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PROPERTY

Frequent mistakes made by French property buyers

An expert from English-language housing site ESREA shares with The Local some tips to help you avoid making the worst mistakes when buying a home in France.

Published: 1 November 2019 14:30 CET
Frequent mistakes made by French property buyers
A house of sale in La-Faute-sur-Mer (Vendée). Photo: Frank Perry/AFP
If you are buying a French property make sure you avoid doing the following:
 
One: Not keeping in contact with your notary
 
Buying French real estate is complicated for you and for your notary. In fact, the signing of the ‘compromis de vente’ is just the beginning of a marathon of collecting and organizing paperwork for the notary.
 
This process takes months and when it is delayed the period between the signing of the ‘compromis de vente’ and the ‘acte authentique’ can end up being longer than the average three months.
 
To help make the process go smoothly you need to make sure your notary has all the documents needed from you as quick as possible.
 
The best way to make sure your notary has all they need is to keep in contact with them, in fact don't hesitate to contact them every couple of weeks to touch base. 
 
Do not expect the notary to contact you since they will likely be working on many transactions.
 
 
Two: Not keeping in regular contact with your bank or mortgage broker
 
If you are buying a French property with a mortgage you need to keep in regular contact with your bank or mortgage broker to make sure they have all the details they need from you to process your request.
 
There is a long list of documents the mortgage supplier needs from you and sometimes as time passes the validity of some documents expires and the bank or mortgage broker needs an up-to-date version.
 
You will also need insurance on your French mortgage and this is also a process that involves lots of paperwork and approvals and often a recent blood test of the borrower.
 
Be sure the bank has all the documents they need by contacting the bank approximately every ten days just so they know you are available if and when needed.
 
Three: Not knowing that the final signing date can change
 
The final date of the signing of ‘acte authentique’ (the legal document that transfers the title from the owner to you) can be changed from the date stated in the ‘compromis de vente’. So make sure you make flexible plans around the date noted in the ‘compromis de vente’.
 
You don't want to plan a vacation or important business trip and have to cancel them since the final signing date was moved.
 
You also don't want to plan your move until you know exactly when it is.
 
Four: Not reviewing the key points
 
When you are buying a French property it is typically in ‘as is’ condition so it is very important to understand all the details in the ‘compromis de vente’ about the property include the declarations made by the seller, the conditional clauses made by the buyer and all the details on the price and additional costs involved in the purchase of the property.
 
In addition, details on the title of the property need to be completely understood. Make sure you have an English speaking notary to explain to you all the details you need to know.
 
To learn more about buying and selling French real estate visit ESREA France where you can also learn of more mistakes made by French Property Buyers and Sellers.
 
David Hennessey, the founder and director of ESREA France. 
 
 

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PROPERTY

French property: What is buying ‘en tontine’?

If you're buying property in France, you might be thinking about buying 'en tontine' - this has advantages especially when it comes to France's strict inheritance laws, but can also have tax implications.

Published: 25 March 2024 11:17 CET
French property: What is buying 'en tontine'?

What is it?

The ‘clause de tontine’ sometimes also known as a ‘clause d’accroissement’ is a clause that is inserted into the property deeds when you are buying a house or apartment.

It can only be inserted during the purchase, and cannot be added later.

It’s basically a ‘group purchase’. It’s most commonly used by unmarried couples who are buying together but it can be used by larger groups too – for example a group of friends buying a holiday home together.

You will have to ask a notaire to draw up the tontine clause during the property purchase and it can only be used if 

  • the parties are equally involved in the financing of the purchase
  • the parties involved have a roughly equal life expectancy (for this reason tontine clauses may be rejected if there is a significant difference in age between the purchasers)

What’s the point of it?

The main reason that people use it is to sidestep France’s strict inheritance laws, which assign that a certain portion of every estate must go to children, at the expense of a partner. 

READ ALSO How France’s strict inheritance laws work

For this reason it is particularly used by couples who have children from previous relationships.

On a property with a tontine clause in effect, when one owner dies their share of the property passes in its entirely to the other member/members of the tontine.

This cuts out children from inheritance, but means that a surviving partner is not evicted from their home in favour of the children of the deceased. 

It also has the advantage of making the intentions of the deceased clear, to avoid arguments among heirs after their death.

It should be noted, however, that the tontine clause only takes in the property that it covers – other assets may be subject to French inheritance law so it’s therefore probably wise to arrange a will, to ensure your wishes for your estate are met.

The surviving party can ask a notaire to update the property deeds to show that they are the sole owner, if they want. Be aware there will be a fee, which could reach four figures for the privilege – and it doesn’t actually involve any change to the property title.

Drawbacks

The advantages of the system are clear, especially for blended families, but there are some potential drawbacks too, which mean that anyone considering buying in this way would be well advised to take proper legal advice before they start.

Inheritance tax – while a tontine will help you to avoid restrictions on inheritance, it does not exempt you from inheritance tax. French inheritance tax is structured according to your relationship to the deceased, and people who are neither married nor related to the deceased pay an eye-watering inheritance tax rate of 60 percent.

The only exception to this top rate of inheritance tax is if the property is your main residence and it is valued at under €76,000 – in that case, tax is paid at a rate of 5.8 percent.

Married couples and family members pay a much lower rate or not tax, but if you’re not married to your tontine co-purchaser, be careful that you’re not lining yourself up for a massive tax bill in future years.

Wealth tax – depending on the value of the property, it could tip you over into the ‘wealth tax’ category when you inherit. France’s wealth tax is a real estate based tax and is levied on anyone who has real estate assets (property and land) worth €1.3 million or more.

The calculation includes property held en tontine.

Tax savings – you might hear tontines being advised as a way to limit your French tax liability.

While this used to be true, changes to tax laws means there are no no significant tax advantages to buying this way – the same is true for buying a property via an SCI, which used to represent a tax saving until the law was tightened up.

Disinheriting family members – One side effect of the tontine clause on mixed families is to effectively disinherit any children of the first person to die.

Because the property passed to the survivor, under French law, only their direct descendants – rather than any family by marriage – are entitled to automatic inheritance.

That means that the children of the surviving partner will be entitled to the statutory share of the entire asset (between 25 and 30 percent depending on the number of children), but the children of the first person to die will be entitled to nothing. Obviously you can choose to leave them something in your will, but you can only leave them some or all of the estate which is not automatically given to the children on the survivor.

Divorce/dispute – if the members of the tontine split up or (in the case of friends) fall out, then they can either sell the whole property or agree to buy each other out.

However, if one party refuses to sell, then you have very limited legal options – unlike a standard property purchase a tontine is not regarded as joint ownership, so one partner cannot be forced to sell as part of a divorce procedings, for example.

Basically the tontine can only be ended or changed with the agreement of all parties – so if you can’t agree between yourselves then you may be stuck with it.

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