge of VAT reclaim) and they usually cost around 300€ per year. After that you can choose to use whoever services you wish or not, but most of the time buyers continue with the originally appointed accountant.

What are the running costs with French leaseback properties?2017-12-18T10:22:56+00:00

The beauty of owning a French leaseback property (freehold) is that there are very few on-going costs for you the owner.

Some developers provide the rental returns as a completely net figure, net of any costs, maintenance or service charges, and some developers provide the returns as a gross figure. In some cases buyers will have to pay a ‘charge de co-propriété’ (service charge) in the region of average €20-25 per m2 (based on your apartment surface) per year, but this can be factored into the rental income.
All property owners in France have to pay Taxe Fonciere which is in the region of €15 per sqm per year on these leaseback properties. Aside from that, the management companies take care of all upkeep and maintenance on an on-going basis and owners are not billed for this. The Taxe d’habitation equivalent to the council tax is paid by the rental management company as are all the utilities including the building’s insurance.
Once a year, a small cost will be required to engage an accountant to take care of your apartment rental income (tax-free in most cases) to prepare your books for French Revenue, cost is around 300€/year.

To recap nowadays you usually have 3 costs each year: contribution to service charges between 20-25€ per your apartment square metres, 300€ for the accountant and around 15€ (per square metre of your apartment per year) for land tax. Example for a 50m2 apartment: 1,000€/year in charges (20€/m2), 300€ accountant and 750€/year in taxe fonciere (land tax). As you can see this is extremely low compared to the usual upkeeps for an outright property abroad.

What is the reservation process when buying a French property?2017-12-14T11:31:18+00:00

The process is simple:
1) FindHomeabroad sends you the reservation contract.
2) You sign them and send to the developer, who counter signs the reservation documents and returns a copy for you to keep.

During this time (once you receive your countersigned copy) you have the right to withdraw from the purchase. Upon reception of the countersigned reservation, the “SRU law” gives a 14-day cooling off period to clients (10 for french residents) where they can still use their right of withdrawal. Even after this 14 day period, you still have the right to cancel and get your deposit back if you are refused your mortgage application for example. Deposit is then to be sent to confirm your reservation.

What is exchange for French off-plan properties?2017-12-14T10:06:40+00:00

Signing of the deeds (“acte de vente”) is when you become the official owner of the off-plan property. Once the VEFA (“Vente en l’etat futur d’achevement” or off-plan purchase) contracts are ready, you will be asked to sign the ‘acte de vente’, which will make you the official owner of the property. This is when you will have to make payment according to stage payment agreement (minus your paid reservation deposit but adding legal/mortgage fees around 4%), with in part your money and other part the bank financing the purchase (if French mortgage indeed). This is why you cannot complete this process until you have mortgage offer in place (if you are not a cash buyer of course).

What is the deposit to reserve the property?2017-11-27T21:30:47+00:00

When you sign the reservation contracts you will be asked for a reservation deposit. The maximum deposit that can be requested depends on the planned exchange date, as follows:
-Within 1 year – 5%
-Between 1-2 years – 2%
We have sometimes negotiated lower deposits as part of a special promotion usually at launch.

The deposit cannot be used or accessed by the developer to fund the development. It must be placed in a client’s account, through the Notaire and (escrow account), and cannot be withdrawn until the sale is completed.

The law strictly forbids the payment of any deposit before the signature of the initial reservation contract. Accordingly, if you are asked for a deposit by a developer before you sign the contract, you should refuse.

How much is land tax (taxe foncière) in France?2017-11-26T23:08:55+00:00

In France you pay 2 taxes on your property each year the land tax (foncière) and the council tax (habitation). The latter is not paid by French leaseback owners as this is paid by the rental management company.
All owners in France need to pay the land taxe called taxe foncière in French. It is a property tax paid on size of your property and it can vary between regions.
In general it is around 15 euros per sqm of the living surface of your property. For example if your ski apartment is 50 sqm you would pay 750€ per year in land tax. When you buy a new-build property (under 5 years old), you usually pay a reduced rate the first 2 years.

When paying before delivery how is my money safe?2017-11-26T22:58:42+00:00

All the deposits paid by the buyers are held by his/her notary into an escrow account under his/her name and must be returned to the buyer should the developer go bankrupt or if some other major delay occurs. Only once the GFA (Garantie financière d’achèvement: completion insurance issued by major bank to guarantee the build until completion) has been obtained,  can the notaire sign the title deeds for the transfer of ownership and transfer the monies originally on escrow account to the developer.

What types of French mortgages are available to non French residents?2017-11-26T22:52:54+00:00

For the latest French mortgage rates and to see the different types of French mortgages on offer, please contact us.
French mortgages in Euros are available on a Repayment basis up to 85% (contact us for interest-only). Loans in other major currencies are available up to a maximum of 70%. Loans for Leaseback properties are available up to 80% of the NET Purchase Price.
The maximum term of any mortgage is 25 years, this varies on the type of loan
Repayment, Interest Only, Fixed Interest and Capped Rate mortgages are available
The minimum French mortgage amount you can take out is usually 50,000-60,000 euros.

What evidence of income do I need for a French mortgage application?2017-11-26T22:48:39+00:00

If you are employed:
Your last three month’s payslips
Your latest P60 or Employers Reference
Your last three month’s personal bank statements

If you are self-employed:
Your last two year’s signed accounts
Your last two year’s personal tax returns
Accountant’s declaration
Your last three month’s personal bank statements

Example of  payments with a French mortgage
If, for example, your gross joint monthly income is £2,500, 33% of this equates to £825. If your only liability is your mortgage payment, of say £300, this would leave a balance of £525 for your French mortgage repayment.

When off-plan can I have a bath tub instead of the shower cubicle on floor plan?2017-11-26T21:38:32+00:00

We can replace shower cubicle by bath tub if space on floor plan permits. If it is the only bathroom in the apartment, sometimes the disabled access laws will make it impossible, as you would lose needed space for wheelchair use, drawn as circles on plan usually. With some developers you may have to sign a clause that this change is your responsibility.

How does developer guarantee/mitigate risk of failure of the developer/contractor?2017-11-26T21:36:18+00:00

In France it is very secure and before exchange contract the completion financial insurance has to be in place and that bank guarantees full completion of project. France in that respect is very safe for the buyer.

How do mortgages deal with off-plan properties and the stages of construction?2017-11-26T21:32:30+00:00

Very simple you pay your deposit first (say 20%) then the bank takes over for all the remaining stage payments. At each stage a surveying company guarantees the work done, issues a certificate which is then sent to notaire who then notifies you or the bank to make that payment. In France it is very secure and before exchanging contract, the completion financial insurance (GFA) has to be in place and that guarantees full completion of project.

How many apartments can a French bank loan on in each development?2017-11-14T14:51:54+00:00

Most French banks only lend on a quota of units per development. So whether it is 100 apartments or 10 within a project, they lend on a certain percentage of the apartments available rather than a defined number. There will also be other French banks who will lend to non-residents  so we always have plenty of lending solutions.

What completion guarantees for new-build properties?2018-03-26T16:47:34+00:00

The notary can only sign the official sales deed when the developer has a financial guarantee / insurance policy which guarantees to the purchaser that the apartments will be finished and delivered even if the developer were to become bankrupt.

This guarantee is known as the ‘financial guarantee of achievement’ (GFA) and the bank which is lending you the money to buy your apartment will insist that the developer has a GFA for the development before they will lend. The insurance company will only give a GFA when the developer has around 50% pre-sales.

Click to see more information on different guarantees when buying off-plan in France