Since the new taxation reform was passed earlier this year, a number of wealthy owners have moved out of France and put up their properties for sale. This resulted in an exceptional price fall of up to 15% for properties over €2 million, a first on the market. Investing in French luxury real estate now could prove very profitable; prices have rarely been so tight and negotiating has become easier for investors. If acquiring property in France still sounds hazardous to you, these eight pieces of advice should help you out:
- Make sure you are personally present when visiting properties to acquire. It is essential not to take a decision from pictures or other people's advice alone. Once your mind is made up, you will no longer need to be present; a legal representative can handle the whole acquisition process for you.
- When considering an acquisition, ask for a second price assessment.
- Arrange for complementary technical audits. A rather inclusive series of technical audits is required by law but will be performed by the seller's expert. It is worth the cost of having your own expert double-check every point.
- Never hand money out to the real estate agent or to the seller before the sales agreement is signed. Real estate agents should be paid upon reception of your new property's keys.
- Notaries are mandatory for both the seller and the buyer. They are responsible for ensuring the contract's lawfulness but are not meant to defend the parties' interests; it is even possible to share the same notary with the seller – although we do not advise this. Notaries are experts in French real estate law but would normally not be able to advise you in English on your own country's legislation.
- French proceedings when acquiring property are thorough and reliable. However they are quite different from other countries' legislation, such as that of the UK or United States. For instance, in some regions a sales agreement will compel you to buy once signed - in others it will compel the sellers to sell even if they change their mind. It is important to get advice from an English-speaking counsel who knows your country's legislation and who will be able to translate French proceedings into your language and customs.
- When undertaking renovation work, check your contractors' lawfulness (such as adequate insurance coverage) and plan for technical audits before and after.
- Do not hesitate to seek assistance from a tax lawyer to optimise your acquisition in anticipation of its future transfer; although the much-publicised wealth tax does not apply to properties (only to revenues), other taxes may apply when selling secondary residence or inheriting property.
Acquiring a luxury property in France should not present any particular difficulty if you follow these steps. If you wish to be accompanied through each stage by an experienced professional, look for a French real estate lawyer with an international background: they would be able to arrange all of these securities for you.
Client Alert 2013-110
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.