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The following text has been prepared by JUST FRANCE Sales based on information provided
largely by Maître Stè phane Zecevic, Notaire, of the firm SCP Girod, Herrnberger
et Zecevic in Paris.
Much more than in the common-law tradition prevalent in the United States
and Great Britain, in France the government takes an active role in legislating
rules that govern private transactions. In the area of real estate law, one result
of the French system is that contractual exchanges of real property are done according
to a government-prescribed formula. Once finalized according to this routine and formulaic manner, the transactions are virtually immune to legal challenge.
In the domain of real estate transactions, the government delegates wide powers
to a qualified professional called a "Notaire." The Notaire is charged with ensuring
that contracts involving real property conform to the current law as well as to
agreements regarding the property that may have existed before the present transaction.
Thus the French Notaire authenticates agreements regarding the sale of real estate.
In fulfilling his or her role the Notaire must use extreme caution before finalizing
any deed of sale, as a misstep can expose the Notaire to severe professional and
financial penalties.
Who is the Notaire?
Becoming a Notaire requires seven years of professional training in French real
estate law, family law and corporate law. The Notaire who completes this rigorous
training is recognized by the government as a public official authorized to practice
law within the domain of the Notaire. Both French lawyers and Notaires are addressed
as Maître, for which the Anglo-American equivalent would be Esquire.
The Notaire may counsel clients without regard to the geographical location of a
transaction. Thus a Notaire based in Paris can handle the acquisition of a house on
the French Riviera. The French government confers on the Notaire,
and only on the Notaire, the power to authenticate agreements for the sale of real
estate. The Notaire's virtual monopoly on real estate transactions prevents almost
any subsequent litigation concerning these contracts.
The Notaire's duties are not limited to drafting and authenticating deeds.
As today's legal transactions grow increasingly complex, another major function
of the modern-day Notaire is counseling clients on the purchase and sale of real
estate. The Notaire often can assist a client on such matters as whether the seller's
asking price is in line with current market values, or whether new construction
is planned in the region that may affect the property's value.
Protections to the buyer deriving from the Notaire system
A direct consequence of the Notaire institution in the French legal system is that,
once prepared by the Notaire and duly executed by the buyer and seller, a deed, agreement for the transfer of real estate and other instrument of sale is rarely challenged
by the parties. When they are challenged, such suits are rarely successful.
The Notaire system operates to the advantage of a foreign buyer who
is contemplating the purchase of property in France. Prospective purchasers can
rest assured that a sale of property properly authenticated by a competent Notaire
will be legally sound and not subject to later challenge.
The buyer is further protected by two other aspects of French law governing the
Notaire. First, in the rare event that a deed is successfully challenged in court,
the Notaire faces severe financial and professional penalties. Second, if a buyer
suffers financially because of a Notaire's incompetence in preparing the deed, the
Notaire is required to reimburse that party for the loss. Should the Notaire be
unable to make full reimbursement, the law requires that the French professional
association for Notaires make up the difference.
Deed registration process
The real estate registration system in France is highly efficient. Only authenticated
deeds settled by a Notaire can be registered, a process that takes two to three
months. While this may seem like a long period compared with some other countries,
the buyer once again has the comfort of knowing that once properly registered the
deed is virtually beyond challenge by the seller, the seller's heirs or any other
party.
How much are the Notaire's fees?
Closing costs include the Notaire's fees, administrative and filing costs and all
taxes. In common parlance these various costs are grouped together into one sum
and referred to as the "Notaire fees" or frais de notaire.
Notaire fees are fixed by law, and cannot be altered. Because these fees are fixed,
the total amount of money due at final settlement can easily be calculated within
a few hundred euros once the once the buyer and seller agree on a purchase price.
Please note that for extensive consultations that exceed the notaire's normal
advisory services, by law the notaire may charge an additional fee. Such fees may
range from 100 € to 300 € or more an hour.
A quick rule of thumb for calculating closing costs is:
For properties more than five years old: approximately 6.5-7.5% of the purchase
price.
For properties constructed within five years before the date of settlement: 2-3%
of the purchase price.
The taxes paid as part of the closing costs are in the nature of real estate transfer
taxes, and generally are not deductible by American buyers on IRS Form 1040. Please
consult an accountant for advice on your particular situation. Upon request Just France Sales will be happy to refer you to an expert in French tax and real estate law.
Can the buyer retain his or her own Notaire?
In most countries, including the United States, the buyer is often faced with the
question of whether it is worthwhile to pay the substantial fees necessary to retain
a lawyer just to oversee an ordinary residential real estate transaction.
The buyer does not face this question in France, where the buyer may retain a qualified
Notaire at no extra cost. French law provides that both parties are entitled to
a Notaire, and that the Notaire fees for professional services (fixed by law according
to the sale price of the property, as described above) are to be divided evenly
between the seller's and the buyer's Notaire. Thus in France the buyer may retain
a Notaire - a wise decision - without paying additional fees.
JUST FRANCE Sales can put you in touch with
an experienced English-speaking Notaire who is specifically skilled in real estate
transactions involving overseas purchasers. The importance of working with a competent
Notaire that you have confidence in, who can communicate fluently with you and who
will will translate relevant portions of the compromis de vente (agreement of sale) into your native language,
cannot be over-emphasized.
Role of the Notaire
As explained above, the Notaire is a lawyer specifically trained in French real
estate law and designated by the French government as the sole official authorized
to effect the transfer of real property. The Notaire prepares all documents and
supervises the sale from start to finish.
Once the buyer has selected a property for purchase, the Notaire will take charge
of the two major steps toward completing the sale. These steps are to prepare the:
- Compromis de vente (agreement of sale), and the
- Acte authentique de vente
(final deed).
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Note: In northern of France, including Paris, this document is often called the promesse de vente. (There are few substantive differences between the two forms.)
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The compromis de vente (agreement of sale)
The Notaire's most important function is to prepare the compromis de vente,
the governing document in any French real estate transaction.
The American equivalent to the compromis de vente is the preliminary Agreement
of Sale. Upon signing an Agreement of sale the American buyer pays a percentage
of the purchase price, traditionally 10 percent, as a deposit.
The practice is identical in France, with the deposit - generally 10 percent - being
paid directly to the Notaire.
The compromis de vente carries far more legal weight than its American equivalent.
This is because all future obligations of the parties are encompassed in the compromis.
Thus from a legal point of view the final deed, which almost invariably mimics the
compromis, is little more than a formality.
It is important to note at this stage that French law does not require that a
compromis de vente be prepared by a Notaire. A lawyer or a real estate agent
is equally authorized to prepare the document.
The fact that a party other than a Notaire prepares the compromis does not
necessarily present a problem for the buyer. However, it is not uncommon for a real
estate agent or highly motivated seller to encourage a buyer to sign such a document
without the supervision of a Notaire. This situation may arise when a real estate
agent says the property will be taken by another purchaser if a compromis
is not signed immediately.
JUST FRANCE Sales strongly discourages
its clients from signing any document before it has been reviewed by an experienced
English-speaking Notaire. This is especially important for non-French clients,
as the resulting document can lock the buyer into unexpected obligations and other
problems that may be difficult to unravel. (Note that having the compromis
prepared by another party does not diminish at all the fees ultimately due to the
Notaire.) It is a simple matter to ask for a delay of a day or a few hours while
the document is faxed to the Notaire for review.
Normally preparation of the compromis follows an agreement between the buyer
and seller and their respective Notaires on all terms of the sale. There need not
be a formal meeting, but all issues must be settled before the Notaire, generally
the seller's, undertakes to prepare the compromis. All parties then sign
the compromis, at which point a seven-day cooling-off period begins.
Documents the buyer must provide to the Notaire
The non-French buyer must provide the Notaire with proof of identify. Generally
a passport will suffice, although in some instances a certified copy of a birth
certificate may be requested.
For titling purposes the Notaire will ask the marital status of the buyers. Married
couples taking joint title to the property may be required to furnish a marriage
certificate. Spouses with a pre-nuptial agreement may have to furnish proof of the
existence of the agreement, though generally they are not required to disclose its
exact provisions.
The seven-day cooling-off period
The signing of the compromis de vente sets in motion a calendar seven-day
period during which the buyer may rescind the transaction for any reason and receive
back the 10 percent deposit. Notification must be by lettre recommandée (registered
mail). Once the compromis is signed the seller does not have the right to
rescind.
Preparation of the final sales agreement
Once the cooling-off period has expired, the commitments of the buyer and seller
are fixed. The Notaire must then collect the various documents necessary to finalize
the sale in a manner where the deed may be formally filed with the local mairie
(town hall) or appropriate jurisdiction. Once filed the deed is incorporated into
the jurisdiction's cadastre, or property ownership records.
The documents collected by the Notaire include certification that:
- All parties are legally and mentally competent to complete the transaction;
- There are no liens against the property, and the title is free of claims and encumbrances;
- The sale and any planned usages by the buyer are in conformity with local regulations,
including those governing historical monuments;
- Government-required inspections to verify the absence of asbestos and lead poisoning
have been properly carried out. Some local jurisdictions also require an inspection
for termites.
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An official survey of the surface area of the property has been prepared.
Final settlement
Once the compromis de vente is signed, it generally takes 75-90 days for the Notaire to prepare the documents necessary for final settlement.
This period may be longer if the Notaire has to obtain permission for the sale from
from heirs who have the sign the compromis but are difficult to reach. In some instances the process can also be
accelerated, especially when the buyer is not seeking a mortgage. In any event, the
verification process is rigorous and a competent Notaire will insist that all documents
be in order before proceeding to final settlement.
Final settlement and transfer of the property generally takes places in the office
of the seller's Notaire. The buyer's Notaire may attend, but frequently does not
as all legal documents and costs will have been reviewed and approved by that Notaire
prior to closing date.
The buyer is notified in advance of the entire amount of money due at settlement.
This amount will include the remaining 90 percent of the purchase price, and all
fees and closing costs. The buyer tenders this amount by effecting a wire transfer
prior to closing into the escrow account of the seller's Notaire, or by presenting a certified
check at settlement.
Where a mortgage is involved, the lending institution will transfer the amount financed
directly to the Notaire's account.
At settlement the Notaire may assist the buyer and seller in prorating any unpaid
utility charges or local taxes that may come due in the near future. The entire
settlement process, including the signing of many documents, takes about 45 minutes.
The buyer then becomes the owner of the property.
For further legal information on the purchase and ownership of a property in France
such as the following topics, visit our Advanced Legal Issues
section:
- The importance of how the property is titled
- Inclusion of a mortgage contingency clause in the compromis de vente
- French inheritance law
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Some tax issues
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