Inside French Real Estate: Notaire Nathanaël Romus on What Foreign Buyers Need to Know

Nestled in the sun-kissed streets of Cannes, just steps away from the renowned Palais des Festivals, stands an exceptional legal institution—the oldest Notaire office in the city, established in 1481. At the helm is Maître Nathanaël Romus, a Notaire Partner dedicated to notarial practice since joining the firm in 2014 and becoming a partner in 2020.

In France, the role of a Notaire is distinct from that of legal professionals in common law jurisdictions like the UK and the USA. Appointed directly by the Ministry of Justice, Notaires serve as public officers representing the state. They occupy a unique position of trust, responsible for collecting various taxes—such as VAT, inheritance, gift taxes, and stamp duties—on behalf of the French government. Maître Romus emphasises that Notaires also draft authentic contracts that carry the same legal weight as court decisions, providing clients with unparalleled security without the need for specialised insurance.

In the realm of real estate, Notaires play a critical role. They hold a monopoly over registering sale contracts at the land registry, meaning clients must rely on their expertise rather than lawyers, bankers, or estate agents for this essential function. Maître Romus highlights the transparency of the Notaire’s fee structure, which is regulated by French law to ensure fairness and consistency—approximately 0.8% of the sale price plus VAT.

Originally from Brussels, Belgium, Maître Romus has made the French Riviera his home since 2013, pursuing his passion for law in this idyllic setting. His office comprises five Notaire partners, four Notaire employees, and around 30 collaborators, each specialising in different legal areas. Alongside Maître Antoine Scriva, who focuses on international private civil law and serves a clientele that is approximately 70% foreign, Maître Romus ensures clients receive expert guidance tailored to their diverse needs. The firm also boasts specialists in public law and family and inheritance law, making it a comprehensive resource for legal services in the region. Specifically, Maître Frédéric Goiran and Maître Eve Ploton focus on public law, while Maître Wafaa Ridouan-Allali specialises in family and inheritance law.

What sets this firm apart is not just its rich history and esteemed reputation but also its commitment to excellence in serving clients. The dedicated team includes Maître Olessia Moulioukova, who specialises in Eastern European clients. Together, Maître Romus and his colleagues navigate the complexities of modern legal challenges while upholding the timeless values of trust and integrity that define their profession.

As we delve into the intricacies of notarial practice, Maître Nathanaël Romus stands as a beacon of professionalism and dedication in the vibrant legal landscape of Cannes.

Saint-Tropez is a coastal town on the French Riviera, in the Provence-Alpes-Côte d’Azur region of southeastern France. It has long been popular with artists and attracted the international jet set in the 1960s.

Key Legal Considerations for Foreign Buyers of Property in France

What are the most important legal considerations foreign buyers should be aware of when purchasing property in France?

Purchasing property in France as a foreign buyer comes with unique legal considerations that are essential to understand. Here are some of the most critical factors to keep in mind:

First and foremost, foreign buyers must be aware of the various recurring costs associated with property ownership in France. One of the primary expenses is the taxe foncière, or property tax, which is payable annually, typically in September or October. There are no specific rules governing the amount, so it’s advisable to consult with the estate agent or the vendor to determine the expected costs.

Another important consideration is the habitation tax, which is also an annual fee, usually due in October or November. This tax applies only to secondary homes used for habitation and is generally similar in amount to the property tax.

For those with more substantial real estate holdings, it’s crucial to understand the wealth tax. This tax applies exclusively to real estate properties based on their net value, meaning you can deduct any debts, such as mortgage loans, from the total value. If a buyer owns multiple properties, the net values are aggregated for tax purposes. The wealth tax kicks in when the total net value exceeds €1,300,000, calculated according to a proportional scale:

From €800,001 to €1,300,000: 0.50%
From €1,300,001 to €2,570,000: 0.70%
From €2,570,001 to €5,000,000: 1.00%
From €5,000,001 to €10,000,000: 1.25%
Over €10,000,000: 1.50%

Additionally, if the property is part of a condominium or a housing development (lotissement), buyers should anticipate service charge invoices. These common expenses may be billed monthly, quarterly, or semi-annually to cover shared costs like cleaning, gardening, and maintenance. There are no standardised amounts for these charges, so it’s prudent to inquire about the expected costs from the estate agent or vendor. Buyers should also be aware of any major works that have been approved during general meetings, as they may be required to contribute to those expenses along with other co-owners.

The Role of the Notaire

The Notaire plays a crucial role in safeguarding the interests of the buyer. They are responsible for ensuring that all legal considerations are thoroughly examined. This means you can rely on the Notaire to highlight any potential issues that may arise during the purchasing process. Key aspects they will verify include:

The capacity of both parties to sign the deed
The vendor’s title deed and their right of ownership
Any existing legal procedures related to the property
Possible easements or charges affecting the property (for instance, a right of passage for a villa without direct road access)
Verification of all building permits and work done by vendors, along with the necessary insurances from the contractors
Required legal surveys that the vendor must provide, such as assessments for surface area, lead, asbestos, termites, electrical and gas safety, energy efficiency, and any natural risk evaluations
Confirmation that there are no outstanding mortgages or debts on the property prior to sale

By entrusting these responsibilities to the Notaire, buyers can proceed with peace of mind, knowing that any significant issues will be raised before the transaction is finalised.

Optimal Purchasing Strategies

When considering the best approach to purchasing property, various strategies can be employed, depending on personal circumstances. Buyers may choose to acquire the property in their personal name, opt for share ownership with children, or consider alternatives such as usufruct/bare ownership arrangements. Other options include purchasing through a French civil company (Société Civile Immobilière, or SCI) or via a foreign company.

The choice of ownership structure is significant, particularly regarding tax implications. Buyers should aim to optimise their strategy to minimise potential French inheritance taxes and wealth tax liabilities. Consulting with a Notaire can provide tailored advice to help navigate these considerations effectively.

By staying informed about these key aspects, foreign buyers can better navigate the complexities of purchasing property in France and make well-informed decisions that align with their long-term goals.

Avoiding Pitfalls in the Property Purchasing Process

3. What are some potential pitfalls buyers should avoid during the purchasing process, especially when it comes to hidden costs or legal issues?

When purchasing property in France, there are several critical points that buyers must pay close attention to in order to avoid potential pitfalls. Here are some key considerations:

Timing and Completion Dates

One of the first aspects to clarify is the completion date outlined in both the offer letter and the preliminary sale contract. It’s vital to ensure that this date allows sufficient time for both parties to fulfil their obligations. Sellers need enough time to move their personal belongings and organise international relocations, while buyers must ensure they have their funds ready, particularly if financing is involved. Generally, the typical timeframe for completing a transaction is between two to three months from the signing of the preliminary sale contract. To prevent misunderstandings later, it’s advisable to specify the maximum completion date in the offer letter right from the start.

Negotiating Suspensive Conditions

If you require a loan or need to sell another property—potentially even outside France—to facilitate the purchase, it is essential to protect your interests by negotiating suspensive conditions with the vendor. This should be addressed during the initial negotiation phase and included in the offer letter. Without these conditions, you could find yourself in a position where, if your loan isn’t approved or your existing property doesn’t sell, you may be obligated to forfeit your deposit as financial compensation to the vendor due to a penalty clause.

Hidden Defects

In France, properties are typically sold “as is,” unless otherwise negotiated. If the vendor is a private individual and not a real estate professional, they may not be liable for hidden defects. For the buyer to hold the vendor accountable, they would need to prove intentional concealment of those defects in a French court. Conversely, if the vendor is a real estate professional (marchand de biens), they cannot evade responsibility for hidden defects, even if they were unaware of them.

This makes it imperative for buyers to conduct thorough inspections during property visits and before the legal ten-day cooling-off period expires. Identifying any issues early allows for negotiations regarding price reductions or commitments from the vendor to rectify problems prior to completion. Once the cooling-off period has passed, it may be too late to address any concerns, so diligence during this phase is crucial.

By remaining vigilant and informed about these potential pitfalls, buyers can navigate the French real estate market more effectively and protect their investment from unexpected challenges.

Selling Real Estate in France

How does selling real estate in France differ from purchasing it? What should sellers expect in terms of legal processes and documentation?

Selling real estate in France involves a distinct set of responsibilities and legal processes compared to purchasing property. Here are some key differences and what sellers should anticipate:

Financial Responsibilities

In France, the buyer is typically responsible for paying the Notaire’s fees as well as the associated stamp duty. This contrasts with many other jurisdictions where sellers often bear these costs. The vendor’s primary financial obligation is the potential capital gains tax, which may arise from the sale of the property.

Legal Documentation Requirements

Sellers must prepare several critical documents to facilitate the Notaire’s preparation of the preliminary sale contract. These include:

Full Title Deed: This document verifies the seller’s legal ownership of the property and outlines any encumbrances or restrictions.
Legal Survey File: A comprehensive report covering various aspects such as the property’s surface area, checks for hazardous materials like lead and asbestos, electrical and gas safety compliance, energy efficiency ratings, and assessments of natural risks. It may also include a survey confirming the property’s connection to the main drainage system or the condition of a septic tank.
Last Property Tax Payment: Proof of the most recent property tax payment is necessary to demonstrate that the seller has fulfilled their tax obligations.
Last Invoice of Service Charges: If the property is part of a condominium, the seller must provide the latest invoice detailing service charges, ensuring transparency about shared expenses.
Invoices for Major Works: Sellers must present all invoices for significant renovations or repairs made to the property, along with any necessary authorisations or permits obtained for such work.

Disclosure Obligations

In addition to these documents, sellers have a legal obligation to disclose any relevant information about the property to potential buyers. This includes declaring any known issues or defects that could affect the property’s value or livability. Transparency is crucial, as failure to disclose significant problems may lead to legal repercussions after the sale.

In summary, while the purchasing process may be more complex for buyers, sellers in France must also navigate a specific set of responsibilities and legal requirements. By understanding these obligations and preparing the necessary documentation, sellers can facilitate a smoother transaction and avoid potential pitfalls.

Maître Nathanaël Romus: Notaire Associé Civil Law Notary Partner – SELAS LES NOTAIRES DU 21 RUE D’ANTIBES

Strategies to Reduce Inheritance Tax on Real Estate in France

What strategies can be employed to reduce or avoid inheritance tax on real estate in France?

Navigating inheritance tax in France can be complex, especially when it comes to real estate. Inheritance tax is progressive, with rates varying based on the value of the estate. For direct line inheritances (from parents to children), the tax brackets are as follows:

Under €8,072: 5%
€8,072 to €12,109: 10%
€12,109 to €15,932: 15%
€15,932 to €552,324: 20%
€552,324 to €902,838: 30%
€902,838 to €1,805,677: 40%
Over €1,805,677: 45%

Each child benefits from a tax exemption of €100,000.

For instance, consider an apartment in Cannes valued at €2,000,000 with no debts at the time of inheritance. If only the father passes away, leaving behind a widow and three children, the inheritance will be divided equally among the three children, each receiving an interest of €666,666.67 (i.e., €2,000,000 divided by 3).

Applying the exemption of €100,000 per child, the taxable amount for each child would be calculated as follows:

Taxable Value:

Initial Value: €666,666.67
Less Exemption: -€100,000
Taxable Amount: €566,666.67

Tax Calculation: Now, applying the progressive tax rates:

5% on €8,072: €403.60
10% on €4,037 (€12,109 – €8,072): €403.70
15% on €3,823 (€15,932 – €12,109): €573.45
20% on €536,392 (€552,324 – €15,932): €107,278.40
30% on €14,343 (€566,666.67 – €552,324): €4,302.79

Total Inheritance Tax Per Child:

Sum of Taxes: €403.60 + €403.70 + €573.45 + €107,278.40 + €4,302.79 = €112,961.94

In this scenario, each child would owe approximately €112,961.94 in inheritance tax, significantly impacting their inheritance.

To mitigate or avoid inheritance tax, here are several strategies that can be employed:

Gift Funds for Property Purchases Outside France: One effective approach is to give money to your children to buy property in their names, ideally outside of France. This strategy can completely avoid inheritance tax since the property will already belong to the children. However, three conditions must be met for the gift to remain untaxed in France:
- The parents must not be French tax residents.
- The children must also not be French tax residents.
- The money transfer must occur outside France.
The main drawback of this method is the potential loss of control over the property, as children may choose not to sell in the future or keep the proceeds if they do.
Shared Ownership with Children: Another option is to share ownership of the property with your children. This arrangement allows parents to maintain partial ownership while ensuring that their share of the inheritance is reduced. The respective ownership shares dictate how expenses, fees, and taxes are handled. However, this structure also presents challenges, as the children can refuse to sell the property, and any sale proceeds will be divided according to ownership shares.
Usufruct and Bare Ownership: In France, property ownership can be divided into usufruct (the right to use and benefit from the property) and bare ownership (the right to inherit the property). By purchasing usufruct, parents retain control over the property during their lifetime, while the children receive bare ownership, which they will inherit upon the parents’ passing without incurring additional inheritance tax. The valuation of usufruct is determined by the parents’ age, which influences how much of the property’s value is taxed upon their death.
Forming a French Civil Company (SCI): Creating a Société Civile Immobilière (SCI) allows parents to pass property to their children by allocating shares of the company. Only the shares held by the parents at the time of their death are subject to inheritance tax, thus minimising the taxable estate. The structure of the SCI can be tailored to maintain control over decision-making, allowing the parents to act as administrators without requiring consensus from other shareholders for significant actions like selling or mortgaging the property.

Conclusion

Implementing these strategies can effectively reduce or even eliminate inheritance tax liabilities for real estate in France. However, it is essential to consider personal circumstances and consult with a legal expert to devise a plan that best fits your family’s needs and objectives. By proactively managing ownership and structuring, families can navigate the complexities of French inheritance tax more effectively.

Understanding Wealth Tax and Strategies for Property Owners

Can you explain the current wealth tax (Impôt sur la fortune immobilière) system in France, and how can property owners minimise their liability?

The Impôt sur la Fortune Immobilière (IFI) is a wealth tax applicable to individuals whose net real estate assets exceed €1,300,000. It’s essential for property owners to be aware of this tax as it requires careful financial planning. The IFI applies to the total value of all real estate holdings, and the tax rate is progressive, ranging from 0.5% to 1.5%.

To minimise liability under this tax regime, property owners can consider several strategies:

Leveraging Debt: One effective way to reduce your taxable wealth is by incurring debt against your property. By taking out a mortgage or loan secured by the property, you can lower the net value of your real estate holdings. When calculating the wealth tax, debts are deducted from the total value of your properties. It’s crucial to assess the costs associated with taking on a loan compared to the potential tax savings. If the cost of the loan is lower than the tax liability, this strategy could be beneficial.However, keep in mind that monthly loan repayments will gradually increase the property’s net value, so ensure that the loan amount is sufficient to keep your property’s value below the €1,300,000 threshold for several years. Consulting with a qualified loan broker in France can help secure favourable loan conditions and interest rates.
Splitting Ownership: Another option to minimise the wealth tax is to co-own the property with family members. By sharing ownership, you can divide the value of the property among multiple individuals, effectively lowering the taxable base for each owner. For example, if a married couple co-owns the property with their children, the total value is assessed collectively, allowing each owner to benefit from the €1,300,000 threshold. This strategy can significantly reduce individual tax liabilities.

Tax Implications of Selling Real Estate

What are the tax implications of selling real estate in France, especially regarding capital gains tax, and how can sellers reduce their tax liability?

When it comes to selling real estate in France, capital gains tax (CGT) is a key consideration. The treatment of this tax can vary significantly depending on the seller’s tax residency:

For Sellers Tax Resident in Europe: The notary is responsible for calculating and remitting the capital gains tax, and they do not charge a fee for this service.
For Sellers Tax Resident Outside Europe: A French tax representative company is responsible for calculating the capital gains tax, while the notary handles the payment. The tax representative typically charges a fee (around 0.7% of the sale price, which is negotiable).

The tax rates also differ based on residency:

For sellers residing in France or outside Europe, the tax rate is 36.2% on the gain.
For sellers residing in other European countries, including the UK and Switzerland, the rate is 26.5%, provided they can demonstrate that they are contributing to the social security system in their country of residence.

Exemptions Available:

After 22 years of ownership, the 19% portion of the tax is waived, resulting in effective rates of 17.2% for non-European residents and 7.5% for European, UK, or Swiss residents.

Full exemption from capital gains tax is granted after 30 years of ownership.

Calculating capital gains tax can be complex, as sellers can deduct various costs associated with the acquisition and improvement of the property. Eligible deductions include:

Purchase fees and taxes.
Significant renovation costs.
Certain documentation costs incurred during the sale.

Additionally, there’s a yearly tax reduction for ownership beyond five years, which can further decrease the tax liability.

Advice for Sellers: Before putting your property on the market, it’s advisable to consult a notary to obtain an initial estimate of your potential capital gains tax. This preliminary assessment is typically provided at no charge and can help you make informed decisions regarding the timing and pricing of your property sale.

Securing Financing for Real Estate Purchases

How can buyers ensure they are getting the best financing options for their real estate purchase, and what role does a notary play in securing a mortgage?

In France, navigating the mortgage landscape can be particularly complex, especially for foreign buyers. One crucial aspect is that only a notary (notaire) has access to the land registry, which means that only a notary can legally register a mortgage. This process involves certain costs, including notary fees and applicable taxes such as stamp duty, all of which are mandated by law.

Steps to Secure the Best Financing Options:

Research and Prepare: Before diving into the mortgage process, it’s essential for buyers to conduct thorough research on available financing options. This includes comparing interest rates, terms, and conditions from various banks and lenders. Additionally, potential buyers should assess their financial situation and determine how much they can afford to borrow.
Consult with a Notary: A notary can play a pivotal role in the mortgage process. Once a loan contract is accepted by the bank, it is the notary’s responsibility to facilitate the registration of the mortgage. This ensures that the mortgage is legally binding and provides the lender with the necessary security on the property.Furthermore, notaries are invaluable resources for buyers, especially foreigners, as they can recommend reliable banks or loan brokers who specialise in working with international clients. A well-connected loan broker often has established relationships with various financial institutions and can help you find the most competitive loan terms tailored to your specific needs.
Leverage Expertise: Given the complexities of obtaining a loan in France, particularly for non-residents, buyers should leverage the expertise of their notary. They can assist in verifying all documents and ensuring that the mortgage agreement complies with French law. Additionally, a notary can help negotiate terms on your behalf and ensure that all legal requirements are met during the financing process.
Understand Legal Costs: Buyers should also be aware of the legal costs involved when registering a mortgage through a notary. It’s important to budget for these expenses early on to avoid any surprises later in the process.

Summary

Navigating the real estate landscape in France can be complex, but understanding the roles of notaries and the legal intricacies of buying, selling, and inheriting property is essential for success. From avoiding hidden costs and minimising inheritance taxes to securing optimal financing options, having expert guidance is invaluable. Notaries not only facilitate legal processes but also provide crucial insights that can safeguard your investment and enhance your financial strategy. Whether you’re a buyer, seller, or investor, leveraging the expertise of a notary will empower you to make informed decisions in the French real estate market.

Contact

Maître Nathanaël Romus
Notaire Associé Civil Law Notary Partner
Email: [email protected]
Tel: (+33) 04 93 39 71 60
Fax: (+39) 04 92 98 99 19

SELAS LES NOTAIRES DU 21 RUE D’ANTIBES
Notaires Associés
21 rue d’Antibes 06400 CANNES