A
Acquisition of a property to be built (off plan) / Vente en l’état futur d’achèvement (VEFA)
For sales of properties for under construction (V.E.F.A - Vente en l'Etat Futur d'Achèvement), both parties must sign a reservation contract (contrat de réservation). This contract includes items such as the guaranteed price of the home when built, payment stages which coincide with the different phases of the property's completion and technical specifications. The buyer usually pays a 5% deposit when signing the reservation contract, which is then deducted from the total purchase price.
B
Buildings and Contents insurance / Multirisques Habitation (MRH)
Buildings and Contents insurance is insurance which provides cover for the rebuild or repair costs to a property and the costs of the contents within that property in the event of damage. This insurance is obligatory and the policy must be put in place before you sign the deed of sale. Your notary will ask for a copy of the policy at the moment of signing the deed.
BNP Paribas International Buyers can put you in touch with English speaking representatives of insurance companies in France.
C
CCMI (Contrat de Construction de Maison Individuelle)
If you wish to design your own home in France with or without the help of an architect in the location of your choice, you will realise it with a CCMI.
Literally “CCMI” is a contract for the construction of an individual dwelling. Having found a plot of land it is advisable to seek advice from local authorities in order to obtain planning permission. You will subsequently sign a preliminary sales agreement for the purchase of the land and a separate contract the CCMI with your builder.
Change of ownership fees / Frais de mutation
A fee is charged to the buyer when property in France is transferred from one owner to another. This fee, legally fixed by the authorities, is based on the agreed purchase price of the property and on whether or not it is old or new. The notary is responsible for collecting this fee and transferring it to the local or regional administrative bodies.
Charges for mortgage security / Frais de garantie
Whenever you take out a bank loan in France to finance your French property, the loan is secured with a charge on the property.
• First charge on property
If you buy an old or a new existing property involving a transfer of ownership, the security associated with this loan is called a first charge on property ("PPD – Privilège de Prêteur de Deniers").
• Contractual mortgage
However, if there is no transfer of ownership - as in the case of refinancing an existing loan or requesting an equity release - or you are purchasing a property under construction, the security is contractual mortgage ("Hypothèque Conventionnelle").
Condition precedent / Condition suspensive
When using a mortgage to finance the purchase, the sales agreement should contain a condition precedent (“condition suspensive”), so that if the mortgage application is not successful, the deposit will be refunded.
D
Deed of sale / Acte authentique de vente
The deed of sale or “Acte authentique de vente” is drawn up by the notary in charge of the sale who also guarantees it is legally secure and efficient. Before the notary presents the deed of sale for signature, he ensures that all legal work and formalities have been completed and that the buyer has been granted a loan and life insurance and has suscribed a buildings and contents insurance. Once the date for the definitive deed has been fixed, the notary will collect all funds to cover the transaction price. He will make a written request to BNP Paribas International Buyers for the mortgage funds. We, in turn, will transfer the money to the notary for the agreed amount.
French law states that the notary must retain the original deed of sale, while the buyer will be given an official copy. Once you, as buyer, sign this document, the property will be yours.
Deposit / Accompte
On signing, the buyer deposits a sum - generally up to 10% of the purchase price - with the notary or the estate agent. The deposit is usually described as a payment on account subsequently deducted from the purchase price, or may be used as a penalty fee if the preliminary sale agreement is broken.
Down payment
The down payment or personal contribution is the part of purchase price which the buyer pays in cash and does not finance with a mortgage.
F
Fixed Rate Mortgages
Fixed rate mortgages mean that the monthly repayment amount and loan duration are fixed at the beginning. You will always know how much to pay and how many payments to make. However, these loans are less flexible: they may not be converted to variable rates at a later date, and early, partial or complete repayments are subject to redemption fees.
I
Inheritance Laws
When you purchase a property in France, French inheritance laws apply to that property. These laws, which are very different from the Separate Estates laws in most Anglo-Saxon countries, can have an impact on the use of the property in the event of a spouse-owner's death. Unless specified beforehand, a surviving spouse/partner residing in France will not automatically become the legal beneficiary of the property prior to any children's rights. To counter these effects, specialised lawyers could advise to set up an SCI or change one's marital status and have it validated in France only for French assets. It is also possible to draw up a personal will. This is an important and complex issue. For more detailed information on the implications of marital status and inheritance laws, please seek advice from your notary or a specialised lawyer.
L
Legal fees or Notary’s fees and costs / Frais de notaire
The fees and costs charged by the notary, which are fixed by French law, consist of two parts: firstly, the costs relating to the conveyancing (“acte de vente”) which would arise whether or not a mortgage is taken; and secondly, the specific cost of registering the mortgage on the property (“frais d’acte / frais d’hypothèque”). The notary’s fees and costs will range from 6% to 8% of the purchase price for the conveyancing costs and 1% to 3% of the mortgage amount for the cost of registering the mortgage on the property. Before paying the notary, you should check the exact settlement amount and the method of payment.
Life insurance
Taking out a life insurance policy enables to cover the amount of a property loan. It is not a legal obligation in France. However, potential buyers should be aware that French banks do not offer loans without it. In most cases, the mortgage protection and loan application are treated simultaneously. The mortgage protection is available in two options:
• Cover of the remaining capital due in case of death or disability
• Cover of the monthly payments in case of long-term incapacity due to accident or serious illness.
BNP Paribas International Buyers requires its clients to be protected for the amount of the loan through a life insurance policy, and has put together a special package with a French insurer to provide comprehensive cover.
M
Marital Status
Two types of marital status are recognised in France:
• Joint estates or "Communauté de Biens"
• Separate estates or "Séparation des Biens"
Unless specific steps are taken before purchasing, British married couples buying property in France will be deemed to be in the “séparation de biens” status. There are possible advantages to adopting the “communauté de biens” status for inheritance reasons. For further information, please seek advice from your notary or a specialised lawyer.
More trading Real Estate Company / Société Civile Immobilière ou SCI
An SCI - Société Civile Immobilière – or More trading Real Estate Company - can be described as a property-holding company. It enables two or more people to purchase a property together. Creating an SCI provides the buyers with two main advantages as opposed to buying a property as separate individuals.
• It facilitates the transfer of a share of the property to someone else should one of the buyers wish to sell their interest. In doing so, the remaining parties who also purchased the property are not obliged to sell their shares if they do not want to.
• It can provide greater flexibility in the context of French inheritance laws.
N
Notary / Notaire
A notary is a public official who is responsible for ensuring that all deeds are authentic and of incontestable value. As notaries are personally responsible for the deeds drawn up, they must be objective in the advice they give and must act impartially towards the various contractual parties. Consequently, the same notary commonly acts for both seller and buyer.
P
Preliminary sales agreement / Compromis de vente ou promesse de vente
While you wait for the final deed of sale, which is drawn up by the notary and will transfer the ownership of the property, you will need to sign a preliminary sales agreement, known in French as a “compromis de vente”. This can be drafted and witnessed by the estate agent or the notary. It is an important step and you should seek advice from your notary on the wording and conditions.
R
Repayment period / Période d’ammortissement
This is the period during which a borrower has to make payments of principal and interest on his or her loan(s).
T
Taxe d’habitation
If your home in France is your principal or holiday residence, you will also be required to pay an occupancy tax, or a "taxe d'habitation ". Occupancy tax is based on the rental value of the property defined by the land registry and local authorities.
Taxe foncière
All home and land owners in France must pay a local property tax known as a "taxe foncière". This tax is based on the rateable value according to the location, the type of building, the surface area and the comfort criteria.
Transaction charges / Frais de négociation
These are the fees charged by the estate agent or the notary for negotiating the purchase of the property and usually represent between 5% and 10% of the purchase price. Sometimes, these fees are included in the purchase price and are paid by the buyer. If the sale is negotiated directly between the buyer and the seller (“vente de particulier à particulier”), these fees will not be payable.
V
Valuation appraisal / Expertise
This is an estimate of the value of the property. The purpose of the valuation appraisal is for loan assessment only and the results are not released to applicants.
Variable Rate Mortgages
BNP Paribas International Buyers variable rate mortgages usually offer stable monthly payments. It is the duration of the loan which varies when the rates rise or fall over a given period. If the interest rate of your loan rises, the duration of the loan is increased within a limit of 5 additional years after the initial term of the loan defined therein. The instalment amount will remain constant as long as interest rate rises allow the full repayment of the loan before the end of the five additional years. Variable rate mortgages are very flexible, and offer subject to certain conditions other advantages as well: no redemption fees should you wish to make an early, partial or complete repayment of your mortgage, and the possibility to convert to a fixed rate mortgage at any time.