France Mediterranean Property

French Property News, February 2012 (our 200th post!)

2012-02-06T01:58:00.000-08:00

In this issue I have offered an up-to-date review of the French property market, looking at France's housing stock and how it is divided between apartments (just 20%) and individual homes of varying sizes, and 32 millions households, just over half of whom are home owners. This last figure contrasts with higher levels of home ownership in Europe - including Spain (83%), Ireland (78%) and Great Britain (70%).

Although France's housing stock has risen from 25 million in 1984 to today's figure, there is still a housing shortage due to marriage breakup and newly constitutde family units, as well as larger numbers of people living on their own. An estimated 2 to 4 million properties are considered to be sub-standard and requiring replacement, including many large estates constructed in the sixties and seventies.

French people also own three million second homes, either inherited or purchased as security for retirement, though the majority are sold by their owners within 10 years of acquisition. Reasons given include children growing up, the trend to travelling further afield and taking holidays outside France, and the need to raise capital (noting that in the last decade some property values have risen by 150%).

Nonetheless transactions involving second homes represent just 7% of the market, though this can be considerably higher in coastal and holiday areas, where the proportion of second homes can be s high as 70% of the local housing stock.

Source: www.french-property-news.com February 2012, Expert Advice, Peter-Danton de Rouffignac

Creating jobs in France

2012-01-31T02:17:00.000-08:00

As we approach the forthcoming elections in France, with radically different programmes on offer from left and right, it seems the French are still struggling with the idea of simplifying the mass of rules and regulations surrounding the creation and management of even small business.

Even though the French auto-entrepreneur scheme has been a relative success (with nearly a million new business creations since its launch) the social security system remains in a total mess, divided as it is into numerous organisations or special regimes depending on your occupation. The situation becomes even more nightmarish if you undertake more than one recognised activity. A lecturer at the Sorbonne complained to me 'for the French social authorities I am two people - a lecturer and a consultant - paying two lots of charges to two different organisations. I also happen to have inherited 20 hectares of land which it is easier to simply let out to a local farmer: If I even thought about cultivating it myself, I would have to join also the special regime for farmers and growers. It is complete madness'.

Retired British people living in France are particularly badly hit, especially if they receive a British pension and depend on the French basic health care system for their sickness cover. Registering as an auto-entrepreneur (self-employed) alters all this, with loss of the basic cover and compulsory entry into a social regime covering the type of work undertaken (from craftsmen to business consultants). As a result many people simply give up, at a time when it is prudent for all of us to try and earn and save a little extra, and not have to rely on handouts from the state, even where these are available.

As a 'victim' of this complex system I have had several meetings with representatives of the various French social organisations and explained the British system - basically explaining that you can receive a pension and work at the same time, paying some income tax (after deducting expenses) above the limit of of one's individual allowances. 'It is really as simple as that?' said one astonished official, 'Yes' I replied as I contemplated the 16 different deductions (social charges) on my payslip - in reality an A4 sheet! - which included 'pension contributions'........

France is not alone in maintaining a complex regulatory system for new business startups (a minefield of regulations, restrictions, licences and permissions) and for the collection and payment of tax and social charges. In a recent interview with young people facing unemployment in Italy, Spain and Greece, several complained of the practical barriers to starting even the smallest business, administrative delays and in some cases the need to hand over a fee (bribe) to a government official in order to get anything done.

It is surprising that in these times of crisis and large-scale unemployment, neither side in France's election campaign has come forward with anything like a solution.

P-D de R.

68% of French property transactions handled by agencies

2012-01-23T02:33:00.000-08:00

In a report published this morning in the LeParisien*, research undertaken by MeilleursAgents.com* shows that of all property transactions in France, no less than 68% are handled by estate agencies, compared with 19% by networks (introducing individuals to individuals) and 13% by other means, including notaires, family and friends.

The research goes on to report that out of evey 100 clients who visit an agency, 79% ended up buying through the agency - in the case of sellers, the proportion was 70%. Results for those consulting the person-to-person networks were 26% and 28% respectively.

The researchers also found that higher value properties of five rooms or more were most often entrusted to agencies by their owners (in 30% of cases), compared with 24% for studios and two-room apartments.

Signing an exclusive sales mandate with one agency resulted in a sale within three months in 77% of cases, compared with 55% where multiple mandates had been given to two or more agencies.

Sources: www.LeParisien.fr www.MeilleursAgents.com AFP/Eric Piermont

Spread of illegal homes in France

2012-01-08T01:35:00.000-08:00

According to a report in the French newspaper LeFigaro, one of the side effects of the economic crisis is an increase in the number of dwellings being illegally built on agricultural land or land classified as non-constructible. Among the regions most affected are Essonne (Greater Paris region), Rhone-Alpes and Provence-Alpes-Cote d'Azur.

Typically small houses are built clandestinely over a series of weekends and can be completed within a month, according to one source quoted. Local mayors react either by turning a blind eye, as it can take several years to bring a case before the courts; while others are taking tougher measures such as refusing to enable electricity and water connections.

Farmers and growers have a right under the law of 2005 to erect a dwelling on their land, but this is often abused by disguised sales or gifts to family members. The French government body SAFER is required to vet all sales of agricultural land, when notified by the notaire handling the transaction, but can remain unaware of cash transactions or private arrangements within the family.

In a recent case, I had to advise clients to withdraw from the purchase of a 7 hectare olive grove, which included a two-bedroom house built some 15 years ago without planning permission. While the owner isisted that 'the mayor knows all about it and everything is okay', my own enquiries revealed that it was known to the authorities 'as illegal, built without permission and could be ordered to be demolished at any time'. My clients eventually bought elsewhere.

If in any doubt, potential buyers of French property should make careful enquiries and take professional advice before entering into a transaction of this kind.

French property market 2012?

2012-01-04T02:06:00.000-08:00

Several of the major French agency groupings (Century 21, Guy Hoquet, Era France) have together offered their thoughts on how the French property market is likely to perform in 2012.

According to Laurent Vimont of Centry21 and Philippe Buyens of Guy Hoquet, overall property sales are likely to fall to around to 600 000 transactions in the 12 months to December 2012, though Vimont also predicts some price rises (2 - 3 per cent on average). This is borne out by other recent surveys suggesting some price reductions, as always highly variable according to different regions - my own, Languedoc Roussillon, for example remaining stable (and recently described by the UK Times newspaper as France's new 'cote d'azur').

Era France have spoken of price falls of up to 9% in 2012 and a reduction in the numberof transactions of around 8% compared with 2011.

Various commentators have expressed different views on the potentially adverse effects of the French presidential elections (investors do not like uncertainty) and the European rescue plan for the euro. Though many argue that these factors tend to encourage investment in bricks and mortar. Interest rates remain comparatively low (4%) though as in the United Kingdom first time buyers face difficulties in saving for a deposit (due to the high cost of renting while they save) and the increasing demands of the banks for larger deposits.

Note however that average prices for an apartment have risen by a staggering 125% between 2000 and 2011, and overall property prices (excluding new-builds) still rose by nearly 8% in 2011- well ahead of inflation.

Source:LeParisien.fr 03 January 2012

Renting versus buying

2011-12-15T01:55:00.000-08:00

A survey published by zoopla;co.uk and published in today's Daily Telegraph reports that in 47 out of 50 large towns in Britain the cost of renting exceeds that of repaying a mortgage. In the case of London it costs 31% more to rent a property than to buy. As a result, potential buyers are faced with ever higher rents, making it even more difficult to save for a deposit.

Compared with Britain at 70%, France has a relatively low level of ownership of principal homes (at 56%), well behind other European countries such as Spain, Greece and Italy. Out of 27 million French households, 43% are renters, with 11.6 households choosing or being obliged to rent. With over 3 million second homes, many choose to live in rented accommodation (as their principal home) and 'invest' in the second home, either for rental, holidays or eventual retirement.

During the current economic crisis, the French property market has been slower than normal, as French banks and mortgage providers excercise more than their usual caution regarding deposits and the one-third income rule - even though, as in Britain, monthly rentals can equal or sometimes exceed rental payments. The banks' traditional insistence that borrowers should show evidence of a long term work contract (CDI) seems somewhat archaic in view of continual employment uncertainty, and the growing numbers of newly self-employed (an estimated half a million, though many part time, created in the last two years).

Source: www.telegraph.co.uk Property

French Property News, December 2011

2011-11-29T01:42:00.000-08:00

This month's issue looks ahead to the major London property exhbition in January which normally provides a post-Christmas stimulus to a market that is traditionally quiet from mid-Novelber until early new year.

Based on my personal experience of currently selling my property on the Mediterranean coast and moving inland to Perpignan, I have been forced to analyse my needs and requirements (budget, amount of space, long term prospects etc) and ask myself the sort of questions which face every potential French property buyer - I include my Twelve Golden Rules for Successful Property Searching.

Also some of the frustrations of property searching, not least of which are the major property websites - one boasting nearly 800 000 French properties came up with nearly 350 meeting my basic parameters; and the poor quality of both photographs and descriptions - such as 'city centre' (well, there are parts I would not consider living in), floor level (I prefer a top floor), charges and taxes (which can vary widely), all the sort of information I want to be in possession of before even considering a visit.

Buying to let

2011-11-21T02:15:00.000-08:00

An interesting article in the French daily newspaper Le Figaro has highlighted the situation of people who invested in French property to rent before the spectacular price rises of the 80s and 90s compared with the situation today. Investing in studios and apartments to rent was particularly attractive to future pensioners at the time, with one example cited of a lady able to add some 1 500 euros monthly to her retirement pension (in addition to a further 1 500 from her employment!).

Another investor, a lady teacher, recalls buying three studio apartments in a sort-after area of Lyon, spacing the purchases over a period of ten years each, giving her time to repay the bulk of the mortgage. She reckoned on contributing a further 100 to 150 euros a month, but overall is currently earning a 6% return on her investment. For someone starting out today, this would be more likely 2.5 to 3 per cent, she admits.

Although monthly rentals are now approaching the levels of mortgage/loan repayments - and in some cases exceeding them - many investors admit that the market is less attractive than it used to me. Among the complaints cited in the article include higher taxes and charges, including the new CGT rules on resale, the higher turnover of tenants and the attendant costs of refurbishing the property between rentals; and unpaid rents as tenants disappear when unable to pay the rent due to job loss or other circumstances.

In the correspondence following the article, many complain of the attitude of French banks towards new borrowers who are forced into renting when they could easily afford monthly loan repayments, and the resulting rise in rentals. For their part, landlords talk of increasing irresponsibility among tenants and complain that the new laws allowing them to accept only a one month deposit mean that tenants can leave behind them a trail of damage, with subsequent repair costs and loss of rental income to the owner.

Source. LeFigaro.fr 19 november 2011

French Property News, November 2011

2011-11-11T01:24:00.000-08:00

In this month's issue I have taken a look at France's buoyant rental markets, from the point of view both of owners wishing to rent out their property, and renters needing guidance about how to secure the best long or short term deal. France's rental market is highly controlled and tenants are carefully protected by law from summary eviction, including in cases of non-payment of rent. However, many French choose to rent, particularly in large cities where the cost of buying an apartment may be prohibitive, and instead invest their savings in a second home in the country or on the coast, which may have been in the family for several generations.

The article also looks at seasonal/holiday rentals and the formalities that need to be completed in order to reach a satisfactory agreement between owner and tenant - guarantees, responsibility for repairs, periods of notice, a tenant's options to buy are all covered.

French Property News is on sale in newsagents or see www.french-property-news.com

Spending on your property to beat the downturn?

2011-11-02T02:09:00.000-07:00

According to an article in today's Telegraph* newspaper, many Britons are being advised to spend money on improving the property they already own, in order to 'prepare it for the market' when prices are predicted to rise again in two or three years time.

However, the writer Caroline McGhie, offers some words of caution - including not over-spending for example, to the extent that a property stands out as 'expensive' compared with other houses in the same street. It is well known that seekers of four-bedroom houses do not search in a three-bedroom street, and adding luxury items such as a swimming pool or jacuzzi can tend to put a property out of context with its neighbours. After all, birds of a feather tend to flock together...

Some estate agents also advise caution - not spending excessively on a property that is already seen as at the top of its price range, and thereby making it stand out among similar properties in the area. Another advises that certain improvements are only worth their cost if the owners are convinced they intend to stay in the house long term - and who can tell these days? - rather than sell up and move within a couple of years.

Will it work in France? Although as the previous post (below) indicates the French are 'starting to think more like Anglo-Saxons' and see their home as an investments as well as somewhere to live, transaction costs tend to be high, including agency fees, the notaire's fees and French government taxes. As a rule the French are reluctant to change areas, for eample to find work even in times of recession, because of family ties and responsibilities - children in school, spouse's own job, caring for ageing parents.

However, mong the principal reasons for moving are the need for more space, as children grow up and more bedrooms are needed, so any improvements that offer more living space as opposed to greater comfort will generally add value to a property, though all the cautions noted above also apply.

* The Telegraph online, 01 November 2011

French becoming more 'anglo-saxon' in their approach to property buying?

2011-10-18T00:56:00.000-07:00

After decades of traditional thinking that you buy a property as a place in which to house your familly and create a life, it seems that the French are finally starting to look at property buying also as a form of investment - an approach that has always been regarded as anglo-saxon rather than continental.

According to a report from the group Credit Foncier, some 70% of French people questioned said that when buying their next property, they would also be keeping a close eye on its re-sale potential. This compares with a figure of just 50% from surveys taken 30 years ago. Principal reasons for buying however still include the feeling of security and the wish to avoid paying rent on a property they do not own.

A spolesman for the finance company notes that the doubling of property prices in the last ten years has also encouraged the French to look at buying property as a form of investment, with many of today's buyers wishing they had purchased their property a decade ago.

However, due to the French banks' traditionally cautious approach to lending, first time buyers are still finding it difficult to finance a property purchase, at a time when monthly rental payments are rapidly approaching the level of repayments of a typical mortgage.

One of the many effects of this is the inability of (young) workers to move to where jobs are more readily available. This last situation is being partly addressed by some employers investing in 'low cost' housing for their employees, to encourage greater mobility. This policy has been attacked by the state organisations responsible for providing social housing (HLM) but employer/investors respond that as France's housing crisis is so severe - 1 million new homes are desperately needed - they are doing their bit to ease th housing shortage.

Source: Le Figaro 15 October 2011

French Property News, October 2011

2011-10-03T07:21:00.000-07:00

In this month's French Property News*, entitled The Business Issue, I have written the introductory article about the various ways you can set up and run a successful business in France. The article covers all the possibilities from the recently created auto-entrepreneur scheme (a simple form of self employment that can be combined with a job or retirement), options for limiting your business liability, and the use of either a French or British limited company as your chosen business vehicle.

I also also highlight which business sectors are in decline and those where you can expect to make a profit, and all you need to know about your business plan, qualifications, finance and how to get started.

The nearly 100-page business section of the magazine looks at a wide range of issues connected with starting a French business, including case studies, suggestions, more expert advice and regional reports.

*French Property News is on sale in newsagents and on subscription. Web http://www.french-property-news.com/

What the vendor leaves behind....

2011-09-30T02:34:00.000-07:00

A recurring problem between vendors and purchasers is reaching an agreement on what is or is not included in the sale of a property - in terms of furniture, fixtures and fittings that are not strictly part of the building fabric.

Over the years, vendors have been accustomed to removing virtually anything that could be unscrwed - from light fittings to door furniture - to the surprise and chagrin of the buyer when he took over the property. As a result, some notaires are now insisting that an explicit list of contents is drawn up and agreed by all parties, at the time of signing the compromis de vente (pre-sale contract). Sometimes in the case of a house that is sold empty and uninhabited, the notaire will include an 'indicative' list of what must not be removed by the vendors, without explicit consent of the buyer, between the signature of the compromis de vente and the acte finale.

It is advisable for buyers to re-visit the property shortly before completion in order to verify that the property has remained in the 'state it was at the time of signing the compromis de vente' as in signing the acte finale the buyer agres to accept the property 'as is' and has no further recourse against the vendor.

These general rules also cover issues like make alterations or changing the decor between signature of the initial and final sales contracts.

Trying to avoid paying agency commission

2011-09-15T03:23:00.000-07:00

The rules governing the payment of commission to an agency responsible for selling your French property are strict and offer considerable legal protection to the agent. Confusion sometimes arises where the vendor reserves the right to sell privately (in this case signing a 'mandat simple' with the agency) and is approached by a potential buyer who has been previously introduced by the agent - with the objective of concluding a private deal and avoiding paying the agency commission.

Sales mandates - the document agreed between vendor and agency authorising the latter to market and sell the property - can have an active life of two years. This means that if a potential purchaser, originally introduced by the agency, approaches the vendor and attempts to conclude a private deal, the agency can claim its commission on the sale, according to the terms of the mandate, if this happens within two years of signing the original sales mandate.

In order to protect themselves and avoid any confusion, French estate agents ask potential buyers to sign a form known as a 'bon de visite' to prove that it was they who first introduced to them to the property offered for sale.

If a potential buyer finds him/herself visiting the property a second time, through a second agency, they should immediately inform both agencies, to avoid confusion. For their part, vendors should be aware of the legal consequences of trying to avoid paying an agency's commission. French courts invariably enforce the agent's rights in such cases.

Curious side effects of new CGT rules....

2011-09-12T05:24:00.000-07:00

Following the French government's recent announcements (see below) on the changes in CGT applied to second homes, the estate agency group Century21 has stated that it received 500 cancellations of compromis de vente (pre-sale contract) and 1,500 cancellations of sales mandates (instructions to sell) from their clients within hours of the original announcement. The figures represent some 5% of their usual 75,000 annual property transactions.

Overall, sales of second homes represent just 7% of the French property market, although in most coastal/tourist areas - where the percentage of second homes can be as high as 80% of the local housing stock - the figure can be much higher. Nationally sales of second homes account for around 56,000 transactions annually our of a total 700,000 to 800,000 changes of property ownership.

CGT rules - final amendments

2011-09-07T02:43:00.000-07:00

Further to my earlier post below, the French government has announced a final (hopefully) revised version of the proposed changes to the rules on Capital Gaisn Tax (CGT) applied on the sale of a second home in France, that is not classed as 'your main and principal residence' for tax purposes. The new proposals are as follows:

- 2% abatement of CGT for each year if the property is sold between 5 and 15 years since first purchased
- 3% abatement each year during years 15 to 25
- 10% abatement each year during years 25 to 30

This replaces the former 10% per year applicable after five years of ownership, in years 6 to 15 inclusive, making the property free of CGT after 15 years of ownership. This is now effctively after 30 years of ownership.

The rate of tax (and a special social charge) is 32.5% of the capital gain - the difference between what you paid for the property and the price at which you sell it.

The new rules will apply for all notarised transactions after 01 February 2012 (and not earlier as announced).

If you are tax resident in France (for example, file an annual French tax return) and your property is classed as your main or principal residence, no tax is paid on the 'profit' (capital gain) when you come to sell.

Source: LeParisien, 07 September 2011.

Vendors - give your agent a chance!

2011-09-05T02:46:00.000-07:00

A recent post on one of the French property forums prompted this note. A British vendor had set very strict rules relating to visits, on the grounds that he owned two large dogs who were albeit friendly somewhat intrustive, and likely to distract potential buyers. He insisted that viewings were by appointment at a fixed time - when the owners would then leave the property with the dogs - and after the visit, the agent was to telephone them with an 'all clear' at which point the owners would return. The system had broken down within days, the vendor complained. In my reply I tried to point out that while his intentions were undoubtedly laudable, arranging property viewings is not always straightforward for the following reasons:

- Almost all buyers leave too little time for viewings, sometimes unaware of the distances involved, and want to rush off to another appointment (with a rival agent!) instead of completing a series of pre-arranged visits.

- Buyers can turn up late without warning, arrive unannounced and without an appointment, and still expect to be taken immediately on a series of visits.

- Many vendors prefer visits by appointment, with adequate notice, and may refuse to receive visits during meal times, evenings, weekends etc.

- Visits may take longer than anticipated, resulting in a series of delays and sometimes the need to re-schedule appointments en route.

- Vendors sometimes "forget" they have arranged an appointment and are not at home when the agent arrives with his potential client.

- Keys are not always where they should be! Some vendors insist on giving out only set of keys to be shared among a number of different offices or even different agencies. If a negotiator has arranged a series of visits he may be holding several sets of keys which will not be available until he returns to the office - perhaps some hours later.

These are just a few of the hazards drawn from my time as a negotiator inside a busy agency, with four offices, and eight or ten negotiators. The rule was that keys would be held at the office nearest to the property and returned as soon as possible after a viewing. Human nature being what it is, this did not always happen.

Vendors should try to understand the practical difficulties involved in arranging property viewings and be as flexible as possible in what is still a very competitive property market;

New CGT rules on sale of second home in France

2011-08-25T01:43:00.000-07:00

As part of its austerity measures, the French government has announced new rules for the calculation of capital gains tax (CGT) on the sale of second homes - and certain other types of property, see below - with effect from today.

The principal measure is the abolution of the automatic abatement of 10% per per year of ownership, from years six to sixfteen, which had the effect of reducing the CGT to zero after 15 years. This will be replaced by a new calculation based on the rate of inflation during the period from initial purchase to sale. Details yet to be published on how this will be calculated.

In addition to second homes, the new rules will also apply to "empty properties, rental properties and land for building" (last three definitions also awaiting clarification) but will not affect main or principal residences, which are not subject to CGT on sale. To establish that your French property is your main or principal home requires proof of your resident status in France, for example a history of submitting French tax returns and being within the French healthcare system.

The new measures are expected to generate 180 million euros in 2011 and 2.2 billion euros in 2012.

Source: LeParisien 25 August 2011

Paris threatens short-term rental apartments

2011-08-11T06:05:00.000-07:00

The mairie of Paris has issued a warning notice about the growth in the number of small apartments and studios designed to be let to short-stay visitors, as an alternative to using a traditional hotel. The mairie estimates that there are a minimum 20,000 (and possibly up to 40,000) such properties, often located in prime central tourist areas, and their use as rental properties is exacerbating the shortgage of suitable long term accommoation available to Paris residents. Complaints have also been voiced by hoteliers concerned about the possible threat to their livelihood.

A trawl through the many websites addressed primarily to American, English and European visitors shows that even a small two-room apartment in a good location can be rented for 1000 to 1500 euros per week, or up to 6000 euros per month - with an average 60 to 100 euros per night not uncommon. Investors in rental property are not unnaturally attracted by these potential gains, which are far greater than the income that can be earned through traditional long-term renting (which in theory should be for a minimum of one year furnished and three years unfurnished).

Where there is a mix of occupants within a building, long term owners and renters compain that their lives are disrupted by the constant coming and going of short-stay visitors.

Seasonal renting is in theory controlled under article 631-7 of the Construction Code and requires an application for a change of use, and in a recent case an English owner has been fined 25,000 euros for not complying with the law. Most owners apparently claim they are unaware of the regulations.

In light of these revelations, the Paris housing authority has announced that it is currently studying the problem, and clearly any solution will have to offer a delicate balance between the undoubted popularity of short-term rentals, as an alternative to hotels (many of which have failed to keep pace in terms of modernisation and standards of comfort); the importance of nurturing the French tourist market; and finding a solution to the perennial shortage of long-term rental properties in the French capital.

Outside Paris, in the popular Mediterranean coastal areas, many studios and apartments are purchased as 'second homes' by owners with a view to securing their retirement, and rented to holidaymakers during the summer season. As a result entire buildings of fifty or more apartments can remain empty and unused during nine months of the year. The few fulltime residents (owners or renters) who choose to live there all year round and for whom it is their principal home are obliged to suffer the July/August invasion by large numbers of seasonal visitors, with the attendant disruption to their daily lives and the inevitable increased wear and tear on the building.

However, apartment owners have not had it all their own way, with an average 30% drop in seasonal rentals recorded for 2010 in Languedoc-Roussillon, and the signs are that numbers are currently down in 2011. Among the reasons cited for the decline are the unsuitability of many smaller apartments (often dating from the 1960s) for seasonal use - for example those without a balcony or terrace or not set in grounds that include facilities such as a swimming pool; the high prices demanded by owners; and the reluctance of the latter to invest in modernising and refurbishing their property. There is also increasing competition from holiday camps, many of them equivalent to small villages with a range of free attractions, supermarkets, sports areas etc, and the availability of ultra-modern self-contained chalets and villas at affordable prices.

The bad weather during July and the downturn in the French economy have also contributed to the decline in numbers - and their spending power, according to the shopkeepers and restaurateurs I have interviewed.

Keeping an eye on your syndic

2011-08-07T01:39:00.000-07:00

It is about this time of year that owners of co-ownership properties - apartments or villas within a complex offering shared facilities - receive their invitation to attend the annual general meeting of the co-owners (co-propriétaires). The meeting discusses the expenditure during the previous 12 months, agrees the budget for the comming 12, authorises any addtional expendicture required (for maintenance, decorating, lift repairs etc) and gives or occasionally refuses applications from individual owners, for example to add a closed loggia to their terrace or balcony.

Co-owners have a right to vote on all these issues, according to the number of parts (known as tantièmes) that they own in the property - in additional to the freehold of their apartment or villa - and in proportion to the size of their property. An owner of a four-bed apartment accordingly has more voting power than a studio. Despite the importance of the issues raised at the AGM and their effect on the building chargers, paid by the owners, research shows that the majority of owners do not bother to attend the AGM or even check the annual report, leaving decisions to a small handful of residents or the residents committee (conseil syndical).

With the takeover of many local management firms - usually estate agencies that offer this service in addition to selling and renting properties - by large glomerates (among them Foncia, Lamy, Nexity) which are often owned by banks and insurance companies, several residents pressure groups have reported widespread abuses, includingover-spending by professioal managers mainly due to the laxity of the residents and the residents committee. At the oppsotive end of the scale, many building syndics (managers) have failed to maintain the property correctly, and properties have now run out of funds to carry out urgent repairs, as the residents cannot afford, or refuse, to pay the increased charges now required.

To take a local example - a block of 60 apartments ranging from 2- to 4-rooms - a two-person residents committee (far too small for a building this size) had simply gone through the motions of verifying that cheques paid by the syndic matched the invoices submitted but had made no effort to check that the expenditure was justified. Now faced with huge additional charges for external and internal painting, two activist residents went through all the recent figures and presented their findings, including numerous examples of uncontrolled over-expenditure, to a shell-shocked meeting of residents. The two were personally attacked by the managers for 'nitpicking' but the upshot was that the residents are now considering sacking the managers and running the building themselves, with an enlarged residents committee. They realised that among themselves they had experts in building maintenance, cost management and legal issues.

This example - and there are others - shows that it pays (literally) to take an active part in the management of a co-ownership property, including offering your services to the residents committee, and at very least studying the agenda and minutes of the annual general meeting, and using your power to vote. This can be done by proxy if you are unable to attend in person. After all, it is your money they are spending.

French Property News August 2011

2011-08-01T03:47:00.000-07:00

In this month's issue of French Property News I look at the importance of studyng a number of documents that you can consulted before taking a decision to buy a French property - or not. These include the cadastral plan of the area where your chosen property is situated; the plan local d'urbanisme which will define whether a particular sector is for example zoned for housing, commerical development or designated as 'green space; and the plan de prévention des risques naturels which is the report concerning risks such as fire, flooding or other hazards, and how these make affect what can or cannot be constructed. These documents should be available via the estate agent, the notaire handling the transaction or from the mairie.

If you are considering buying a property such as an apartment within a co-ownership building, essential documents to consult include the rules of the syndic (building management) governing issues such as sub-letting, keeping pets or working at home. Also important to study are the recent reports of the annual general meeting of co-owners which will give an idea of any expenditures voted (for example, for external painting or modernigisng the lift), the cost of which will be inherited by the new owner. The latest reports of the syndic should be provided by the estate agent or notaire.

Source: http://www.french-property-news.com/

Relocation 66 - relocation service in Pyrénées Orientales (66)

2011-07-14T07:24:00.000-07:00

One of the services we offer to clients is Relocation 66, designed to help ex-patriates and others moving to the Pyrénées-Orientales (66) region to work, and needing to find a suitable home on a short term or more permanent basis. Areas covered include of course Perpignan the department capital, as well as its neighbouring suburbs and attractive coastal towns, most of them less than 25 minutes drive to the city centre.

The service includes initial search for suitable properties for sale or rental, advising on the area, drawing up a short list, accompanying clients on visits with estate agents, and advising on all the formalities of acquisition and moving-in - in short everything from installing a telephone and internet to advising on local shopping.

Our fees are designed either as an all-in package from initial search to completion or can be paid on an hourly, daily or half-daily basis as you wish. We are totally bi-lingual English and French, with ten years experience in the region and the French property business. Contact Peter-Danton de Rouffignac, a former negotiator with one of the area's largest independent estate agencies, on + 33 (0)4 68 81 16 07 any time.

Parmi les services que nous proposons à nos clients s'appelle 'Relocation 66' qui aide les français et les expatriés à s'installer dans la région, à Perpignan et dans ses environs. Cette service est tout à fait compéhensive - recherche des maisons et appartements à vendre et à louer, accompagnement pendant les visites, assistance avec toutes les formalités administratives pour vous aider vous installer en tout confort.
Je suis anglais mais parle couramment français et j'ai 10 années d'expérience dans la région et dans le métier (inclus 2 ans comme négociateur dans une des plus grandes agences de la région).

Nos tarifs peuvent etre taillés à vos besoins - un 'paquet à prix fixe, ou par jour, par mi-jour ou à l'heure. Veillez me contactet à 04 68 81 16 07 sans obligation et en toute confiance.

Peter-Danton de ROUFFIGNAC MA LLM peter-danton@orange.fr

French Property News, July 2011

2011-07-04T06:49:00.000-07:00

In this month's French Property News I have brought readers up to date about Ian and Lori Sutton's search for a property in France and their plans to creat an organic olive grove. Now the owners of a house and a three-hectare piece of land, Lori has to start the process of improving her French and finding her way round the inevitable bureaucracy in order to achieve her dream.

French Property News July 2011. http://www.archant.co.uk/

The delicate art of price negotiation

2011-07-04T06:43:00.000-07:00

At some stage in the process of buying a French property, there comes a time when vendor and purchaser must agree on a price, which may be below that advertised. It can be a difficult moment and writing in the English Daily Telegraph property specialist Christopher Middleton has described the process of buying and selling as 'a war, both psychological and financial. We don't so much purchase a house, so much as prise it out of the hands of the people who own it. We don't so much as sell a house, as surrender it to invaders. And right up to the last minute, the deal can be sabotaged by an act of panic or greed on either side'.

Middleton was writing mainly about the British market, but here in France I have witnessed acrimonious exchanges between vendor and purchaser, largely because neither has mastered the delicate art of price negotiation. And the occasional collapse of a deal for want of a little leeway, when neither side would concede over a matter of two or three thousand euros on a property typically costing a hundred times that sum.

Principal errors on the buyer's side include:

- assuming that property prices in France have dropped dramatically everywhere. They have not and in most areas they are going up.

- assuming there is a magic figure - 5%, 10%, 15% - that the vendor has tacked onto the asking price in order to enable hm to drop the price in negotiation.

- assuming that because a property you like is beyond your budget the owner will reduce the price in order to help you fulfill your dreams.

- you want to add a fourth bedroom or a swimming pool on the back lawn, assuming the owner will help finance these for you by reducing the price.

- making a verbal offer during your first visit; this puts the owner on the spot and your offer is likely to be refused. Difficult then to repeat the same offer this time in writing (the correct procedure, allowing both sides time for reflection).

Common errors on the vendor's side include:

- pricing the property not on its market value but on the amount he wants to receive to pay off his debts or finance his next project.

- not emphasising the property's hidden plusses - a quiet location, ready-to-move-into condition, scope for alteration or expansion, garde or terrace not overlooked and/or with plesant views.

- in a co-ownership building, such as an apartment block, not listing works recently completed (outside painting, interior decor, new lift etc) and paid for by the vendor, which the new owner will enjoy for many years to come.

- announcing in advertising that he is 'open to offers' - a clear sign of incorrect valuation and desperation.

- turning down a verbal offer immediately. Better to ask the vendor to submit a written offer for consideration, preferably through his agent.

Prior research by both the vendor (state of the market, prices of similar local properties) and the buyer (the same but including a maximum budget not to be exceeded) will help ensure that both parties enter into negotiations armed with accurate information to back up their offers and counter offers. An unemotional, business-like approach can go a long awy to reduce the stress of buying and selling French property.

Source: Christopher Middleton, Daily Telegraph, 02 July 2011 http://www.telegraph.co.uk/ See also "101 Things an estate agent should tell you" Greene & Co. http://www.greene.co.uk/

EU pilot scheme aims to guarantee 'legal certainty' when buying property abroad

2011-06-21T01:35:00.000-07:00

The European Union has been funding a pilot scheme set up by the European Land Registry Association which offers buyers of property outside their own country legal protections that could be enforced by the laws of their home country.

The scheme has been tried out in Holland and Spain using a system known as CROBECO (Cross Border Electronic Coveyancing). As a result Dutch law could apply and compensation awarded in cases of breach of the purchase contract for a property in Spain.

The ELRA points out that the sales transaction could even be processed in the buyer's home country by a local conveyancer, making buyers more confident of purchasing property abroad, as the scheme is gradually extended to other European countries.

How this proposal could eventually affect property purchases in France remains to be seen. French notaires currently enjoy a monopoly of property conveyancing in France, and even if British buyers choose to employ a local lawyer to check the purchase contract, it is the accuracy of the original (French) documentation, combined with the notaire's local knowledge, that ensure that the transaction is transparent, legal and fair to both parties.

Further information Daily Telegraph Overseas Property Section, Sean O'Connor 15 June 2011. http://www.telegraph.co.uk/

Early retired wanting to settle in France

2011-06-21T01:06:00.000-07:00

Under pressure from the Eropean Commission, the French government is being forced to re-think the rules changes introduced in 2007, which required British citizens below retirement age to provide their own private medical cover if they wished to become resident in France. For many people this has meant paying for expensive private health cover or having to change their plans if they found that a pre-existing medical condition ruled out private insurance.

As a result many have had to defer their plans to move permanently to France or have restricted their stays to the legal limits and remained within the British health service, until they reached retirement age. In the case of a married couple, it is often the wife's earlier retirement age which can allow a permanent move, with the husband's health care linked to that of his wife until he too reaches retirement.

It is likely that the French government will be obliged to allow British citizens caught in this situation to have access to the CMU (the French state health care system), which provides health cover for those not in employment or self-employed, with 70% medical costs covered by the state (with some serious conditions such as cancer subject to 100% cover). As a rule French citizens pay for private top-up insurance to cover the remaining 30% not reimbursed by the state, using one of the mutuelle insurance providers, and British residents below official retirement age and not working will be allowed to do the same.

Talking to local residents, it is clear that they could be paying perhaps as little as one-fifth of their existing private medical cover, once they are allowed access to the French state system and pay only for top-up medical insurance.

Property buying agent?

2011-05-20T01:54:00.000-07:00

This new term has been given another airing in today's Daily Telegraph, in an article highlighting the use of property searchers or 'buying agents' (their term) by potential buyers, this time in Italy.

It is a term we have resisted using, along with the French chasseur de biens (literally 'property hunter') as searching for French properties forms a relatively small part of our business. We find that local French estate agents are well informed about the local market and it is rare that they are unable to track down properties that are for sale or likely to come onto the market.

Note that many 'property searchers' have in fact links to estate agencies. In Britain some established estate agencies have even set up property search subsidiaries, duplicating the work of agency negotiators who should be presenting their clients with a list of properties for sale, or more pro-actively making enquiries among their colleagues. In France, some property finders advertise a range of properties in much the same way as professional estate agents, so that it is difficult to understand how they can claim to act independently for the buyer.

What we find most clients appreciate is our expertise in ensuring that the buying process, including initial search, procceds smoothly, from checking the inevitable paperwork but more importantly ensuring that the property is as described, and there are no hidden surprises. This involves being in place, understanding French law and the property buying process, and drawing on ten years practical experience of overseeing every type of transaction, from beach-side holiday apartments to land destined for agriculture.

Don't rely only on printed information when buying property

2011-05-19T01:32:00.000-07:00

A couple of recent cases have prompted me to emphasise again to buyers of French property the need to physically check for themselves (or ask someone to do it for them) the land or property they are intending to buy, and its surroundings.

In my experience I have found that Notaires will - in good faith - primarily rely on the documents provided to them by vendors, estate agents and the local mairie, but that these may not always be up-to-date or one hundred per cent accurate. A typical example is the plan cadastre which identifies the property and its reference number for tax purposes.

In a recent case, when I visited some agricultural land on behalf of clients I found that the property included a two-bedroom house built some 15 years previously, but which did not appear on the cadastral plan. When I visited the local mairie they said 'they knew about it'; the vendor insisted that the mayor had visited the property and had said 'no problem'; while the chief executive at the mairie bluntly informed me that the 'house was illegal, built without planning permission, and was sited on agricultural land which was also classified as a zone rouge' - in this case due to high risk of flooding.

The buyers subsequently withdrew from the purchase but in early discussions with the Notaire he was unaware of the house, as he was working only from the cadastral plan which did not show it.

In another case, involving purchasers of agricultural land they intend to cultivate, a forage (deep well) did not appear on the plan, and an irrigation channel bordering two sides of the property was interpreted by the Notaire as a farm track. A clause was later inserted in the purchase documents to include the forage and the irrigation channel, together with their attendant rights to draw water. There is still a question pending about the precise boundary line as there is a second well adjacent to the farm track (which runs alongside the irrigation channel) with what looks like provision for an electrical supply (EDF pole and junction box and metre). All these elements are important to the buyers who plan to cultivate the land.

These cases illustrate the need to physically check your French property before buying and not to rely solely on the official documentation.

French property insurance - buy locally?

2011-05-16T01:17:00.000-07:00

One piece of advice that I regularly offer to clients and friends is to buy their French property insurance locally. Many choose to spend hours on the internet seeking a quote that will offer a few euros less but my question invariably is How do these online companies react when you come to make a claim?

In contrast I have used the local office (agent) of a French national insurance company for the ten years that I have lived in France, dealing with the same owners and staff during that time. Most questions are dealt with face to face as the office is only a few minutes from where I live and answers provided right away. The office has often arranged instant insurance cover for new buyers literally on their way to the Notaire's office to sign the final papers, and who have forgotten they need to provide proof of insurance when buying their apartment.

They have also paid out sums on account to help clients facing a claim and needing immediate financial help to finance a repair (following a broken water pipe and flooding) or to get their car back on the road after an accident. They recently sent an expert and estimate for repairs within 24 hours and advised the apartment owners that dampness in their living room wall was due to a building fault and therefore the responsibility of the building management. When a friend's car was written-off due to a breakdown, the office cancelled the insurance cover immediately and even refunded half of the current month's premium as it had occurred on the 15th.

Sometimes it pays to shop locally.

Diagnostic report before selling French property

2011-05-10T00:00:00.000-07:00

A question arose recently on one of the French discussion forums whether the 'presence of a few English style electrical sockets alongside some French ones' was likely to cause problems on selling the property - and at the time the diagnostic report had to be prepared.

Two points arise here. The first is not to under-estimate the length and complexity of the latest diagnostic reports, which in the section dealing with the property's electrical installation, can run to several pages, and include a detailed survey of every room, commenting on each single power outlet. The presence of UK-style sockets and attendant wiring will cause serious problems, as there have never been any French norms approving this type of electrical installation. A qualified French electrician has the right in extreme cases to inform EDF who may cut off the supply until the installation is brought up to current norms.

Second, it seems inconceivable that anyone would buy a French property that had UK-style circuits and power outlets or that an owner would subsequently install these after purchase, against all the advice and information readily available on the subject in the French forums.

French property transactions to rise in 2011?

2011-04-29T01:52:00.000-07:00

According to a quarterly report from FNAIM, the estate agents' body, the number of French property transactions is expected to rise to 750,000 during 2011, compared with 850,000 during the best of the boom years and 570,000 during the worst.

Currently 50% of transactions concern existing property owners selling their property and trading up (or down?), and the remainder a mix of buy-to-let investors, second home buyers and first-timers - the latter given a boost by the revised PTZ (zero per cent loan) addressd to first-time buyers.

Estate agents fear a shortage of saleable properties as owners hold on in expectation of still higher price rises, which some commentators say may be of the order 5% to 6% by September this year.

Recent price rises for apartments have been highest in Paris, Lyon, Marseilles, Toulouse, Strasbourg and Cannes; and more 'modest' in Biarritz, Limoges, Nimes, Orléans and Poitier. Only Annecy, Chateauroux, Perpignan and Reims have registered price reductions.

French property title deeds

2011-04-28T01:20:00.000-07:00

Several clients have recently asked me about the 'title deeds' to their French property, as they have not received anything from the Notaire many weeks or even months after completion of the purchase of their property. This is at best unusual and could be worrying as it is the titre de propriété which sets out who is the owner and under what conditions the property was purchased.

When buying a French property, the Notaire handling the transaction will first prepare a pre-contract known as the compromis de vente which sets out the terms under which the buyer intends to buy the property, with details of how it will be financed (single payment, mortgage etc) and any conditional clauses (clauses suspensives) the parties may have agreed to - such as buying subject to a satisfactory survey or obtaining a mortgage. The buyer also has a period of reflexion before he is finally committed to buying.

If all goes well, the Notaire will proceed to the next stage - preparation of the acte finale which repeats much of the information contained in the compromis de vente but this is the final contract setting out the terms under which the buyer agrees to buy and the vendor agrees to sell. The transaction is completed once all parties have signed this document.

It is at this point that the buyer becomes the owner of the property and the Notaire will give him several originals of a signed attestation proving that he is the new owner. Meanwhile copies of the acte finale and supporting documents are sent to the nearest land registry (bureau des hypothèques) in order to register the sale and details of the new ownership. (The new owner will need the attestation for matters such as taking over the utilities, getting a phone installed etc.)

The process may take several weeks but once the transaction has been duly registered, the Notaire should send a copy of the titre de propriété (title deeds) to the new owner, together with his final account (fees and taxes associated with completing the transaction). If you have not received a copy of the titre de propriété after say, six months, you should contact your Notaire.

Further information about the procedures for buying French property is available from us (sent as an email attachment in Word) on request at no charge.

Relations with your syndic

2011-04-15T01:32:00.000-07:00

Most French apartments and housing complexes are looked after by professional managers, known as the syndic, who are appointed for periods or one year or longer by the resident owners by vote at the annual general meeting. The syndic is normally aided by a small residents committee and will be responsible for overall day to management of the complex, in such matters as cleaning, maintenance and repairs, and for major expenditure for outside and internal painting, replacement of the lift etc. which occur periodically.

Each owner enjoys the right to occupy his own apartment and generally can decorate or alter any aspect within its four walls, provided this is not prejudicial to the building - such as removing a load bearing wall. Permission will normally have to be sought to alter an outside terrace or balcony, which forms part of the building's 'common parts' of which the owner has exclusive use. This distinction is important, as an owner cannot for example sell is terrace or balcony independently of the apartment, or decide to sublet it it to someone else.

Differences can occasionally arise where one resident is given permission for certain works and another is not, which may leave the dissatisfied owner in conflict with the syndic. In a recent case I have examined, an English resident has been refused permission to lay tiles on his ground floor terrace in what appears to be an exactly similar style to that of two neighbours living in the same complex. The area is currently a mix of pavement and rough ground, in the condition it was left by the developers, and clearly any improvement will enhance the quality of this space not only for its owners but also his neighbours. It is unclear as yet why permission has been refused and arriving at a solution will require an examination of the two previous cases (where permission was given) and the grounds on which the third resident was refused. Apparently only one neighbour is objecting, when normally such permissions are subject only to a majority decision at the annual general meeting and do not require unanimity. It will be an interesting case to follow.

Buying agricultural land

2011-04-15T01:03:00.000-07:00

Agricultural land - classified as non-constructible - in France is frequently offered for sale, and purchased by buyers in the hope that one day it may be re-zoned for building, or more commonly for use as leisure land (terrain de loisirs). In virtually all cases, the French organisation SAFER - which exists to protect agriculture and agricultural land - will automatically have a droit de pré-emption (right to buy) if they judge that the land is needed for farming.

SAFER's interest will trigger a delay in completion of the purchase of two months and in the absence of a reply within that time, the purchase can go ahead. This right is similar to that of the local commune to purchase land and buildings, if they are considered essential to the public interest - such as demolition for road widening. The existence of this option is written as a condition into every pre-contract (compromis de vente). The notaire handling the transaction will satisfy himself that this option is not exervcised before completing the sale.

If the local commune wishes to exercise their right of pre-emption they must normally agree a fair market price with the vendor, who is turn could decide to withdraw his property from sale.

The use of leisure land is restricted to occasional occupation and subject to strict local rules and guidelines that will be applied by the mairie or the departmental préfecture.

Spanish property woes and the French market

2011-04-04T02:06:00.000-07:00

Reading the latest account of Spain's troubled property market can provoke comparisons with the relative security of the French property buying and selling system.

Writing recently in the Guardian newspaper, Rupert Jones has highlighted not only the surplus of properties empty and for sale - an estimated 600,000 new and 200,000 part completed - and the dramatic decline in sale prices. Official figures from the Bank of Spain talk of a 17% reduction since 2007, based on estimated values, but estate agents say that the real drop is prices can be between 20% and 50% in some areas of the country.

In addition to the banks holding thousands of repossessed properties which they are required to try and sell after two years, many Spanish owners are competing with foreign investors in trying to offload their holiday properties. In contrast with France's 10% of second home properties, an RICS study quoted in the article estimates that one fifth of Spanish households own a second property, often as an escape from an over-crowded urban apartment, which may be occupied by family several generations. In addition Spain boasts Europe's highest level of property ownership at 82% with a tiny rental market concentrated in Madrid and Barcelona.

A business consultant is quoted as saying that as a result "there is an entire generation of young Spaniards with a millstone round their becks. They will have to work their whole lives to pay for houses now worth half what they bought them for".

Could it happen in France? Certainly there are reported price reductions in some areas, but rarely more than 5 or 10 per cent, with price increases routinely recorded in inner cities (led inveitably by Paris), according to figures provided by Notaires de France and the estates agents' body FNAIM. France's traditionally cautious bank lending policies - based on the customer's ability to repay rather than the notional value of the property - while often crticised as inhibiting entry to the market, have prevented the rabid speculation witnessed in Spain. The property market has been given a fillip by the French government with schemes such as the zero per cent loan for first time buyers recently introduced.

In contrast also to the scandals of "illegally" contructed Spanish properties, France's system of property land registration, as well as zoning policies that forbid construction in areas of high risk from hazards such as flooding, ensure that property transactions are legal and transparent, and fair to both parties.

Source: Rupert Jones, The Guardian, 02 April 2011.

Photo: AFP/P Dozo

Agency commissions

2011-03-23T02:52:00.000-07:00

The argument about who pays the agency commission on sale of a French property is as old as the hills, whether it implies that the buyer pays more or the vendor receives less.

Properties sold by French estate agents are normally marked as 'F A I' - frais d'agence inclus (including agency fees) - and the figure expressed in Euros is the price at which the property is offered for sale. Arriving at a correct sale price is an inexact process, as it is invariably a combination of the owner/vendor's aspirations (the highest price possible!) and what the agent considers the property is worth, in relation to the local market and similar properties offered for sale. A price reduction may encourage a quick sale, if this is regarded as below the market price.

As property prices tend to fluctuate in reality by few percentage points, there is relatively little room for manoeuvre. It is rarely possible for a house to sold at the market price plus agency commission on top, as this would exceed the market price by too large a percentage.

The picture becomes confused when there is talk of the 'nett vendor' price, a term widely (mis)used by owners about to sell, but employed by agents to indicate the amount the vendor will receive after deduction of the agency commission and any other costs, such as capital gains tax.

Buyers applying for a mortgage may find that their lenders may wish to exclude the agency commission (and other transaction costs such as Notaire's fees, taxes and land registration charges) from the loan they are prepared to offer. But this is like borrowing money to buy a car and being told the loan will only cover the manufacter's wholesale price to the garage and not the costs and profits associated with the showroom.

Buyers facing this problem with their lenders should insist that the price stated is the price at which the property is offered for sale and that is the price they are expected to pay.

Preparing your property for sale

2011-03-17T09:58:00.000-07:00

Once again the French property programme on M6 Maison à vendre offered some useful advice for sellers, based on two case studies - a village house just outside Lille, and a fairly nondescript pavillon near Paris.

It was clear from the outset that the owners of the first property had an exaggerated idea of its worth - even in its deplorable state before the makeover team moved in. Talking originally of a sale price of 400,000 euros, which had apparently been confirmed by an 'expert', by the end of the programme they were looking at offers of just 250,000 euros, with no certainty of a buyer. Among the efforts needed to make the house presentable for sale was the removal of a veritable menagerie of animals, including rabbits, chinchillas, several geese, chickens, cats, a goat and two lively dogs, and repairing the damage they had caused over the years to furnishings and paintwork.

In contrast, the standard concrete bungalow attracted four offers, including one accepted at the full asking price, after minimal decoration and refurbishment - on the first day of being offered for sale.

French Property News - February, March 2011

2011-03-07T02:15:00.000-08:00

In February's issue of French Property News I offer some suggestions on how to present your French house or apartment ready for sale, including some room by room recommendations about what improvements will add value and those that do not. Essentially, the property should be impeccably clean and tidy, and generally de-cluttered. Owners should attend to all those minor repairs and renewals they have kept putting-off and which are a certain deterrent for would-be purchasers.

Going back to basics, in the March issue just out, I offer some suggestions on how to hold onto your French second home, if you are tempted to cash-in your property asset in time of crisis. Surprisingly, the majority of French second homes are sold by their owners within 10 years of purchase, despite the disadvantages of capital gains taxes and sometimes the inability to recoup the high transaction costs (agenncy commissions on buying and selling, Notaire fees, land registration costs and taxes).

Instead I suggest ways to hold onto your property, through letting long or short-term, or if it is your main home and the situation is serious, returning to the UK to work for a while, and renting out your French property for a year or more. Harsh decisions may have to be made but selling-up is often not the best or only option.

French Property News is available in newsagents or see http://www.french-property-news.com/

(Picture shows lovely holiday studio at Argelès-Port recently sold by its owners within a few weeks of going onto the market).

DPE - Certificate of energy efficiency

2011-02-21T03:13:00.000-08:00

Since January 2011, all French properties offered for sale or rental must include a certificate of energy efficiency (DPE) in the property description, whether offered privately or through an estate agency. This is in addition to the technical reports (diagnostiques) already required covering lead, asbestos, termites, state of the electrical installation etc, with the added requirement that the DPE must be included in the property description as soon as it is advertised for sale or to let. Traditionally, the technical survey - which has to be commissioned and paid for by the vendor - was not done until a buyer had signed a pre-contract (compromis de vente) and was committed to purchase the property.

The new DPE uses a an efficiency scale from A (energy efficient) through to G (low energy efficiency) and the full report offers indications of what can be done to improve eneergy efficient, with estimates and costs and potential savings.

In practive energy savings may be quite small and can outweigh the cost of suggested improvements. While many properties in the Mediterranean south may be rated as energy inefficient, the low rating is unlikely to deter potential buyers looking for a second home, occupied largely during the warmer summer months. However, as more holiday properties become permanent homes and occupied all year round, would be purchasers should be aware that winters on the Mediterranean can be chilly for a few weeks either side of Christmas, though temperatures rarely drop below 1 degree C.

Managing your French bank account

2011-02-21T02:44:00.000-08:00

Buyers of French property, whether a second home or for permanent living, need to open a French bank account as soon as possible, preferably before completing the purchase transaction. Normally up to four weeks are needed between your initial application of the bank of your choice and the arrival of your cheque book and debit/credit cards. These are essential to enable you to pay for local purchases and to settle the bills that will almost immediately arrive from utitilites (water, gas, electricity etc) as the accounts are transfered from the vendor into the name of the new owner.

Th French government has recently turned its attention towards the operation of its High Street banks, and introduced a number of reforms in response to complaints by consumers and lobbying by magazines such as Que Choisir?, a sort of French version of Which?. French banks are now required to publish clear and up-to-date information about their basic services, including tariffs and charges. Since November 2009 they are also obliged to help customers in the process of transfering their account to another bank, without charge and within 10 days of asking. The new bank should open an account within 5 days of the transfer.

In line with a European directive of 11 March 2009 - in response to the world banking crisis - the French government now guarantees all banks accounts up to a level of 100,000 euros (decree of 1 October 2010) per account, per branch. The timescale for reimbursing the client, in the case of bank failure, has been reduced from two months to just 20 days. Banks have also been obliged to guarantee greater security in the use of debit and credit cards, an important measure in view of the proposed phasing-out of cheques.

Note that cheques are still widely used in France, as cash payments are forbidden above certain levels, and it is an offense to write a cheque without adequate provision. If you overdraw on your account without authorisation, you will be penalised by the bank and possibly obliged to close your account.

Choosing your bank can be tricky and it is best to sound out friends and acquaintances about their personal experiences, as the efficiency of local branch staff can vary widely. Online banking is routinely available, provided you are satisfied with the level of internet security, although online payments currently represent over half of all banking fraud for just 7% of transactions!

Source - Maison Magazine January/February 2011

Buying a business in France - 'murs et fonds' explained

2011-01-31T03:06:00.000-08:00

As part of their search for a new lifestyle, some property buyers in France are also interested in buying and taking over an existing French business - perhaps as an alternative to starting a business of your own. The idea has its attractions as well as being a potential minefield of problems, as the new owner will inherit not only the business, but also its premises, equipment, stock, leasehold or freehold premises, existing staff, suppliers, customers and good will, plus any ongoing contracts and possibly outstanding debts and loans.

All of the above are included in term 'fonds de commerce', to which might be added 'les murs' (literally the walls), meaning that the purchase would include a freehold property, as well as fixtures, fittings, stock and goodwill ('les fonds'). Arriving at a valuation of 'les fonds' can be difficult and will depend to a large extent on the accuracy - and honesty - of the owner's financial records. Businesses receiving a high percentage of payments in cash, such as bars, restaurants, retail shops etc, are routinely suspected of concealing part of the takings, in order to reduce tax and other liabilities.

In order to arrive at a correct valuation of 'les fonds' the would-be purchaser will have to rely on his/her own expereicne of running a similar business, the opinion of an expert valuer and personal observation - for example, is the café or restuarant you are thinking of buying really full on Saturday evenings? What would be the total takings if you added up the number of customers multiplied by the price of an average meal from the menu?

Goodwill may be difficult to establish, relying as it does on customer loyalty. If for example the current owners of the restaurant you have your eye on are going to re-open another one just a few streets away or even in the next town, a lot of their existing customers may follow them. If you are contemplating buying a rundown business or considering making a radical change, the value of the existing customer base may be very little - say, you are turning a traditional French café into a brash English pub!

Businesses located in holiday resorts and existing on seasonal trade rely on an annual influx of mainly new customers, with very little repeat business year on year. The exceptions may be some hotels, gites or camp sites, but the percentage of holidaymakers returning every year to the same resort is very low. Consequently there is little goodwill that can be assigned a monetary value, although turnover from previous years can give an indication of what might be exprected in succeeding years.

In conducting your search for a business reliant on passing trade, you enquiries should include any future plans for the neighbourhood that might affect the location - for better or worse. New road schemes can affect traffic flows or the prospect of a new lycée oppostive your premises may be good or bad news depending on your trade.

Business owners tend to exaggerate the value of goodwill, including location, but careful observation can help establish what this aspect of a business - largely unpredictable and totally intangible - is really worth to you. You might in the end decide to acquire you own premises and start your business from nothing. It may be the cheaper option in the long run.

French Property News - January 2011

2011-01-18T01:04:00.000-08:00

In this month's issue I look at ways in which buyers of homes in France can hang on to their property, during a time of recession and when many owners contemplate selling-up and returning home. This is often not the best solution, particularly at a time when the market is depressed and there may be a glut of secondhand properties for sale. Even heavily discounting the selling price may not be sufficient incentive to off-load a property quickly if other factors are present which prevent a quick sale - poor location, state of repair, size and disposition of rooms etc.

Instead I suggest ways of reducing costs, and looking at the possibility of letting a second home long-term or for the summer season. There is still a good rental market for the right type of property in the right location - larger family homes close to public transport and conurbations where people travel to work, studios and smaller apartments in university towns, and holiday rentals on the Mediterranean and Atlantic coasts. Property seekers and workers on temporary assignment are also potential users of furnished rented accommodation over the short and medium term.

Downsizing is not always a cost-effective option, due to high transaction costs in France. If you are thinking of selling one property and buying another, you need to facor in two sets of agency fees (5 - 10 per cent of the sale/purchase price) and the Notaire's fees and other costs (around 7% of the purchase price). You may find that you are spending 20,000 euros or more - money that is not recoverable or reflectded in tangible assets such as a home extension or a new kitchen! - just to make the move, when it might be wiser to stay put and wait for the market to improve.

Source http://www.french-property-news.com/

Self-employed with limited liability

2011-01-08T02:28:00.000-08:00

From 01 January 2011, those running a small business in France can opt for the new statute - an individual enterprise with limited liability (EIRL). Those who are already self-employed or auto-entrepreneurs as well as new business creators can choose this format.

This new business model is designed to protect the entrepreneur's personal assets (such as his home) in the case of business failure, by separating personal from business assets. In the event of a business failure leading to legal action by creditors, only those assets previously declared for use exclusively in the business - known as the patrimoine d'affectation - could potentially be seized in order to repay creditors. Typical business assets would include business premises, the value of a lease, machinery and equipment.

In registering the new enterprise at the local centre de formation d'entreprise (CFE), a list of business assets is drawn up and items with a value exceeding 30,000 euros require professional valuation. Forms are available from local CFEs and registration is effected by chambers of commerce, chambers of trade etc as appropriate according to the nature of the business or occupation. Registration costs are expected to be around 55 euros.

The newly constitued EIRL is required to open a separate business bank account and to maintain proper accounts. There is also an obligation to file annual accounts and statements of affairs, details of which have yet to be published.

The owner of the EIRL can choose to be taxed individually on his revenue from the business, or the EIRL can choose to be taxed under the corporation tax régime (IS or impot sur les sociétés). The latter option offers a number of advantages if the EIRL wishes to retain funds (reserves) in the business. It is not however open to auto-entrepreneurs.

Although slightly more complicated to set up and run, the EIRL offers considerable protection to the business owner, which is similar to the position of directors of limited iability companies such as the French SARL, and guarantees protection of his personal assets such as his home.

Further information can be found on http://www.eirl.fr/ and a declaration can be made online at http://www.guichet-entreprise.fr/ or by visiting your local CFE.

Source: APCE (Agence Pour la Création d'Enreprises), January 2011.

New rules for French estate agents

2011-01-07T02:14:00.000-08:00

The French government has introduced new leglisation, applicable from 01 January 2011, concerning the receipt of client funds by registered estate agents. In addition to declaring 'sur l'honneur' that they do not intend to receive client funds, agents electing for this option will have their carte professionnelle marked accordingly. The form of wording will be 'non-détention de fonds' as well as 'absence de garantie financière' as appropriate.

French estate agencies which accept funds from clients - such as the traditional 10% deposit paid by the buyer when making an offer on a property - are required to provide guarantees and insurance cover for the amounts likely to be received, and to display a certificate at their premises indicating the name of their insurers, the sum insured and the policy reference number.

Many agencies choose not to accept client funds, and in this case any monies paid on account - such as the purchase deposit noted above - by a client, are instead paid to the Notaire appointed to handle the transaction, and held in their special sequestered client account, to which the balance of the purchase price will eventually also be transfered.

The new legislation helps to distinguish clearly between agencies authorised to receive deposits and those which are not. The French estate agency sector is already highly controlled by legislation and licensed by the regional Prefecture, and the new rules offer an additional safeguard for clients using their services.

French property discounts average just 5.21%

2011-01-05T01:43:00.000-08:00

According to a recent report by the French estate agency group Century-21, the average discount negotiated by buyers of French property is just 5.21% - down from nearly 7% in 2009, and probably less than most potential buyers imagine when embarking on the process of acquiring a French property. Apocryphal stories abound of 'bargains' picked up for half their original asking price but the hard evidence appears to confirm the reality that there is relatively little room for manoeuvre even in a sluggish property market.

The highest average discount of 6.63% is attributed to Marseilles but still down from 8.16% in 2009, and the lowest at 2.56% in Paris (4.36% in 2009).

The average price per square metre is now 2,515 euros - the highest since before the recent property crisis. During 2010 prices actually rose by an average of 8.69% across France, and double that amount (at 18.46%) in Paris.

Despite these figures, buyers it seems will find it difficult to secure a reduction of more than 5% off the property's asking price.

Source: Mireille Weinberg, Les Echos.fr 04 January 2011.

Spanish property woes highlight security of French system

2010-12-24T01:39:00.000-08:00

Although Spain is still the number one choice for British overseas property buyers - ahead of France - recent reports in the Daily Telegraph and elsewhere continue to highlight the many uncertainties surrounding property purchase there, in comparison with France's highlys secure system of property buying and selling.

Headlines such as 'Britons lose millions on the Costa homes that never existed' or 'Nearly 400 Britons lost £43 million in property deal' appear almost daily in the property columns of the daily and Sunday newspapers. Among the most recent scandals has been the failure of some regional Spanish banks to provide the financial guarantees (against deposits paid) which are required under Spanish law 57/1968 designed 'to protect the funds paid by the buyer into a special account and ensure they are used solely for the purpose of building the property'.

Speaking of a recent ruling by a provincial court in Cantabria, Charels Svoboda - head of an action group in Valencia - noted "While this is an improvement, and it does make me hopeful, it is important to remember that half of the Spanish banks are in financial trouble and many of the developers have gone out of business or simply disappeared - so where is the money going to come from to pay them back?"

According to recent figures there are some 683,000 new-build properties in Spain seeking buyers, plus an estimated 700,000 homes for sale by their owners, according to consultancy RR de Acuna. Several Spanish banks, who have repossessed properties from owners unable to keep up repayments, are now trying to offload them at 50% of their original price. The same report notes that out of 60,000 property companies, some 23,600 have gone bust, owing 137 billion euros to the banks.

Could this happen in France? The answer is a resounding No! In the case of off-plan developments, a minimum of 50% of the proposed properties (such as apartments and villas) have to be sold before work can begin. Purchasers then pay a small deposit and a series of stage payments only when building work progresses - foundations, first floor, roof etc - which are verified and authorised by independent lawyers ('notaires') in charge of the transaction. It is rare for a building company, many of whom are large multi-nationals, to run out of funds and for work to cease.

Because of its system of land registry, existing properties and their ownership can be verified by consulting the 'plan cadastre' on-line or at the local Mairie. Part of the duties of the Notaire handling the transaction is to ensure that the property exists and that the owner/vendor has has true title. Any additions or alterations can also be checked to make sure the appropriate planning permission was obtained. Building work undertaken by correcntly registered French artisans will be covered by insurance guarantees of up to 10 years.

Buyers should exercise reasonable care particularly when purchasing new-buildss or off-plan property, either for occupation or investment, and as a minimum personally visit the site of the proposed development and samples of recent properties built by the constructor.

Sources: Sean O'Hare, Daily Telegraph 23 December 2010; Graham Norwood, The Observer, 26 December 2010.

Auto-entrepreneurs - shock tax, resolution!

2010-12-07T02:48:00.000-08:00

Many people opting for the comparatively new French self-employment regime (known as 'auto-entrepreneur') suffered a nasty shock this autumn when they received huge bills for a new local tax (CFE*) which replaces the old 'taxe professionnelle' levied on all commercial and professional enterprises, including those run from home. This despite the fact that many of the newly created enterprises had little or even a nil turnover, and had relied on the French government's promise (when the scheme was launched in January 2009) of 'no turnover, no tax' - including exoneration from the 'taxe professionnelle' or its equivalent for the first three years of operation.

The problem, as is often the case, lay in the small print, in this case buried within the auto-entrepreneur registration form, which basically offered two distinct options for paying income tax and social security contributions. Both of these are based on a fixed percentage of revenue - 13% in the case of 'commerce' (basically businesses that buy and sell) and around 23% for services and professions. Of these amounts the majority comprises social security contributions and the remainder (1% - 2%) income tax.

The registration form offered two methods of payment of the tax element, either by three-monthly declarations (along with the social security payments) or at the end of the tax year, together with any other income tax. The latter option appeared attractive to those on very low incomes or a pension, who might end up paying no income tax at all. (For a single person, earnings up to nearly 10,000 euros do not attract tax, and for a couple the amount is around 15,000 euros).

What many signatories missed when completing the form was the provision that the exemption from 'taxe professionnelle' - replaced in 2010 by the new CFE - only applied to those electing for the system of three-monthly payments - known as 'prélèvement forfaitaire libératoire' - a term not easily understood by the average French person, let alone an English speaker resident in France. Those that had opted for the once-off annual income tax payment were as a result suddenly faced with a huge CFE bill, often when they had not generated any income from their newly created auto-enterprise.

Further anomalies arise as the former 'taxe professionnelle' and its new replacement the CFE are calculated on notional values of property owned by local businesses, whereas many auto-entrepreneurs work from home and already pay 'taxe habitation' and 'taxe foncière' - personal taxes applied to domestic properties and their owners/occupiers! Many auto-entrepreneurs also point out that they do not actually work at home but at their clients' base (such as those offering services delivered in their clients' home or business premises) or at most use a few square metres in their living room, occupied by a computer.

Fortunately after vigorous protest and a lot of adverse publicity, the government has amended the law and on 6 December, as part of the budget for 2012, announced that all auto-entrepreneurs would be free of the new tax, during the early years of startup.. Anyone who had paid the tax already, ahead of the 15 December deadline, would be reimbursed. There are ongoing discussions about paying a contribution towards local business training programmes.

While the decision has been welcomed by auto-entrepreneurs, it is regrettable that a basic form of self-employment has become so complicated in the hands of French bureaucrats.

The French discussion forum http://www.auto-entrepreneur.fr/ is an excellent source of information about the auto-entrepreneur regime, including the new EIRL** version available from January 2011, which offers an element of limited liability, similar to a company, for the individual auto-entrepreneur, by separating (and protecting) personal assets from those of the enterprise.

(*'cotisation foncière des entreprises') (**'entreprise individuelle à responsabilité limitée')

Selling your French home - description!

2010-11-24T01:18:00.000-08:00

In a recent case involving the private sale of a French apartment, the English owners offered the property 'as is' but included in the asking price certain items (refrigerator, microwave, beds etc) plus certain others that were offered separately, at a price to be negotiated. The property details included two lists - items that were included in the asking price, and the items offered separately.

An offer was received from a French couple, who intended marketng the apartment as a summer rental, and accepted by the owners. As they approached the preparation of the compromis de vente (pre-contract) the French buyers insisted that the apartment was offered 'fully furnished' and that their offer was based on that. No amount of discussion could convince them that the printed details, of which they had a copy, clearly noted which items were included and which were not. It took considerable negotiation to finally reach an agreement, the owners reluctantly conceding all but a few items they wished to retain, in the interests of concluding the deal and moving on.

Could the property details have been clearer? Perhaps with hindsight one could use the French word vide, to emphasise that the apartment was offered empty. This term however does need clarification and agreement between the parties, as it does not normally imply that the vendor can strip out fittings such as kitchen units, bathroom cabinets etc which are expected to be left behind.

However, in all situations, it seems advisable to list and agree the items that will be left behind, and those that the vendors wish to retain. Some of the latter could of course be offered for sale at a price to be agreed.

Home DIY when you come to sell

2010-11-13T02:16:00.000-08:00

When the times comes to sell your French property, DIY renovations carried out by owners are generally not popular with French buyers, who prefer to see work undertaken and guaranteed by qualified artisans.

A recent French court decision may now alter the legal responsibility of owner/vendors for work they have undertaken themselves. The appeal court has used the argument that an owner who does building work on his own property automatically becomes a "builder" - and as a result is subject to the same laws requring a 10 year guarantee on the work done, that is applicable to registered artisans (who are obliged to carry the requisite insurance cover).

The court case cited a vendor who had re-covered the outside of the property in question, but the work had proved defective. The new owners sued for damages and won, despite the arguments of the previous owner that he was merely the seller and not a builder. The court ruled otherwise.

How far this ruling will affect current legislation or lead to the introduction of new rules covering DIY renovations is unclear. French jurisprudence does not carry the wame weight as in British law, where previous judgements can be cited in subsequent cases. However, a vendor doing renovation, repair or rebuilding work on his own property should be aware of the potential risks following the French court ruling.

(Source: Europe 1)

Opening a French bank account

2010-11-06T02:05:00.000-07:00

Opening a French bank account is relatively simple, but can be the subject of frustrating delays which appear inexplicable to the client. In the interests of preventing money laundering (the reason usually given), increasing amounts of doculmentation are asked for, to prove that you are who you say you are. If you are not living and working fulltime in France, or receiving pension payments, the French bank may require proof of your non-French resources, such as salary slips, and/or UK bank statements.

All this can take several weeks, as new accounts are eventually approved by the Banque de France, meanwhile the client has no way of paying French bills - for utilities, suppliers, artisans etc - other than in cash (only allowed for small amounts) or bank to bank transfers from his home bank. It is not uncommon for utilities to be cut off without warning as a result of non-payment of the initial bill when moving into a French property.

Regular bills, such as those for electricity, gas, telephone etc can be paid by standing orders ('prélèvements') and the first bills received usually include a form to complete and return to the supplier, which will be passed in turn to your French bank, once the account has been opened.

In view of the delays associated with opening a French bank account and its sometimes annoying consequences, we advise clients to set up a French bank account well ahead of the intended completion/occupation date of any property purchase, allowing at least two months - which is normally the time allowed for completing a French property purchase from initial offer to final contract.

Rise in French property transactions 2010

2010-10-28T01:34:00.000-07:00

According to a report published earlier this month by the French estate agents' body FNAIM, property transactions during 2010 are likely to reach 700,000 - and by mid-year had already exceeded 650,000, representing an 18% growth over 2009.

These are encouraging figures after the decline in the number of transactions to less than 600,000 in 2008/2009, which had been preceded by six years (2003 - 2008) when the number of transactions exceeded 800,000 annually.

Buying to let - caution!

2010-10-18T02:38:00.000-07:00

Last night's Capital (M6) programme emphasised once again extreme care needed when buying an apartment intended for letting, particularly under recent government tax saving schemes such as the 'loi Scellier'. Under this scheme, monthly repayments of, say, 1200 euros can be reduced to around 400 euros, after taking into account income tax saved and income from rentals, encouraging many French investors to put their money into bricks and mortar.

The programme looked at two examples, a typical commuter town 15 kms from Paris and the city of Bergerac. In the first case, the development turned out to involve hundreds of apartments, located not 10 minutes but nearly 45 from the rail station, in an area of over-supply and lacking public transport. Much the same situation was apparent in Bergerac, where despit the promises of developers, the majority of apartments were un-let - due again to poor location and over supply according to local estate agents interviewed.

Even though the developers promised a guarantee against failure to find a tenant, in practice this lasted for only 12 months. And when desperate owners tried to sell, they found that their apartment was over-priced, and that after one year without tenants (and rental income), the tax advantages were cancelled. One owners found himself paying over a 1000 euros a month for an apartment he did not occupy, which remained un-tenanted and which he could not sell.

Surprisingly, less than half of buyers bother to visit the site or the area where they are being urged to invest an average of 200,000 euros, to check the quality and location of the property, and to find out for themselves whether a rental market actually exists. A government official interviewed admitted that the criteria for selection of projects under the Scellier scheme were being revised to include an asessment of rental potential, but the new rules would not apply before 2012.

Curiously, France currently has an estimated immediate need for over 1 million new homes.

Signing a 'mandat de recherche' - advisable?

2010-10-12T03:00:00.000-07:00

Potential buyers looking for a French property may be offered the option of signing a 'mandat de recherche' (research mandate) by an estate agency, which empowers the agency to search for a property on behalf of the would-be buyer. Is this advisable?

Normally, an estate agency will present the buyer with details of those properties already on his books - for which he has a mandate to sell signed by the vendor - which approximately match the buyer's requirements. In the case of a visit to view the property, the buyer is asked to sign a bon de visite which is a simple acknowledgement that he was introduced to that particular property by the agent. This is largely to prevent an unscrupulous buyer from subsequently attempting to strike a private deal with the owner/vendor which would deprive the agent of his commission, and presumably for a lower price. Agents have been known to sue and successfully win a claim in court for payment of their rightful commission, based on their written agreement (the sales mandate) signed by the vendor.

An agent proposing a mandat de recherche will argue that this enables him to widen his research, including for example approaching private vendors and other 'hidden' sources, and generally work harder to find the sort of property the buyer is seeking. Such a mandat involves payment of a percentage commission, based on the price of the property, in the event of a successful transaction.

Confusion can arise however when for example agent X holding a mandat de recherche concludes a deal with agent Y holding a mandat de vente (sales mandate) from the vendor, under which he too is entitled to a commission in the event of finding a buyer and concluding a sale. Are two lots of commission payable? Should the two agents divide and share the commission? Does signing a mandat de recherche cost the buyer more?

The answer to the last question is probably Yes, and a potential buyer might argue that in offering to find him a property, an agent (who has nothing currently suitable on his books) is doing no more than his normal job, when he contacts colleagues to see if they can propose something suitable. Indeed, many agencies work together in this way by means of formal or informal local groupings. In the event of a transaction occurring, the commission is normally split between the two agencies involved.

The situation is slightly different when a potential buyer, possibly someone who is exceptionally busy or who has special requirements, engages an independent property searcher - one of the new-style chasseurs de bien who have recently made their appearance in France. Many of them are operating under the laws (loi Hoguet) regulating the estate agency sector, and may charge both a fee and a percentage commission for their services. In Britain, several large estate agencies have even opened 'property search' subsidiaries, leading one to question where their independence lies - and whether this type of operation is simply another device to extract more fees from the potential purchaser.

In choosing his approach, a potential buyer can weigh up the cost of using these extra services, against his time availablity, knowledge of the local area and property market, and in the case of France his knowledge of the language and the property buying process.

French interest rates lowest since 1945

2010-10-05T01:43:00.000-07:00

According to a report in Monday's Le Figaro, French mortgage interest rates were at their lowest - 3.30% - since 1945 during September 2010. The previous record low occurred towards the end of 2005 when rates were at 3.36% (excluding insurance). The number of mortgages granted by lenders was up 17% in the same month, compared with autumn 2009.

Source - Observatoire Crédit Logement/CSA.

Selling up and moving back

2010-09-27T08:36:00.000-07:00

Second homes do not come cheap and the cost of owning and running them are among the reasons why many second-home owners decide to sell up and - if they are foreigners - return home or decide to take their holidays elsewhere than in France.

France has one of the highest levels of second-home ownership, and in the Mediterranean coastal region where I live, around 70% of properties are second homes, occupied for only a few weeks of the year. They comprises mainly studios and apartments in co-ownership buildings, holiday villas sometimes located in a complex with a pool and other facilities, and villas or older house a few kilometres inland. As a result outside the main holiday season, many properties lie empty and the coastal resorts are deserted from October to the following June.

Some second homes may be owned as part of a family inheritance, due to France's peculiar successions laws which favour keeping acquired property within the family. Second homes also attract capital gains tax if sold within the first 15 years of ownership, although there is 10% per year relief in years 6 to 16 after which there is no CGT to pay - as is the case with your main or principal home. Newer buildings approaching their 15th year and in which owners may have bought apartments off plan at the time of construction may suddenly lose a number of owners simultaneously as they approach the end of the capital gains period. The resulting glut of similar style properties can force prices down and offer attractive bargains to buyers.

Second homes that were originally purchased with a view to family holidays can also lose their appeal, as children grow up and adolescents want to holiday separately from their parents and explore places outside France. A decline in the summer rental market may also provoke sales of second homes, as is happening along the Mediterranean coast. Owners who have failed to upgrade their rental apartment or villa are facing stillf competition from camp sites, many of which have upgraded their facilities, providing modern chalet style accommodation, swimming pools and numerous other attractions for their clients. During the summer, many of these become veritable holiday villages with 5,000 or more residents in place.

Costs of maintaining the second home are also another factor considered by vendors, as the prices of utilities, local taxes and leisure (especially eating out) have continued to rise, forcing comparisons with the cost and attraction of holiday packages, including villa rentals, outside France.

Second home owners from Britain and Ireland especially who were attracted by convenenient low-costs flighs to nearby airports are now finding many flights reduced or diverted to more distant locations - both in the case of departures and arrivals. With journey times extended to a day or more just to take a short flight, many owners are questioning whether they want the hassle of travelling by air associated with short visits of a week or less. The good news is that areas which can be easily reached by car and increasingly fast TGV trains will attract second home owners disenchanted with low cost airline services.

The French themselves have always favoured locations no more than two hours drive from their main home, and it is generally economic and family considerations that influence the decision to sell. However, research show that the majority of second homes are nonetheless sold by their owners within 10 years of purchase, even during times of relative prosperity. In times of crisis, leisure spending is a major item that can suffer as family budgets are cut back, and the second home may be sold if for example it is not producing revenue from rentals and the costs of buying and running the property are simply too high.

The exceptions are properties intended for eventual occupation in retirement. Owners who thought long term and bought before 2002 have seen the value of their investment rise steadily or hold its value, even during the recent economic crisis. With the comparatively high transaction costs (agency fees, Notaire's fees, registration charges and taxes) associated with buying a property in France, you need to take account of these factors when deciding to sell your second home, or hold onto it in the expectation of better times.

French Property News, September 2010

2010-09-09T00:51:00.000-07:00

In this month's issue I describe the first part of my search for a working olive grove in the south of France, on behalf of an English couple planning a new life in their early retirement.

I have also written an article about the subtle art of negotating the price of a French property, when to take advice, doing your research on local prices and above all avoid pitfalls such as expecting that every vendor is prepared to drop the asking price by 10 or 15 per cent as a matter of routine. Above all, I advise against trying to bargain based on your ambition to buy something that you cannot afford - wanting a three-bedroom house for the price of a two-bedroom, for example.

Larger deposits demanded by UK banks

2010-08-31T01:59:00.000-07:00

In the wake of the econmic crisis, British banks have started asking mortgage applicants for larger deposits, which according to Rightmove could have an adverse effect on property prices. First-time buyers now need a 25% deposit instead of the traditional 10% common before the crisis. And according to the Council of Mortgage lenders, 80% of first-time buyers aged under 30 need the assistance of their parents to finance their purchase, pushing up the average age for a non-assistd purchase from 33 to 37 years.

In many ways, the British housing market may gradually come to resemble that in France, where buyers purchase essentially with a view to the long term (for occupation or investment) and banks maintain their traditionally cautious lending policies - a loan being based on the borrowers ability to repay, rather than the notional value of the property, with monthly payments not allowed to exceed one-third of income.

The higher cost of transactions, which include agents' fees, Notaire's fees and government taxes and charges, also serve to discourage frequent property purchases with a view to 'trading up' and making a short term profit. Many first-time buyers are in fact older than their British counterparts, and may choose to establish their main home in a rented property (for example in a city centre where the cost of buying is prohibitive) and buy a second home in the countryside in which they will eventually retire.

Commentators on the article* have generally applauded the idea of higher initial deposits, with some suggesting it is time British house buyers get used to the idea of regarding their home as a cash-making asset instead of somewhere they intend to live for a long time.

Source - Philip Aldrick, Daily Telegraph 30 August 2010.

Can journalists 'talk up' property markets?

2010-08-29T01:39:00.000-07:00

An astonishing report in the Irish press tells of a goup of overseas property investors who are contemplating suing property journalists, claiming that their upbeat descriptions of variour property investment opportunities abroad caused them to lose money, when property prices subsequently collapsed. Among the markets cited in this context are many former Eastern communist countries that have recently become independent and in some cases joined the European Union, and areas such as Florida, Dubai and the Spanish Costas. Speculative investments became popular during the 1990s and reached a peak in 2002, only to collapse a few years later leaving investors facing heavy losses.

Whatever the outcome of any proposed legal actions, a number of lessons can be learned, among them the need to check and double check any proposed investment opportunity, particularly in newly developing and largely untried areas, and particularly if the prospect is offered of more than average returns from rental income.

Regrettably, property buyers are often dangerously casual about about their investments, as has been witnessed in France during the mini-boom in investment properties destined for rental, under various government tax saving schemes (Robien, Borloo etc). Anecdotal evidence suggests that more than 50% of 'investors' failed to actually visit the area and the property they were buying within France, to verify if the rental levels promised by developers were actually achievable.

What many found to their cost was that many buy-to-let properties had been built in unsuitable locaations, remote from towns and centres of employment, and lacked basic facilities such as nurseries, schools, shops, and public transport - all major deterrents to prospective renters on low incomes, to whom these properties were primarily addressed.

When they finally woke up to the reality of nil or reduced rental income from their investment, many buyers found that their properties were often badly constructed, largely unlettable and in many cases unsaleable. Many have since been heavily discounted and sold, often by the original developers.

Buying French property rarely promises high short-term profits and should only be considered as a long-term investment. Rental income is unlikely ever to contribute more than half of the monthly mortgage repayments, with French banks insisting that loans on based on your ability to repay rather than on the notional value of your investment.

Fancy owning an olive grove?

2010-08-23T07:08:00.000-07:00

One of the most interesting property search requests I have had was to help an English couple find an olive grove somewhere in the south of France. They ideally wanted a property they could also live on, within reasonable distance of a largish town (providing a market for their olives and olive oil), and land that was already certified organic or capable of conversion in the coming years. I am telling the full story of the search and hopefully their final choice, starting in the September 2010 edition of French Property News.

Energy performance label for properties

2010-08-19T09:13:00.000-07:00

After the 1st January 2011 an energy performance label will have to be included in descriptions of French properties offered for sale or to let (loi Grenelle 2). The label - rated from A to G - is similar to that already applied to domestic items such as a refrigerator and to new motor vehicles, and is designed to highlight whether a house or apartment is rated as 'energy efficient' or one that is likely to be expensive to heat. The French government emphasises that buildings are responsible for 21% of CO2 emissions and 43% of energy consumed.

Estate agens are already asking whether a poor rating will have an effect on the saleability of a property, and note that vendors will have to organise and pay for a 'diagnostic de performance énergétique' (DPE) before putting their property on the market.

Low ratings - E, F, G - indicating that a property is costly to heat, due for example to poor insulation, may encourage potential buyers or renters to ask for a reduction in the asking price, according to a spokeman for FNAIM, the main body representing estate agents in France.

The new regulations may give a boost to the market for new-build properties while having an adverse effect on un-renovated older properties, including many dating from the building boom of the 60s and 70s along the French Mediterranean coast.

Top five tips for buying your home

2010-08-17T03:06:00.000-07:00

An interesting piece in the Daily Telegraph recently (about property buying in Portugal) offers some useful tips which are equally applicable to buying a home in France. They are:

'Take your time - never be rushed or pushed into purchasing'

'Get independent legal advice' - Not always necessary if your French Notaire or agent speaks enough English to guide you through the various purchase documents, from pre-contract ('compromis de vente') trhough to completion. An adviser on the spot who knows the area and the local property market is helpful if you do not speak French and are unfamiliar with the French property buying process.

'Choose your area carefully' - Always important with a vew to a future sale, even if you intend to live in your new home 'for ever' unforeseen circumstances may force a change.

'Research what you can renovate' - Be aware of planning permissions, likely costs and regulations regarding what is and is not possible, particularly in areas classified as of historic interest and requiring permission from Batiments de France.

'Be willing to wait' - France like Portugal is slowly pulling out of recession but there are no quick profits to be made from buying and selling property. Properties are rarely offered at huge discounts, and you have to look at your property as an essentially long term investment.

Source - Leah Hyslop, Daily Telegraph 26 July 2010

Studio apartment in Argelès-Port

2010-08-12T02:34:00.000-07:00

I am helping friends sell their property in Port-Argelès as they have run out of space and need something larger, now they have decided to live here almost pemanently. Details are posted on http://www.argeles-apartment-sale.blogspot.com/ if you are interested. This is a private sale by the owners.

Living on the top floor

2010-08-04T01:34:00.000-07:00

An interesting article in this month's French Property News* explains some of the advantages of living on the top floor, a point to bear in mind when buying an apartment in France. I have always favoured the top floor of buildings, provided it is not much above the third floor (a personal choice, though I lived for many years on the sixth and ninth floors of apartment blocks in London), and many people will not consider living higher than, say, the third floor if the building has no lift. I currently live on the second and top floor of a building facing south east and a leisure port, with a large terrace; whereas the Mediterranean side of the building rises to four floors, facing east, and tends to be cooler in summer after midday.

Older buildings may not have a lift installed. This is often the case with older buildings in Paris, particularly where a series of 'chambres de bonne' (servants quarters) have been converted into desirable apartments with stunning views. However they are invariably located at the rear of the building and access is by the 'back stairs' with no possibility of finding a lift.

Aside from that, top floor apartments offer a number of advantages, not least that of sound insulation, particularly in older buildings and conversions. Sound from below is less intrustive and easier to control by installing a 'floating' wood floor or buying thick carpets and rugs. Top floors offer the prospect of more light and air compared with the lower floors, where you can end up looking into the apartment of your neighbour.

On the Mediterranean coast there is the prospect of sea views or views over the rooftops of an historic town or village, and the almost certainty of a roof terrace for sun bathing and enjoying meals outside. Not unnaturally, top floor apartments can command a premium, ten per cent or more according to Rebecca Russell, author of the article, compared with lower floors, even in older bourgeois buildings without a lift.

The presence of a lift means higher services charges paid to the building managers (the 'syndic') for maintenance and eventual replacement - many older lifts are currently being renovated or replaced to comply with new safety norms. Buyers, according to Russell, should also check that the building is well maintained, particularly with regard to the roof, as top floor apartments are among the first to suffer the results of high winds and rain storms common in the south of France.

However, the author concludes, top floor apartments invariably hold their value, are ideal for renting and in every way represent a sound investment should the time come when you wish to sell.

* French Property News, August 2010.

Independent property searchers in France

2010-08-02T12:08:00.000-07:00

Property searchers, buyers' agents or 'chasseurs de biens' have been around for a few years in France, even forming their own membership association, but unfortunately like many good ideas - I would cite here the French 'auto-entrepreneur' initiative as another spectacular example - the French have managed to get it wrong! This usually happens once the bureaucrats get involved and try to pick apart something that started out as innovative and clearly responding to client demand.

What happened in the case of property searching was the official insistence that this new occupation fell within the estate agency sector, and consequently was subjects to the 40 year old 'loi Hoguet' of 1970 which defines how the French estate agency sector is governed. Under this law, only licensed estate agents are allowed to mandate and market properties, and take part in the negotiating process between vendor and potential buyer.

As a result many property searchers became freelance commercial (selling) agents tied more or less loosely to a licensed estate agency, instead of the truly independent, impartial advisers they should have been to their client - the potential buyer. This was until a little known ministerial reply of August 2008 sensibly clarified the role of someone paid by a client - in this case referred to as the 'mandant' - who acts as an independent searcher and adviser, working outside the traditional estate agency sector - but using local estate agents as one of their sources when conducting an initial property search on behalf of their client.

Some estate agents and even various newly formed associations of property searchers seem unaware of this important distinction or choose to ignore it. Fortunately, the role of the relocation adviser has developed alongside that of the independent property searcher, in the former case often working for a corporate client and helping relocate and settle one of their employees and their family in another part of France. Their services can include finding a property to rent or buy, and helping with all the administrative formalities of moving and settling in.

Recounting her experiences trying to find a family home in Edinburgh, Financial Times journalist Merryn Somerset Webb* describes finding and using a property searcher and poses the question Why are buyers prepared to spend the largest amount of money they are ever likely to commit when buying a property - and not ask for independent advice? Recognising, of course, that estate agents are in business to sell property, not to worry about whether you are going to be happy in it or not.

As an independent French property searcher and adviser working outside the traditional agency sector - though I was for two years a negotiator/salesman in a busy French estate agency - I now find I spend almost as much time dissuading clients from buying certain properties as I do advising on those I think will meet their requirements. As a negotiator I was under pressure to sell. Today I am relieved of that burden and derive considerably more satisfaction in seeing a client truly satisfied with the property they eventually purchase and move into.

* Financial Times 30 July 2010

French Property News August 2010

2010-08-01T03:24:00.000-07:00

In this month's issue I offer a few tips on how to get the most out of your French estate agent, based largely on my experience of working for two years as a negotiator in one of my region's largest independent agencies, catering mainly for British and Irish clients, and subsequently as an independent property searcher and adviser.

France has around 15,000 estate agents (double the UK figure) and entry qualifications and controls are rigorous. French agents are much more hands-on, for example always accompanying the client on property visits, often over a wide geographical area. They are also much more involved in preparing the package of documents that will be passed to the Notaire in the event of a sale.

I also describe a typical day in the life of an agency, based on my experience in a busy office in Collioure, attempting to juggle phone calls, emails, visitors to the office, sales visits with clients and meeting property owners with a view to taking-on a mandate to sell their property. We invariably worked a six or even seven day week, and lunch was usually a sandwich consumed on the run between appointments. Perhaps not the relaxed Mediterranean way of life some readers might imagine!

French Property News is available on subscription or on sale in newsagents. http://www.french-property-news.com/

Selling your home? Some things to avoid....

2010-07-25T02:46:00.000-07:00

Writing in the UK Daily Telegraph, property expert Phil Spencer of the TV progamme 'Location, Location, Location' offers some useful tips on how not to try and improve your home before selling. Among his suggestions are:

- Avoid 'outgrowing your street'. 'If houses in your street cost £250,000 don't build an enormous extension and ask £400,000. People looking for a £400,000 house won't want to live in a £250,000 street'. Harsh but true.

- DIY bodging. The greatest turn-off especially for French buyers used to work undertaken by registered artisans, with the accompanying invoices and guarantees.

- Replacing all the furniture. This, he says, will not add value to the house. This does not mean neglecting to present the property well, including home staging.

- Too big a television. 'I have seen far too many living rooms that have been overpowered by the size of the plasma screen' he says. This is a common fault among French owners, whose living areas have been turned into virtual home cinemas.

- Too many bedrooms. 'There is a substantial difference in price btween two, three and four bedroom houses' says Spencer, 'after five there's hardly any'.

Although writing about English property, many of Spencer's ideas can be equally well applied to your French house or apartment. In the same article he offers a list of improvements that can add value, from re-painting to opening-up internal spaces.

Spencer also suggests that sellers should be aware of their target market. 'Work out who is your most likely type of buyer' he suggests, 'and aim accordingly. This will determine whether you present a spare room as, say, an office, a play room, a gym or a study'. Related to French property, I would add being able to offer a ground floor bedroom, as many older buyers appear concerned about not being able eventually to climb the stairs, while younger ones are becoming increasingly responsible for looking after an ageing parent.

Source: Daily Telegraph, Property Section 23 July 2010.

Letting your French property

2010-07-20T02:18:00.000-07:00

One of the attractions of buying property in France is the chance to earn additional income from letting, particularly where the property is purchased as a second home and you do not intend to occupy it all year round. However, the rental markets differ widely according to location and market demand, and can broadly be divided into short, medium and long term.

Typical medium term markets include student rentals, if you happen to live in or near a university town. Suitable properties include one or two person studios, or larger apartments suitable for sharing. Such properties are invariably offered furnished and equipped, and wear and tear can be considerable, so you need to factor in the cost of replacement and redecoration. Tenant turnover can be high as young people tend to give minimum notice and will leave if they find another cheaper apartment or decide to move in with friends. Rentals are of course confined to term time. In some areas, furnished studios or apartments could also be offered to those moving temporarily for work or house hunting.

Longer term lets are generally for three years or longer, and unfurnished if the let is more or less permanent. Many French people choose to rent rather than buy, or live in a rented apartment in a city centre during the week (where the cost of buying can be high), and return to their family home in the country at weekends and for holidays. Rental properties in high demand include three and four bedroom houses suitable for families with children, with a garden and possibly a pool. Ideal locations are suburban or in towns close to public transport and main centres of work, and offering schools, nurseries and conveneint shopping. Ideal tenants include dual-income families with children in local schools, who are likely to want to stay for a number of years.

The most common short-term letting markets are those addressed to holiday makers, and comprise the six to eight week summer season (July, August), the period around Christmas and skiing, Easter, and in some areas shorter periods outside the main season, for example during spring and autumn.

The main summer season has tended to contract in recent years, and now stretches from mid-July to the third week in August at its peak, with large concentrations of visitors on the French Mediterranean and Atlantic coast, and some inland areas of special interest, such as national parks or the mountain regions of the Alps and Pyrenees. On the Mediterranean coast, there is increasing competition from camp sites, many of which are graded 4-star and describe themselves as 'hotelerie en plein air'. Many thousands of euros have been spent on upgrading accommodation (chalets) and facilities, with the largest sites catering for 5,000 or more visitors at any one time, and are virtually transformed into temporary villages complete with supermarket, restaurants, bars, cafés and all facilities, as well as every kind of sports and entertainment.

In contrast many coastal apartment and villa owners have failed to react to changing customer demands. Having managed for years to let their fairly average holiday homes at inflated prices, many are now feeling the pinch. In some Mediterranean resorts, apartment bookings are reportedly down by 30 to 40 per cent (in the third week of July 2010), and restaurants and shops are also suffering from lower takings as a result.

A few home owners have reacted by turning their apartments into 'boutique' accommodation, in competition with hotels, and specialising in short-stay breaks - typically long weekends or mid-week to weekend - possibly outside the main holiday season, and where the location has more to offer than the traditional sun, sand and sea. Popular destinations are centres of historic interest, as a base for excursions and sightseeing. Another niche market is that catering for special interest holidays. These can range from cycling or hiking to cookery, crafts, art classes, slimming, vegetarian, yoga, nature study, languages, or culture.

In looking at short term rental options, property owners should take into account the potential of their area and its adaptability to these new markets. If your property is part of a co-ownership (condominium) complex you also need to be aware of the rules regarding visitors and letting. Invariably owners are held responsible for the 'good conduct' of their tenants and residents are quick to complain to the building managers in the event of noise or misconduct that disturbs the tranquility of other (permanent) residents.

Some large apartment or villa complexes include attractive gardens and a pool, as well as easy parking, and can be attractive to holidaymakers who do not wish to stay on a campsite or in a hotel. Agencies handling seasonal rentals demand a fairly high standard of furnishings and equipment, such as washing machine and possibly a dishwasher, and will take care of rentals, security deposits, insurance and cleaning between rentals.

An attractive location such as facing the sea or a marina, together with a balcony or terrace, will help make your apartment or villa stand out among the hundreds on offer. If you are offering a country house for short term holiday rental, minimal requirements will be a garden and a pool, as visitors do not like travelling every day to the beach due to the inevitable traffic congestion around the coast in high season.

Income can be made from renting but you need to research the different markets and decide how your particular property can be best adapted to varying local demand.

French property prices nearly back to pre-crisis levels

2010-07-07T00:56:00.000-07:00

Prices of older properties have almost reached the pre-crisis levels recorded before 2008, according to figures just released by Century 21 for sales during the first half of 2010. With an average cost of 2508 euros per m² (7079 euros/m² for Paris), prices have risen by an astonishing 8.48% in just one year, and an even more remarkable 15% in Paris (5.4% higher than the first half of 2008).

Commenting on the figures, Laurent Vimont chairman of Century 21, which has 850 offices throughout France, noted that "We are now suffering a shortage of properties for sale, with 50,000 compared with 63,000 a year ago; with very narrow margins for negotiation, just 4% for apartments and 6.3% for houses. We are also seeing vendors demanding unrealistic prices which only serve to stifle the market".

The French Mediterranean coastal regions continue to record rising prices, an average of 11% in Provence/Cote d'Azur and nearly 7% in Languedoc-Roussillon.

With mortgage interest rates at their lowest for several months, averaging 3.6% over 20 or 25 years, a typical borrower who had access to 146,500 euros in 2008 can now borrow 169,000 euros to finance his acquisition.

Vimont predicts that average property prices will rise 6% during 2010 before stabilising.

French Property News, July 2010

2010-07-06T08:58:00.000-07:00

In this month's issue of French Property News I look at a number of reasons why you should sometimes NOT buy a French property, and at all times use your head and not your heart. Among the reasons for not buying I include falling in love with the owners or their lifetyle, or being seduced by cosmetic improvements which may be the result of preparing the property specifically for sale. Bear in mind that attractive curtains, carpets and furniture will not be left behind - unless you intend buying the contents - though they may give you an idea of what might be achieved.

It is tempting also to imagine buying into the owners' lifestyle, which in part we do, as almost all advertising and selling is based on our aspirations. However I do recommend sometimes taking along a dispassionate third party on property viewings - an estate agent's worst nightmare but possibly your best ally.

As someone who advises potential buyers of French properties, my personal list of problem areas includes uncertainties about ownership, boundary rights, unclear rights of way, sitting and protected tenants, DIY renovations and other factors that can make a sales less straightforward than normal. Prolems can be ironed out in most cases, provided the property is worth the extra effort, but sometimes it is easier to simply move on and find something else.

Another twist to French estate agency sector

2010-07-01T01:03:00.000-07:00

Although an admirer of the French estate agency business - I used to be an agent but now prefer my role as adviser - I am also aware of its many defects. The sector is in theory highly protected under French law, such as the 'loi Hoguet' which closely defines estate agency activities and sets down standards for anyone wishing to apply for an estate agency licence, normally a business degree and/or several years experience.

In practice, estate agency operations can be open to anomalies, notably in the use of freelance 'commercial agents' who are self-employed and loosely attached to an agency as property negotiators. They depend for their legitimacy on the agency's professional licence, issued by the Prefecture to the principal/owner.

A recent and worrying development is the establishment of several national networks of freelancers, recruited for the most part without previous experience, and relying for a living on the commissions they could potentially earn from mandating properties for sale and subsequently negotiating a purchase. These activities require considerable professional expertise and experience if they are to be performed correctly, including an in-depth knowledge of the property market, estimating property values and completing the transaction from initial pre-contract to final signature.

Many of these sub-agents depend on an estate-agency licence issued by a single Prefecture and used to legitimise the activities of an entire national network. FNAIM, the French estate agents' national body, has expressed concern about "the reality of control over the activities of these negotiators at a time when we are trying to strengthen the guarantees offered to consumers" (Le Monde 06 July 2010).

Checking up on one of these networks (which continues to recruit) I found that my small local town has two of their 'agents' in place (in addition to more than 20 properly licensed estate agencies), operating from their home addresses. A search of their property website revealed just two properties listed, where the average licensed agency has a minimum of 100 on offer.

These developments are worrying not only for potential buyers, who may find themselves in the hands of these fringe operators, but also for individuals who imagine that joining a network as a commercial agent is a viable route into the French estate agency business.

Picture - Daily Telegraph, UK

Electrical installations - new norms

2010-06-25T01:37:00.000-07:00

As a result of a new law passed in June 2009, anyone selling a French property must now provide a further expert report concerning the state of the building's electrical installation. This is in addition to those covering termites, lead, asbestos, gas installation, flooding and natural risks, and energy efficiency.

The inspection, undertaken by a certified professional, is extremely thorough, and covers everything from the mains supply, distribution panel and fuse box, wiring, electrical sockets and switches. The expert's report includes an obligatory list of comments and recommendations.

The result is that many existing properties will not be in conformity with the latest norms (as they may well not be in terms of energy efficiency) and in extreme cases an expert might recommend shutdown of the system by the supplier (EDF) until alterations have been carried out. Similar procedures apply to gas installations.

The new inspection imposes another obligation on vendors, who have to pay for the expert's report, and may encourage buyers to seek a further reduction in the sale price if it appears that there is a considerable cost involved in bringing the electrical installation up to standard.

In all cases and especially where defects or 'anomalies' have been identified by the expert, the report emphasises that the new owner inherits the risks and responsibilities associated with the installation as it exists, and notes that in some cases insurers may decline to offer cover until alterations have been carried out.

500,000th auto-entrepreneur registered this week

2010-06-16T06:00:00.000-07:00

This week, France's minister for small business, announced the registration of the 500,000th auto-entrepreneur, another clear sign of the popularity of this simplified form of self-employment created in January 2009. Originally registrations were expected to reach 100,000 in 2009 but this figure was later revised as they excceded 320,000 in the first year of launch, finally reaching today's figure of half-a-million registrations in just 18 months.

This week's announcement notes that combined income generated by new auto-entrepreneurs was over 1 billion euros in 2009, and is expected to reach three billion in 2010, represented a significant extra income for many new full and part-time businesses.

A recent study has found that 64% of new auto-entrepreneurs are men against 34% women; 16% are aged 30 or under, and 19% are aged 60 or over. This last figure is particularly encouraging, given the very low percentage of French people actually in fulltime jobs after the age of 55, five years before the tradtional retirement age of 60.

In January 2011, the French government intends to launch another new regime - the E I R C or Entreprise Individuelle (avec) Responsabilité Limitée. This will be similar to the single-person limited company (EURL) but enables an individual who is self-employed to enjoy the same sort of protection, with the added benefit of limited liability.

Individuals opting for the auto-entrepreneur regime are self employed, and pay a combined total of tax and social contributions (at a rate of 13% for commercial activities and around 21% for services), based on actual income earned, and declared quarterly. There are limits on annual turnover, currently around 80,000 euros for commercial activities and 34,000 euros for services, such as consultancy. Auto-entrepreneurs are not alllowed to deduct or charge VAT on their activities, and some reserved occupations are excluded from the regime.

Activities as an auto-entrepreneur can be combined with full or part-time employment in another occupation, including students. The regime is open to those out of work (11% of AEs), pensioners (about one quarter of AEs) and EU nationals, including British who wish to work in France. A search on Google will reveal a wealth of information on the subject, much of it in English.

French property sales up, interest rates down

2010-06-07T03:21:00.000-07:00

A recent batch of reports has produced the usual confusing picture of the French property market.

Among the certainties are the fact that typical interest rates are at their lowest since 2006, with some lenders offering 15 year loans at a fixed rate of 3.35%, with borrowers contributing 10% of their own capital. The T3 (three rooms, kitchen and bath) is still seen as the most secure investment by buyers. A rise of 10% in loan approvals was recorded during the first quarter of 2010.

Some sources also report an average 16% shortage of good saleable properties, and 21% for apartments. As a result small price increases have been noted in some of the most popular sectors, including Paris and other large centres.

In Languedoc-Roussillon we are currently experiencing a shortage of good, saleable properties, with too many still coming onto the market over-priced and not in a fit condition to show to potential buyers.

Would-be sellers have only themselves to blame if their property fails to sell within a reasonable time, while these near ideal market conditions continue to prevail.

Sources: Argus du logement, Universimmo, Notaires de Paris.

Sudden surge in new-builds.......

2010-05-27T08:24:00.001-07:00

Fifty-four new apartments and villas, out of a total of sixy-two available, were sold in a single weekend recently in France. A sign that the property market is picking up?

Certainly the predictions are optimistic according to various experts quoted in Le Figaro who cite another example of nearly 70% dwellings sold on a development by Nexity, and a rise in building permits of 25% recorded in March and April alone. In the first quarter of 2010, sales of new developments have risen by 5.3% against a dramatic 59% fall in 2007/8, with around 75% new starts already recorded in 2010.

This year sales of new-builds are forecast to reach 106,000 in addition to 100,000 much needed social housing units.

Already there are signs that new property prices are rising, up by 8.5% for studios and 8.9% for properties of four rooms and above. Reasons given are the need for new-builds to comply with the new BBC norms ('batiment basse consumption') for low energy consumption, with tend to add around 10% to building costs.

Source: Le Figaro 27 May 2010.

Making an offer on a French property

2010-05-17T03:07:00.000-07:00

It is virtually always possible when considering buying a French property to propose an offer that is below the asking price. The crucual question is By how much?

Properties offered for sale by estate agents should have been subject to an estimation of the property's value, before being formally taken onto the agency's books with the completion of a 'sales mandate' by the vendor and the agent. The mandate sets out the agreed asking price of the property, the commission payable in the event of a sale, and the term of the mandate - usually three months renewable in the case of a simple mandate.

In discussion with his client, the agent may have gleaned an idea whether there is any room for manoeuvre in the event that a potential buyer makes a formal offer on the property. Almost invariably owner/vendors have an inflated view of the value of their property, which they may have loved and cherished over the years, and are now reluctant to part with. Emotional reactions may cloud their judgement and many do not, at this stage at least, always listen to the advice of the agent, who may have his own view of the property's saleability. (A reputable agent would not take on a property that is so over-priced as to render it unsaleable).

Buyers considering making an offer should consult their agent and listen carefully to his advice. There can be certain legitimate grounds for proposing an offer, for example if the state of the property means that extensive renovation works are required. In this case asking for a price reduction is justifiable, and you could support your request with builders' estimate to prove the point. Asking for a price reduction simply because a particular property is priced at more that you can afford leaves little ground for justifying your request. In this case, you would have to turn elsewhere and find something cheaper.

Potential sales often collapse because of intransigence by either buyer or seller, even when the two sides are only a few thousand euros apart. More often it is an unrealistically low offer by the buyer which is put forward, against the agent's better judgement, that effctively kills the sale. Well instructed agents will know or have a feel for how much leeway is possible, and may know from past experience that offers at or below a certain amount have been refused by the vendor, and simply refuse to pass them on.

Even in what is currently regarded as a buyers' market, many owners are simply withdrawing their property from the market, as many may be second homes or there is no particular urgency to sell. In every case, it is wisest to listen to you estate agent or adviser, who knows the market, knows the property and - above all - knows the vendor.

Getting the best out of your 'agent immobilier'

2010-05-12T01:48:00.000-07:00

Your first contact as a potential property buyer in France is almost always through a local 'agent immobilier', a member of a licensed profession uniquely authorised under French law to handle the sale of properties entrusted to them by their client-vendors. As French agencies tend to work a little differently from their English counterparts, it is useful to know what to expect - and what not.

Many first approaches are made by email and a common frustration for non-French buyers is what they see as tardiness by the agent in responding to their requests for 'more information' about one or more properties. Having worked in a busy French agency, a three-person office of a group of four, I can explain how life really was. We routinely received 20 to 30 emails per day. In addition to potential buyers seeking general information, many emails concerned ongoing transactions, as well as requests from vendors to consider taking their property onto the agency's books.

In addition there were phone calls, mainly from French buyers; visitors arriving at the office either unannounced or by appointment; visits to make to view properties with the client; or to a vendor to prepare a mandate for sale, take photographs and prepare the sales description for the office window, magazine advertising and the website. Every sale also absorbed numerous man-hours preparing the documents for the Notaire's dossier, with some agencies, such as ours, even preparing the initial sales contract ('compromis de vente') and taking a 10% deposit on account.

As a result, general enquiries arriving by email tended to sink to the bottom of the pile, particularly if they were vague requests for more property details (often no more than we had posted on the website), compared to phone calls which could be dealt with quickly or visitors arriving in person.

We also learnt over the years that 90% of these general-enquiry emails produced no result - no subsequent phone call, no visit, no sale. We also developed a fairly accurate profile of the typical property buyer as someone who:

- knew or had visited the region
- were often already known to us
- knew what they were looking for (house, apartment, land etc) but prepared to be flexible
- phoned a few days ahead to arrange property viewings by appointment
- had allowed sufficient time to visit us and several other agencies (a minimum of several days) and make return visits if necessary
- had their finanaces in place and were ready to sign an initial offer or the 'compromis de vente' and pay a deposit to secure the property
- might come back for a second visit
- might come back in three to six months time

Most had NOT requested information by email but had probably phoned us after identifying a property or several, mainly to check their availability and to arrange viewings. Very few were travelling a long distance to view only one property they had identified or 'set their heart on'.

To make the most of your property search visits, I advise clients to be reasonably certain of which region and type of property they are interested in; to listen to the agent's advice about alternatives, prices, locations, lettability, offers; allow sufficient time for visits and preferably by appointment; try not to visit too many properties too quickly; to be aware that the same property may be with several agencies; to be honest with the agent about whether they are really in a position to buy or simply making a preliminary visit to get a feel for the market.

Following these simple guidelines can help ensure that your dealings with the French agent are pleasant and productive. If you are not used to the French property buying system or do not speak French, then firms such as ours are available to help you from initial property search through to completion and settling-in.

Getting on with the neighbours

2010-04-26T06:17:00.000-07:00

A recent post on one of the French discussion forums concerns an English family who moved to a small village in France 'hoping for rural solitude'. They had in fact bought a derelict plot of land and spent the last two years building a house, and are now suffering hostility from the neighbours.

Perhaps not surprising, as they describe their activities as including long periods of using a mechanical digger, receiving deliveries of building supplies, keeping a noisy guard dog, erecting a seven-foot high surrounding hedge, and claiming they do not work during lunchtime or on Sundays! If it was a British person writing about a French family, doubtless they would have been labelled as neighbours from hell.

Much of the advice given in the replies to this post has included adopting a more conciliatory approach to the (French) neighbours, and trying to apreciate the situation from their point of view. Sadly, the original poster appears more ready to file a formal complaint for harrassment.

I think one can draw a number of lessons from this truly sad situation. One of which is clearly that you can not and will not find peace and solitude in a small French village, where typically everyone knows everyone else's business and new arrivals have to make a super-human effort to fit in and slowly become accepted. It is very much about contributing something to the overall life of the community.

If you are not prepared to do this, for whatever reason and it is entirely a personal choice, then it is perhaps wiser to settle in a larger, more cosmopolitan community, where your arrival and lifestyle will pass largely unnoticed. In many of the Mediterranean coastal resorts where I live, the original residents are used to the influx of seasonal visitors of virtually every nationality, and those who live here permanently tend to go about their affairs wihout attracting any particular interest. Friendships and connexions can be made but they are an option not an obligation.

Selecting your French property for either occasional or permanent use should take into account your personal preferences, and time is well spent in searching for the neighbourhood which suits your way of life and in which you will feel most comfortable.

Home renovations that add value

2010-04-13T03:00:00.000-07:00

In an interesting article in yesterday's Daily Telegraph, property expert Phil Spencer - presenter of the TV programme Location, location, location - points out that not all home renovations necessarily add value to a property when it comes to re-selling.

He particularly cautions against over-spending on kitchens and bathrooms, as these are items that new owners are most likely to want to change and 'impress their personal style on their new home'.

Anything that creates more space and light will generally add value to the property, including extra bedrooms, an office, a utility room or garage. He also advises that quality details will always impress, including items such as wood floors, bathroom fittings and light switches.

Source: Daily Telegraph, 12 April 2010.

French Property News, April 2010

2010-04-13T02:54:00.000-07:00

In this month's issue I look at the recent trend to buy atypical properties, including basements that that can be converted into living space and which have been awarded the name 'sousplex' by astute Parisian estate agents. I also look at the potential for converting former commercial properties into housing, sometimes with the option to revert back to commercial status, and the rules and regulations that are commonly applied by the planning authorities and the managers of co-ownership properties. The latter tend to be very conservative when it comes to innovative projects!

French Property News is on sale in newsagents or on subscription. See www.french-property-news.com

Translation or interpretation?

2010-04-09T01:13:00.000-07:00

Buying French property necessarily involves reading and understanding a large number of documents - a difficult task if French is not your first language. Documents include the estate agent's description, the obligatory technical reports on the property and its environment, building surveys, reports and regulations from the syndic of co-owners, the pre-sale document ('compromis de vente'), power of attorney, the final sales act and many others, running in some cases to fifty or more pages. How do you set about dealing with such a mountain of paperwork, written in legal jargon and in a language you do not undertsand?

One option is to use a qualified translator, and for some documents French law may require the use of an approved translator ('traducteur assermenté') who can provide official translations for use in court. These translators have a near-monopoly, are in short supply and are expensive. Other translators can provide a 'literary translation' but this is usually offered without guarantee or legal authority ('sans portée juridique') and in all cases, in the event of a difference of understanding, it is the original French document that counts.

Because of the wide differences between French and Anglo-Saxon law, even an English translation of a French document can be difficult to understand, as the terminology and practices differ between the two jurisdictions.

A more helpful approach is to use an interpreter, particularly one who can be present before and during the signing of the principal documents, and ideally someone with a good knowledge of both French and English law. Someone who lives locally and knows the property business and the area offers a distinctive advantage.

An interpreter can work with the Notaire to help explain the broad concepts behind a particular French document, and what its implications are for the signatory. French Notaires are also under an obligation to ensure that you fully understand what your are signing. Working in conjunction with an interpreter (and many Notaires speak at least some English themselves) can usually provide a more cost-effective and useful solution for the client.

Many documents associated with a French property purchase are more or less standard, using well known approved models (such as those provided by FNAIM, the estate agents federation), and provided the broad principles are fully explained to you by the Notaire, you can normally proceed to signature confident that you not committing yourself to anything you do not understand.

Where a home-based adviser is employed, such as your family lawyer, even someone who understands French and French law can at best best only work with the information contained in the original French documents supplied by the Notaire (property description, technical reports...) and in the absence local knowledge is obliged to rely solely on their written content when advising the client. This is not an effective substitute for employing someone on the ground who can carry out any necessary, independent checks and verify the accuracy of any information supplied.

Buying a French property for re-sale

2010-04-08T02:42:00.000-07:00

A question that is frequently posed by potential buyers is whether it is feasible to buy a French property, do it up and then offer it for re-sale. Some principles to bear in mind include:

1. Capital gains tax will be payable on the re-sale of a property that is not your main home (as evidenced by your tax status as resident in France). There are some abatements possible, with tapered relief after year six years of ownership, and no CGT to pay if you sell the property after fifteen years.

2. Other costs that need to be factored-in include transaction costs - agent's fees, notaire's fees and taxes - both on the original property purchase and its subsequent re-sale. Be prepared for delays due to planning permissions, cost overruns and other hazards associated with this type of project.

3. If you plan to undertake the renovation work yourself (DIY), note that particularly French buyers prefer renovations that have been carried out by registered artisans, and like to see the bills and accompanying guarantees regarding the quality of the work.

4. If due to change of circumstances, such as a cash shortage, you are unable to complete the renovations, a partially renovated property can prove very difficult to sell, except perhaps at a knock-down price, that may result in your incurring further losses.

However, if you plan to invest in a property for future (short-term) re-sale:

5. Choose an area and a type of property where there is an active market. Examples include areas where holiday lettings predominate or there is a demand for student accommodation.

6. Check local prices for fully renovated properties against the cost of buying a property for conversion, plus building costs and a margin for profit, after taxes etc.

7. Ensure that all work is carried out by properly registered, fully insured (French) artisans, who can provide the appropriate guarantees ('décenniale' etc).

8. Ensure that you can be on site to check progress or have someone who can do this for you. An architect is advisable in virtually all cases, even for small projects, to plan and supervise the work, liaise with artisans and suppliers, and authorise stage payments as work progresses.

9. Check and double check the figures from initial purchase through to completion of the conversion.

Tighter rules for syndics

2010-03-25T03:50:00.000-07:00

The French government has just issued new rules for the operation and management of 'syndics' - the professional building managers who look after multi-occupancy properties on behalf of their co-owners, such as blocks of apartments or private estates.

The emphasis of the new regulations is on greater transparency in relation to the financial management of the building, including right of access to documents such as estimates and invoices received for building and maintenance, and clarification of management charges. The new law also forebids demands for additional payments for information such as a copy of the syndic rules, building plans and explanation of the maintenance charges - all information that would typically be requested by someone considering buying a property in the building.

The changes reflect the government's concern about criticisms of some professional syndics that have been widely expressed on French television and in some consumer magazines, in particular relating to the activities of several syndic organisations which have recently become subsidiaries of major finance and banking groups.

Source: Arreté 19 March 2010 modifying that of 2 December 1986, JORF 21 March 2010 p 5673.

Buying older properties in France

2010-03-24T02:04:00.000-07:00

Many British and Irish buyers seeking a principal or second home in France are sometimes attracted by the idea of buying an older property that they can 'do up', perhaps with the assistance of family and friends, and if necessary a professional builder. The process is not without its problems.

Major building works including external alterations and extensions are invariably subject to French planning consents, and in the case of buildings sited within an area of historic interest, will require approval from the architects at Batiments de France (roughly equivalent to organisations such as English Heritage). Planning permission may be subject to restrictions such as height, dimensions, type of materials to be used and colour schemes, to name but few. All building and alteration works above 170m² require the services of a professional architect, and is advisable in most (older) buildings even below this size.

The initial survey, paid for by the vendor, may indicate the presence of lead, asbestos, and termites, as well as the condition of heating and electrical systems, gas installations and thermal efficiency. All these may have a bearing on the price you are prepared to pay.

In the case of older buildings, common problems can include damp; uneven floor and wall surfaces; lack of right angles (for example if you are installing a fitted kitchen). The electrical installtion is unlikely to conform to current normas and may have to be renewed, bearing in mind that French wiring relies on separate circuits for items such as hot water, cooker, heating, lighting etc which emanate from and return to the central distribution panel and fuse box. The French do not use the 'ring main' system.

Heat and sound insulation may require improvement, particularly in the case of parquet floors resting on wooden beams in many typical older village houses, as well as more recent (1950s onward) precast concrete structures, where noise transmission levels can be a deterrent, particularly in apartment buildings. In many cases there may be no double glazing, with heat lost through drafty ill-fitting window frames.

It is certainly prudent to have a professional survey done before committing to purchase, and if possible get some idea of likely renovation costs. In practice, fully renovated older homes can cost little more than those requiring work, provided the improvements have been carried out by approved French artisans, and are to your taste. It is a truism that homes that have been renovated by their owners, and are accordingly offered without guarantees, are extremely difficult to sell, should the time come for you to move on.

French Property News March 2010

2010-03-18T03:50:00.000-07:00

In this months issue I talk about the various ways in which you can do business in France, starting with the recently introduced and relatively simple self-employment regime known as 'auto-entrepreneur'. Under this scheme, which has proved extremely popular since its introduction in January 2009, tax and social contributions are paid quarterly, based on a fixed percentage of the income actually received by the business, rather than on notional amounts applied under some of the other business regimes (which can prove to be a burden for new start-up enterprises).

I also look at the different types of French limited company, including the SCI which is a special arrangement to enable different members of a family or a group of friends to jointly buy a French property. There is also a summary of the general business rules and regulations, as well as some curious anomalies.

French Property News is available on subscripton or see www.french-property-news.com

Checking your 'syndic'....

2010-03-09T02:43:00.000-08:00

Co-ownership ('co-propiété') properties in France are similar to the American style condominium, where residents own their apartment or villa, and in addition have a share in the property's common parts - corridors, staircases, lift, gardens or grounds if they are present. Such properties are usually managed by professional organisations known as a 'syndic' which is appointed by the residents, usually through a residents' committee and the annual meeting of the co-owners.

A number of recent articles in French consumer magazines have been highly critical of some professional syndics, particularly those belonging to large groups such as Foncia (part of Banque Populaire). Specific complaints include high administrative charges, and the recent costs associated with bringing passenger lifts up to the new standards required by the French government. A typical eight-storey apartment building in my region would pay around 80,000 euros for replacing the lift - the cost borne by the residents in proportion to the size of their apartment and the floor level on which it is situated.

Residents however have been fighting back, sometimes appointing outside specialists to examine expenditures, check that competitive estimates have been secured before any work commences, and vetting income and payments. In some cases, syndics owned by large conglomerates have been sacked by the residents in favour of smaller, local firms who have effectively cut back on management costs.

If you are considering buying a co-ownership property, such as apartment, you should ask to see the minutes of recent AGMs, to check what expenditure is anticipated and what are the standing maintenance charges. Particularly high cost items are outside painting ('ravalement'), interior decoration, and lift maintenance or replacement. Buildings with extensive grounds and amenities such as a pool or tennis court will naturally attract higher annual charges than, say, a small building divided into flats.

As an owner you have a right to attend and vote at the annual general meeting, and if your French is up to it, you could consider putting yourself forward as a member of the residents' committee ('conseil syndical'). At the very least, you should exercise your right to vote, which can be done by proxy if you are not free during the months of July and August when most AGMs seem to take place.

Selling a tenanted property

2010-03-08T01:30:00.000-08:00

Selling a French property with a tenant in place is not quite as straightforward as offering you house or apartment with vacant possession on completion.

There are few circumstances in which you can ask your tenant(s) to leave, for example unless you require the property for your own use or for a close member of your family, or if you need to undertake urgent building works. Tenants occupying your property as their main or principal home or who are of advanced years have additional protections under French law.

If you decide to sell, you must offer your tenant(s) first refusal to buy the property, at market value, and giving at least six months notice in advance. Tenants are allowed a period of reflexion, as well as additional time to secure a loan or mortgage if required.

If you are selling a property with tenants in place (and they do not wish to buy), then you need to agree with them reasonable times during which prospective buyers, agents etc can visit the premises. Evenings, weekends and holidays may be excluded, and tenants may insist that visits are by appointment and only while they are present in person.

Failure to reach an agreement can result in tenants becoming obstructive and making visits difficult, sometimes to the extent that agents aware of the difficulties of viewing the property may refuse to take it onto their books, or are geneally relucant to offer it to prospective purchasers.

However, buyers looking for a longish term investment with a secure income, should not be discouraged. Studios and smaller apartments generally have a higher occupancy turnover (and suffer more wear and tear) than, say, larger three and four bedroom properties occupied by families, who are seeking long term stability.

Prospective purchasers should take advice about the potential rental markets - short, long and medium term; seasonal etc - in the locality where they are thinking of buying property.

French property sales up but property shortage

2010-03-04T01:15:00.000-08:00

Recent discussions on one of the French property forums (www.totalfrance.com) and in the British press have highlighted the fact that suddenly and to many people's surprise, the French property market appears to have picked up during the first few weeks of 2010, with the notable return of British buyers to southern France and the Mediterranean.

In a curious twist however to this encouraging news, several of my local estate agent colleagues report a dearth of correctly priced, good quality houses and apartments. Some have even been unable to locate suitable properties for serious buyers, with upwards of 400,000 euros to spend.

It seems that many vendors have simply withdrawn their property for sale, while the market was slow and in anticipation of a revival in 2010. Prices have however not fallen significantly and many French vendors are still reluctant to spend money presenting their property for sale - a process that can cost as little as two or three per cent of the sale price and dramatically improve their chances of attracting a buyer.

Finding the right property may take a little longer, as buyers becoming increasingly discerning in their choice.

Property finders not always independent......

2010-02-28T00:58:00.000-08:00

In a revealing article in Britain's Daily Telegraph, many of the country's largest estate agents are creating susidiary firms which act as property searchers, or 'buying agents', and which charge a fee and 'act independently for the buyer'. Among the firms cited are Private Property Search (Strutt & Parker), The Buying Solution (Knight Frank) and Prime Purchase (Savills).

Search fees can be as high as one or two percent of the property purchase price, usually with a minimum payment, in addition to any commission charged by the estate agency handling the transaction.

Among the advantages claimed by property searchers featured in the article were their in-depth knowledge of the local market, prices and property values - all of which, some commentators argue, should be the stock-in-trade of a competent estate agent; and leading potential users of such services in Britain to question where precisely is the added value?

Buying property in a foreign country such as France is a different matter, due to the language and a different system of law. In France, the estate agency sector is rigorously controlled, with estate agents licensed by the regional Prefecture and governed by the Loi Hoguet of January 1970.

One of the weaknesses of the French system however is the widespread use of 'commercial agents' - self-employed individuals attached by contract to an estate agency, who rely in turn for their legitimacy on the employing agency's licence and through which they obtain their personal 'carte professionnelle'.

The system can be open to abuse when an 'agent commercial' operates independently - as a property searcher or negotiator - and may have only a tenuous link with the employing estate agency, which could be one licensed in another Département. Some national networks rely on this method of working, and the estate agency professional body FNAIM have been critical of the system.

The status of property searchers working in France was clarified by a ministerial reply of 12 August 2008, which stated that an independent property searcher can legitimately act on behalf of a client, outside the provisions of the Loi Hoguet, provided he was paid a fee by the client and did not rely on a commission from the sale of a property (Journal Officiel Q. 20525, p. 6987).

This is the position adopted by my firm, and enables us to remain completely independent, when advising our clients on all aspects of living, working and buying property in France.

Source: (UK) Christopher Middleton, Daily Telegraph 26 February 2010

French Property News February 2010

2010-02-20T02:23:00.000-08:00

In this month's issue I look at the emerging organic movement in France and in particular my own region Pyrénées-Orientales, which has seen a doubling of organic producers in just 12 months. It seems that one of the effects of the economic crisis has been to encourage people to grow their own vegetables, explore local markets and not simply rely on supermrket standardised products that have been imported or travelled long distances, when they can be found locally.

I explain the different European labelling systems including the reliable French 'AB' symbol, and how to avoid meaningless descriptions such as 'farm fresh' or 'natural' which have no real validity.

French Property News is available on subscription and in newsagents. See www.french-property-news.com

The British are back! Daily Telegraph

2010-02-20T01:48:00.000-08:00

According to the Daily Telegraph, British buyers, who have become increasingly wary of investing in "emerging hotspots" (nonetheless heavily promoted by the British media at the time!) are now returning to the tried and tested French property market, with particular interest in Gascony, the Dordogne, the Loire Valley and the Mediterranean. This comes just months after an 80% drop in purchases by British buyers overseas during 2009, who own an estimated 430,000 holiday homes outside Britain, according to a report published by Savill's estate agency.

"The big news is the Brits are back" according to Knight Frank's French department. "It's a good time to buy. French property prices have fallen (not unversally true!) and there is a nice supply of good-quality properties at the right price on the market". More than 70% of the firm's enquiries so far this year have been from Britons with greatest interest in the south, the south west and the Alps.

As well as France's traditional attractions, potenial buyers are now citing proximity, including the option to drive or take the train, in addition to using low-coast flights and regional airports (80% of holiday homes are sited within easy driving distance of a regional airport). The warm southern weather, after a particularly severe British winter, is another plus, with the Mediterranean attracting the highest number of short break visitors to France, Spain and Italy. The survey estimates that 25% of holiday homes are located in France, 25% in Spain and a further 25% elsewhere in Europe.

Although some overseas owners felt their properties had lost some of their value, this was compensated for by the increase in rentals, some owners letting out their properties for the first time. Three and four bedroom houses proved particularly popular with seasonal renters during 2009. The report also notes that period properties are increasing in popularity, provided they are ready to move into and do not require renovations; in contrast to recent trends for purpose-built resorts. Three-quarters of holiday homes cost less than £300,000 and just under half less than £200,000 - easily achievable in my region of Languedoc-Roussillon.

Here we have escaped the worst of the winter weather, with the Pyrénées-Orientales Mediterranean region particularly well protected by its sourrounding hills - the Albères to the north, Mont Canigou to the west and the Pyrenees to the south, in line with the traditional boast of 300 days of sunshine a year. And remember, we are less than two hours drive across the Spanish border to the Costa Brava!

Property prices have generally remained stable in contrast to the 10 to 30 per cent drop in some areas, particularly inland Spain, where some owners who purchased on a 75% mortgage are now in negative equity, according to the survey.

My local estate agency colleagues report an increase in enquiries from both British and French clients in the first two months of 2010 and I am currently advising a number of clients who are in the process of buying property in the region.

Sources: Zoe Dare Hall, Daily Telegraph, Friday 19 February 2010; Graham Norwood, Daily Telegraph, Friday 26 February 2010; Rebecca Gill, Savill's estate agency, UK, author of the Report.

D I Y home valuations

2010-02-13T00:42:00.000-08:00

As part of Britain's growing anti-estate agent movement (according to the Daily Telegraph), property owners are now turning to the internet and logging onto sites such as the Land Registery or zoopla.co.uk to get an instant online valuation of their home.

Criticis of this approach argue that such sites are only as good as the data they contain, based mainly on price comparisons of 'similar' properties recently sold, and therefore not much use in the case of an isolated rural property in an area where nothing has sold for the last 20 years. Here where I live on France's Mediterranean coast, I know the average value of a two-bed beachfront apartment, but would have more difficulty giving a spot appraisal of a detached house with garden, located 5 miles inland.

The owners of Zoopla admit that their estimates rely mainly on data supplied by the user along with a 'confidence index' and advise getting a second opinion. And one English estate agent is quoted as saying 'you may as well rely on a clairvoyant'.

When the author of the article, Anna Tyzack, called in half a dozen estate agents to value her 'tiny London flat', estimates varied by as much as £150,000 and when the flat was sold seven months later it reached the mid-point of the various estimates but higher than the figure suggested online.

All the agents however were familiar with the sale prices achieved for other flats in the same street, showing once again that - as with property searching - there is no substitute for local knowledge from the person on the spot.

French estate agents will at best offer an 'estimation' which is often less than the price a vendor hopes to achieve, and may choose not to take a property onto their books knowing that it is impossible to sell at the asking price demanded.

French property prices on the whole have not dipped dramatically even in recent months, and where there is a sudden large reduction it is invariably the result of a hard-pressed vendor coming to his senses and finally accepting the agent's estimate. 'Properties simply do not sell if they are incorrectly priced' one local French agent confirms, 'but vendors often have their own ideas and we can do little to change that until they find their property stuck in the market place'.

Source: Daily Telegraph, 12 February 2010

An architect for 12 euros per square metre?

2010-02-11T01:04:00.000-08:00

French architects, tired of being seen as expensive and beyond the reach of ordinary users, are hitting back with a series of initiatives designed to demystify the profession and offer a number of low-cost alternatives.

They have been helped by popular TV programmes such as 'Question Maison' on M6 and in particular the part of the programme 'SOS Maison' which features the work of young Paris-based architect Philippe Demougeot DPLG, author of three books and a specialist is re-designing small spaces. The programme receives 3,000 requests a week for his help, in which he visits a small apartment or studio, and proposes a design solution. Part of the cost of the building work is borne by the programme.

In February, Le Figaro newspaper described two new internet-based services, in which clients can submit room plans and pictures by email to a central office, and receive in return the services of a low-cost architect. This will include a basic design, recommended suppliers and artisans, and choice of furniture (www.architurn.com).

The second online service (www.architeambox.fr) offers a series of design packages, ranging from just over 1000 euros to under 2000 euros, from a single room to studios, apartments and houses. The studio package costs 1189 euros tax included, and includes a visit by an architect, a plan up to 35m², two concept illustrations and an estimate of costs of the building work.

Le Figaro suggests that these low-cost services may be particularly attractive to intending buyers wanting to explore the potential of a property before committing themselves.

For more information consult the above websites; also Philippe Demougeot's two recent books 'SOS Maison avant et après' (2006) and 'SOS Maison libérons l'espace' (2007), both Editions Hoebeke, Paris; www.M6.fr 'Questions Maison'; also the excellent series 'Archi Pas Chère' published by Edtions Ouest-France, which feature architect designed houses that cost under 100,000 euros, and a third volume on low-cost home extensions.

What is my home worth?

2010-02-07T03:14:00.000-08:00

The answer to this question could be 'It depends who's asking', according to an article in the UK Daily Telegraph. Citing the experiences of three typical British property sellers, the author Graham Norwood found that valuations could vary widely, depending whether they were given by estate agents, professional valuers or experts working on behalf of banks or insurance companies.

Local estate agents tended to value properties in line with 'similar' ones in the same area, relying for guidance on past sales, prices asked and the acutal amounts achieved. "Most agents simply make appraisals of a property and produce a figure that sits well in the local market" according to Peter Bolton-King of the National Association of Estate Agents. He admits there is also a tendency to pitch high in a rising market, and low in a stagnant market.

Surveyors working on behalf of banks, according to Bolton-King, err on the side of caution, in the interests of protecting the lenders, particularly in the case of new-build properties, which he argues are consistently under-valued.

The Royal Institution of Chartered Surveyors (RICS) issues its own 'Red Book' guide to valuation and says that looking at recent property sales are only a partial guide to a property's worth.

A comparable 400-page French manual offers comprehensive guidelines on how to value properties as diverse as apartments to commercial premises held on lease, using varying approaches including price comparison. However the manual distinguishes between physical value (broadly what it cost to build or replace the property), taxable value, judicial value and social/economic value. An attractive property with a high physical value could see this reduced if it were encumbered, for example, by onerous long-term leases (offering high levels of protection to sitting tenants), or planned local developments, such as road widening or a supermarket, both of which could detract from the property's other values.

Considerations such as these illustrate the weakness of valuation only by price comparison, and reliance on online 'automated valuation models' that offer property valuations based on data input from sources such as local councils and the land registry, rather than a personal inspection by a local estate agent or valuer. Although properties in the same area or even the same street may appear similar in size and type of accommodation, one could be tastefully decorated and maintained, and the other represent a DIY nightmare.

As with all property searching, there is absolutely no substitute for a personal visit and local knowledge of the current property market, the locality and the individual property.

Source: Daily Telegraph, 05 February 2010.

French Property News January 2010

2010-02-02T01:08:00.000-08:00

In this month's French Property News I have reiterated some of the basic rules for buying a second home in France, including location, short and long term rental potential, the widely differing rental markets, and doing your sums when looking at the cost of purchase against anticipated income from your investment. Interestingly, half of all second homes are sold by their owners within ten year of purchase, an indication that there is a buoyant market even at a time of slowdown in the property sector.

French Property News is available in newsagents or on subscription. www.french-property-news.com

Fancy living in a 'sousplex'? Beware...

2010-02-01T01:32:00.000-08:00

The French housing crisis has encouraged Paris estate agents to invent a new type of property, the 'sousplex'. A reverse of the more commonly known duplex, the 'sousplex' consists of a ground and basement level living area and makes use of many former unexploited areas of typical city centre apartment blocks.

However, potential buyers should be aware that many recent conversions are in fact illegal as, under current planning regulations, all living rooms (including bedrooms) are required to have normal height windows, not just a ventilator at pavement level. Whole streets are also designated as 'commercial' where planning consent will not be given for conversion of former boutiques and workshops into living accommodation.

However, because planning departments are notoriously under-staffed, many building conversions go unchecked, or are carried out without planning permission or the agreement of the building co-owners - or occasionally with their connivance. The result is that many owners find they have bought an unsaleable property, unless they can secure retrospective planning consent and the approval of the co-owners at their annual general meeting. Neither are easy to obtain and can not be guaranteed.

Among the advantages cited by promoters of this type of property are lower purchase costs, sometimes 30% less than traditional apartments (but conversion costs can be high); lower taxes as some parts may not be officially designated as living space; and the chance to create vast areas of open-plan living accommodation. They have a particular appeal to fashionable young couples who like entertaining and parents with large families.

As always, professional advice should be sought as to the feasibility and legality of any proposed building conversion, before committing to purchase.

Estimation versus expert valuation

2010-01-29T10:20:00.000-08:00

There is often a lot of confusion on property forums about the different terms used when it comes to arriving at an idea of what price your French home might fetch on the open market - or if you are wondering whether the property you are thinking of buying is really worth the asking price.

Estate agents have to arrive at some kind of estimate of the 'value' (potential sale price) of a property they wish to take onto their books. They will take into consideration the age and condition of the property, the local vicinity (proximity or not to shops, schools, transport), and the asking price of similar kinds of properties currently on the market. The methodology is essentially crude and largely based on the agent's experience and familiarity with the local market. The result will be an estimate ('estimation' in French) with which the owner/vendor may or may not be happy.

A formal valuation - for example, for probate or as the basis for a bank loan - is normally undertaken by a specially qualified 'expert immobilier' who will produce a lengthy and detailed report, and for which he will charge a fee. You need to allow around 1000 euros for this - less than the cost of a square metre of average French real estate!

Anecdotal evidence indicates that owners consistently over-value their property, despite informal and expert assessment. Expectations may be unrealistic or vendors may be seeking a target sum they wish to achieve, in order to cover the cost of renovations carried out or to fund another purchase. If a property is for sale privately, potential buyers need to be aware of this tendency and to take particular care that a property is not being offered for more than it is worth.

French property market compared to USA, UK

2010-01-28T01:20:00.000-08:00

Articles in today's 'Le Figaro' (France) and Daily Telegraph (UK) highlight the differences between the French property market and the situation in USA and UK.

After two stagnant months immediately prior to Christmas, figures indicate that the total number of US new-property transactions reached only 342,000 for the entire year, not far from the figures for France, a country one-fifth of the size of the USA. There is now an estimated eight months supply of unsold new-build properties on the US market.

Sales of older properties are down by nearly 17 per cent on previous years. Price falls averaged over 5 per cent in November and 7.3 per cent in October. Other signs of decline include new-starts and the number of planning applications for new residential properties.

According to the Telegraph, Britain's main problem continues to be the cost of mortgages, including arranging fix-rate deals (usually over a short term) and the shocks that await those who will emerge from a period of fixed rate interest in the coming months and face adjustments to their monthly mortgage repayments.

In a short report on French consumer spending habits during the recession, Le Figaro notes that among the products that have suffered worst are ready-prepared meals, sticky sweets, chewing gum and hair colorants; while consumption of hard liquor, coffee doses for machines, fruit cordials and canned energy drinks such as Red Bull (38% up!) all rose during 2009.

Sources: Daily Telegraph (incl photo), Le Figaro 28 January 2009.

575,000 new French enterprises created in 2009

2010-01-19T01:03:00.000-08:00

The year 2009 has witnessed a record number of new business creations in France - 575,000 against 327,000 in 2008. The figure is due in large part to the introduction of the new simplified self-employed status of 'auto-entrepreneur', which accounts for 320,000 of the newly created businesses.

Interestingly the majority of new business created are within the services sector (235,491), followed by 193,373 in the commercial sector. Construction and industry account for 73,417 and 24,118 new business respectively.

The most spectacular inceases - 135% according to APCE - are within arts and entertainment, education and personal services.

Specific areas that are seen to be growing include advisors on energy efficiency, and alternative medicine and relaxation (massage, saunas etc), responding to the needs of France's ageing population. Fast food outlets are also increasing and many new businesses are relying on the internet (rather than opening an office or boutique) to sell goods and services, reflecting the growing trend in purchasing on-line.

Source: Le Figaro, 18 January 2009. APCE - Agence pour la Création d'Emploi.

Paying the agent's commission

2010-01-17T06:48:00.000-08:00

A subject that sometimes comes up on the French property forums is that of agency commissions - and what happens if a buyer attempts to byepass the agent and deal direct with the vendor.

First, when taking a property onto his books, the French estate agent enters into a legally binding contract, known as a 'mandat', with the owner/vendor. The 'mandat' authorises the agent to market and try and sell the property on behalf of the owner, against an agreed commission, payable to the agent and based on a percentage of the property sale price.

Most 'mandats' are for an initial three or six month period, that is renewable, but can be valid for up to two years, binding the vendor to payment of the commission in the event that a buyer originally introduced by the agent buys the property - either passing through the agent or dealing direct with the vendor.

Second, in order to protect the agent against an unscrupulous vendor attempting to deal direct with the buyer, buyers are required to sign a 'bon de visite' when visiting a property with the agent, as evidence that they were introduced to the vendor by the agent.

There is considerable French statute (notably Code civile art: 1165) and case law (eg Cour de Cassation 9 November 1999, no. 292) where the courts have obliged a vendor to pay the agent's commission, in situations where buyer and seller have got together and agreed a sale, and attempted to defraud the agent of his commission. It is also possible for the sale to be blocked by the courts until this issue is resolved, thereby causing lengthy delays for both vendor and purchaser, and locking both parties into a transaction they cannot complete.

Selling your property - an agent's advice

2010-01-14T00:48:00.000-08:00

An interesting article in the Daily Telegraph (UK) chronicles the opinions of a group of British estate agents about which improvements can help sell your property - and those that don't.

Among their black-list of improvements to avoid are extravagant fixtures and fittings inside an otherwise ordinary property - they cite gold bath taps in a standard two-bedroom semi; home gyms, hot tubs, and installing a new kitchen or bathroom. These latter are seen as personal spaces that many incoming owners prefer to design and install themselves. Any extremes of personal taste in decorating style are also regarded as well known turn-offs.

The number of bedrooms can also be an important factor, and owners who have perhaps knocked two bedrooms into one may find the property looking expensive compared to its neighbours. 'For example, you can end up trying to sell a three-bedroom house for the price of an equivalent property with four bedrooms' says one agent.

When it comes to the outdoors, mistakes to avoid include over-cared-for gardens, seen as a maintenance nightmare by many would-be buyers; and over-large swimming pools that are costly to run and take up too much garden space.

The agents interviewed also warn buyers against turning parts of the property into letting accommodation. 'One guest unit is fine, more than that and the property starts to look like a business' is one agent's view.

Source: Graham Norwoord, Daily Telegraph, 13 January 2010. www.telegraph.co.uk