Property Purchase Process | Property Purchase Costs | Mortgage Finance

Introduction:

Property purchase costs are high in France and purchasers should expect to pay between 9 and 12 per cent of the purchase price in costs (excluding a buying fee, payable to the estate agent, which may be applicable in some cases). Purchasing costs will include taxes and legal fees collected by the notaire as well as other professional fees (the cost of the survey, for example) and mortgage costs.

Taxes:

• Transfer taxes: On signing of the final Acte de Vente, the notaire will collect transfer taxes from the purchaser on behalf of the various local authorities – departementale (4.2%), communale (1.2%) and regionale (1.2%). Transfer taxes, land registry and stamp duty will add on approximately 7-7.5% to the purchase price. This cost is normally borne by the purchaser unless the price is stated in the offer to be “acte en main”, in which case the seller will pay.
• Stamp duty: Stamp duty will add approximately 0.6% on to the property price. This will be paid to the notaire on completion of the sale as part of a single sum including all taxes, legal fees and the balance of the purchase price.
• VAT: If the property was constructed less than five years prior to sale, value added tax (“TVA”) of 19.6% must be paid. In this instance, the buyer will pay slightly lower fees and registration costs. TVA and the reduced costs will also apply to the first resale within the same five year period after construction of the building. The notaire will collect TVA on completion of the sale as part of a single sum including all taxes, legal fees and the balance of the purchase price.

Legal fees:

• Notary fees: The notaire's fee (“honoraires”) is calculated on a sliding scale. This is normally 5 per cent of the purchase price for the first 3,000 euros, falling to around 0.825 per cent for values above the first 16,750 euros. The fee is fixed by law and is non-negotiable. If more than one notaire is used, the fee is divided between them.
• Land registry fee: A fee of 0.1% must be paid to the Title Registration Office. Registration of a charge on real estate guaranteeing repayment of a loan will add approximately 0.6% to 1.5% in purchase costs.
• Additional legal representation: If you have instructed a UK lawyer, his or her fee is likely to be in the region of 1 cent too.

Other professional fees:

• Real estate agency commission: If a real estate agency is used to sell the property, they will be entitled to a commission on completion. Normally these costs are met by the vendor but in some exceptional circumstances these are paid by the purchaser. If the purchaser is to pay the agent's commission, this should be agreed in advance and included within the “mandat” (the official instruction from the vendor to the agent). French estate agency fees are high and normally range between 5 and 10% of the purchase price.
• Surveyor's fee: Fees for any other professional work undertaken - such as the cost of a survey or work to establish or reposition boundaries - also should be taken into account.

Financial costs:

• Mortgage fees: Mortgage finance is expensive to arrange in France . The costs of arranging a mortgage (“frais d'hypotheque”) will be around 1-2% of the value of the loan and there will be further administration charges (“frais de dossier”) on completion of the loan. Life insurance is compulsory in France to guarantee repayment of the outstanding loan amount in the event of death or disability.

• Other financial costs: Purchasers should bear in mind the cost of foreign exchange if currency needs to be changed from sterling to euros to make payments.  If the services of an accountant are used their fee must also be included in overall purchase costs.

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