Vive la différence

It is easy to get to France, but the shortness of the journey belies the significant difference in French and British property, tax and inheritance laws, says Terry Corbitt.

Ease of access and the different way of life are among the factors that make France the country where British people are most likely to buy overseas property. They have a wide choice.

France is a large country that ranges from the Mediterranean in
the south to the English Channel in the north, from the Atlantic in the west, to borders with Belgium, Germany, Luxembourg, Switzerland and Italy in the east. It has rolling countryside, mountains, wide rivers, forests and beaches. And the
advent of cheap flights make most areas easily accessible.

Any decision to buy property in France must therefore start with a choice of area in which to start looking. But be clear, a different way of life also comes with a different approach to property, tax, inheritance and other laws.

Your main considerations when choosing a property will be its cost (French house prices are less than in the UK but have been rising fast), its state of repair, nearness of towns, beaches, mountains or other leisure amenities, and ease of access by road, rail, sea or air.

France attracts millions of tourists each year but its holiday high season tends to be relatively short – mostly July and August – which is a consideration when assessing letting potential.

Also do not underestimate the cost of repairs of what seem to be spectacularly cheap but run down French properties. French trades people are often registered. The standard of work is good but the cost is relatively high.

It is all but essential to open a French bank account, this will simplify the purchase process and will also make payment of local tax, fuel, water and telephone bills much simpler. You must take care that your account is always in credit as if you go overdrawn without arrangement you could be prevented from operating a bank account in France for 10 years.

Estate agents in France are also strictly regulated. They must have a professional qualification and a financial guarantee enabling them to receive your deposit. Agents in France must display details of their professional charter, the sum of their financial guarantee and the name of the organisation which covers it.

Do not necessarily expect reams of details of properties to inspect. Agents may well accompany your on a tour of likely properties and on viewings.

When you have found the property you wish to buy and have agreed a price you will be asked to sign a preliminary contract and to pay a deposit, usual 10 per cent on existing property and 5 per cent on new. Beware, it is much easier to commit yourself to a purchase in France than in the UK.

You do not need a lawyer to act on your behalf (an independent notary will act for both sides) but it in many instances it is wise to have a French lawyer. He or she will understand the nuances of the system as well as local custom.

There are two types of preliminary contract in France, the compromis de vente, which is binding on both parties and the promesse de vente which is binding on the seller. This is an example of where it is essential to have a legal expert who understands French legal documents and is fluent in French.

The notaire is essential in all property transactions, he or she is a public officer, controlled by the Minister of Justice, who will supervise and authenticate the transfer of ownership. Notaires can also act as an estate agents.

Theoretically the purchaser has the right to choose the notaire when the transaction involves an existing property. In practice, however, the French estate agent will probably suggest the notaire who handled the previous sale of the property. Whoever nominates the notaire, the notaire represents neither the purchaser nor the vendor but is responsible to the French government to ensure that the law is properly applied and that all fees and taxes due to the state on completion of the deal are paid.

The notaire will make enquiries and searches on the property with the local authority and the Land Charges Registry, to verify that the property is the vendor's to sell and that there is no outstanding loan against it greater than the current purchase price. In the case of land or farm buildings the notaire will check that French agricultural authorities will not be exercising their right to step in and buy the property instead of you.

When the notaire has completed the enquiries, he or she will draw up the deed of sale which contains a full description of the property. Once the vendor and the purchaser have agreed and signed this document, witnessed by the notaire, ownership is transferred. The details will be recorded at the Land Registry and you must ask the notaire for a copy or a certificate stating that the transaction has been completed.

The notaire’s enquiries only relate to the property itself and not the surrounding area, so you should make your own enquiries at the local town hall.

In France it is advisable to introduce yourself to the local mayor as he or she is a far more influential person than British counterparts and has authority and responsibility for making decisions which could affect your property.

The costs involved in the transaction vary between new and old property. Taxes and legal fees on older houses can amount to 8 to 10 per cent of the basic purchase price. On new homes the cost is 3 to 4 per cent, VAT will have been included in the purchase price. The costs include stamp duty, Land Registry charges, the notaire's fee and transfer duty.

The French and British governments have a double-tax treaty which means that you do not have to pay taxes in both countries. If are resident in the UK and rent out property in France you must declare the rental income to both the French and the British tax authorities.

Non-residents selling property in France pay capital gains tax at 33.3 per cent. There are allowances for inflation against the original purchase price, purchase costs and major rebuilding and structural repairs where VAT has been paid and the VAT receipts retained. There are also reductions of 5 per cent for every year of ownership after the first two, this means that if you own the property for 22 years you are exempt from French capital gains tax.

Also note that French inheritance tax rules mean that children are entitled to a set proportion of estates. Joint ownership rules are also different to those that apply in the UK so that unless arrangements are made at the time of purchase, the death of a spouse could mean children are entitled to an immediate share.

The complexity of the French inheritance tax rules alone mean it is worth hiring your own French lawyer when purchasing a property in France and, among other things, making French wills.

French property buyers should consider the following before buying a property in France:

• Do not be rushed into buying a property or signing a commitment.
• Visit the property you plan to buy wherever it is situated. If it is not completed, ask to see a similar design that is ready for occupation. Check on the materials and finishes being used and get assurance that any proposed amenities such as swimming pools will be available for use immediately.
• Before signing any documents or paying over any money seek advice on the contract, the specification and the terms of business from qualified legal experts and an accountant. Ask the estate agent or developer for English translations of all documents which commit you to a purchase.
• When purchasing an apartment obtain written confirmation of maintenance charges and management arrangements
• When facilities such as swimming pools and tennis courts are promised in the brochure and publicity, but have not been provided at the time you purchase your property, get written confirmation as to when these will be available.
• Ensure that you obtain a proper title to the property you are buying and that there are no encumbrances, such as a mortgage, registered at the Land Registry. The local legal expert that you employ should routinely make these checks.
• Ask for a completion date to be included in the sales contract.
• At an early date compile a list of costs and taxes that you will be liable for when you purchase the property.
• When buying a new property that is still under construction obtain information about stage payments as the work proceeds and check what guarantees you have if any faults should develop in the completed building.
• Make sure that you comply with the fiscal rules of the country. Check out the regulations regarding taxation of foreign residents, remember the tax collector will want a share of your 'profits'.
• Make a French will.

As Britain is a member of the EU, UK citizens have the right to live and work in France. But they must still comply with local requirements which will include making various authorities aware of their residence and, for example, taking out medical cover.