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The Role of the Notaire
The Notaires of France explain exactly what they do, what they are responsible for and how much they charge for various services. He or she can be both the estate agent and the solicitor and in many property transactions will represent both the purchaser and the vendor.
The French notaire is both a sworn public official and a freelance professional at the same time. He or she is subject to strict rules and rigorous controls and is both legally and financially liable for the deed he drafts. As English solicitors, French notaires do probate, divorce settlements, and estate planning. But, the major difference is that they don’t plead before Courts.
The role of the notaire in France is markedly different from that of a notary in the UK, particularly in respect of property transactions. This is the reason why we have decided to use the French word (notaire) instead of the English one.
Notaires are well known in France for property issues. We will see that they do not only draft the sale agreement between the parties, but that they also make the sale legally secure, and do all the necessary formalities after completion. Moreover, they can assess the property, negotiate the transaction, and manage the property after completion.
Notaires are also family advisors; they can advise you on the inheritance tax implications of your purchase, and, on a general point of view, deal with all your personal issues like pre-nuptial agreements, divorce, wills, succession law, etc. They also propose appropriate legal and tax solutions to the changes occurring in family structures.
As legal and financial advisors to families, notaires help to prevent conflicts and, consequently to minimise the number of lawsuits. As consultants to business owners and companies, notaires also advise and draft contracts for business owners in all aspects of business law. They are authorised to organise auction sales for real estate properties.
NOTAIRE AS PROPERTY EXPERT
When looking for a purchaser or for a property to purchase, the notaire assesses
Thanks to his/her knowledge of the property market, the notaire is in a very good position to appraise the real value of your property. He can thus advise you in the perspective of selling your property for the right price and within a reasonable time.
The notaire negociates
Since property negotiation requires professional skills (in valuation, property law, and taxation) it is worth using the services of a notaire to do so. In such a case, the notaire will seek a purchaser for the property that you wish to sell, or look for a property that you wish to acquire.
Moreover, using a notaire will offer you three main guarantees:
a guarantee of security, because the notaire will act as a public officer, as stated above,
a guarantee of efficiency, because he will use his good knowledge of the market. To this regard, the French notaires have access to a national database listing most of the properties currently for sale.
A guarantee of costs because, as we will state below, notaires’ negotiation fees are strictly ruled by Statute under French law, and are caped at 2.5 % for the part of the purchase price exceeding EUR. 46,000.
The notaire advises
If you are considering purchasing a property, he/she can advise you for:
defining your purchasing project,
determining its value,
choosing the best financing,
doing all the relevant formalities.
If you wish to sell your property, the notaire can advise you for:
completing your sale rapidly and on the best terms,
investing the sale price as well as possible,
doing all the necessary formalities (e. g. capital gain tax declaration, or tax clearance).
On a wider point of view, the notaire will give you enlightened advice about the effects of the transaction on your estate and on your taxation.
After finding a purchaser or a property to purchase
The notaire makes the sale legally secure
Drafting the pre-sale agreement
First, the notaire offers the best legal guarantees to the parties for drafting the “pre-sale agreement” (which is named “promesse de vente” or “compromis de vente”). It is a preliminary contract which binds the future seller and purchaser for the time necessary for collecting the necessary documents and making the due diligence necessary for completion.
For example :
checks the identity, the marital status, and the legal capacity of each party, gathers the planning documents enabling him to identify the potential constraints over the property,
checks the title deeds and the rights of way and other easements that might affect the property.
Collecting the necessary documents and information in order to draft the deed of sale
Given that, in France, any property transfer must be notarised, the deed of sale must thus be
checks the mortgage situation of the property,
questions, if any, the manager of the co-owned property (syndic de copropriété),
gather if any, the information requested by the lender in order to put in place the guarantees, etc.
The notaire does the necessary
After completing the sale, the notaire takes the necessary steps so that the sale is enforceable and opposable to third parties. To this regard, he, in particular:
informs the manager of the co-owned property,
has the sale registered at the local land registry, and to the Mortgage Registration Office (Bureau des hypothèques), for modifying the property file, and entering the new owner’s identity,
pays the transfer stamp duties due to the tax authorities; and, if any, pays the capital gains tax due by the vendor.
The notaire can manage the property
As a specialist in property, the notaire can also ensure the rental managing your property, i.e. all letting and administrative formalities like :
finding a tenant,
drafting the deed of lease,
collecting the rent,
preparing your property income declarations, etc.
Furthermore, if the deed of lease is authorization, it will be easier to enforce it under French law. You will be entitled to seize the tenants’ estate in the event of non-payment of rents, without prior action or authorization before a Court.
The seller may owe taxes on the capital gain realised on the sale. The sale of the principal residence is exempt from such tax, as are other properties under certain conditions. The capital gain is equal to the difference between the sales price and the purchase price, or the declared value upon receipt of the property by gift or will.
The tax position
Capital gains are entirely free from taxation after the property has been owned for fifteen years. The gross capital gain is, in effect, reduced by 10 % per annum for each year as from the fifth year after the purchase. In addition, a lump-sum allowance of € 1,000 is applied to the gross capital gain realised on a transfer. Furthermore, properties whose sale price does not exceed € 15,000 are completely free from capital gains tax. On the other hand, for properties sold more than five years after purchase, the purchase price may be subject to a lump-sum increase of 15 % for work done, without supporting documents. lt is possible to replace this 15 % lump-sum by actual expenditure, on condition of its being supported by company invoices.
Payment of the tax
The tax corresponding to the capital gains made at the time of the sale is no longer payable with your other income taxes. The notaire is responsible, on registration at the Land Registry, for payment of the appropriate sum to the tax authorities, based on the vendor’s declaration.
The application of the rising income tax bands has been removed and replaced by a fixed taxation at 16% for someone who is tax-resident of European Economic Community. For someone who is not tax-resident, the capital gain realised on the sale of property located in France is subject to a deduction of 33.33%. The declaration of a capital gain on real estate at the Land Registry must be made by the non-resident or by their representative. Usually, the notaire carries out this formality.
Exemption for transfers of buildings, portions of buildings or rights related to assets that are lodgings in France for individuals who are non-residents in France, who are citizens of a member State of the European Community, within the limitation of one residence per tax payer, and on condition that the assignor was tax domiciled in France for a continuous period of at least two years at any moment to the transfer. The exemption may only be applied twice, upon the two sales performed as from 2006.
Additionally to the purchase price, the purchaser must also pay:
the commission due to the estate agent, if any ;
taxes, stamp duties and transfer tax due to the inland Revenue ;
the notaire’s fees ;
and miscellaneous costs.
All these are strictly defined, which makes the system very secure.
The most significant part of the acquisition costs is dedicated to taxes and stamp duties to be paid to the French State which total 5.09% of the purchase price.
But if the property is new, or if it was built less than 5 years ago and is sold for the first time within this delay, then the sale is subject to value added tax (VAT) at the rate of 19.6%, which then excludes transfer tax.
2. The notaire’s fees
The notaire’s fees are clearly defined and ruled by Statute and are called “emoluments”. We can distinguish three types of emoluments:
And negotiation emoluments.
3. Proportional emoluments
These are the main remuneration of the notaire relating to the sale (except if this has been negotiated by him : see below). They are calculated in proportion to the purchase price at a rate of 0.825% + EUR 290 as soon as the price is over EUR. 15,000. Of course, VAT must be added to these amounts at a rate of 19.6%,
At the same time, when the purchaser makes out a mortgage loan, which, in France, must be drafted by a notaire, the notaire is entitled to receive fees at a rate of 0.26% of the amount borrowed.
4. Fixed emoluments
They are not proportional to the purchase price and include various steps made by the notaire before or after completion in order to make the sale legally secure and efficient (see above).
5. Negotiation emoluments
When the notaire has negotiated the sale, as an estate agent would do, he is entitled to be paid negotiation emoluments, by the seller or by the purchaser, according to the agreement made between the parties. These emoluments equal 5%, of the price, up to EUR. 46,000 and 2.5% over this amount; bearing in mind that we must always add to these rates the amount of VAT (at 19.6%).
6. Other costs
The purchaser must pay other miscellaneous costs, in particular related to obtaining certain documents (cadastral map, information about local planning rules, mortgage statement, etc.). Of course, the purchase price may also be increased by the real estate agent’s commission, if any.
7. Detailed statement of costs
After completion, when the formalities of registration of the deed of sale at the local mortgage registry have been completed, the notaire must send to the purchaser his/her title deed, with a statement of costs showing exactly which sums have been paid, in particular, to the French Inland Revenue and to him.