Why You Need A Lawyer When You Purchase A Property in France

May 7, 2013

First, a note of transparency:  I am a lawyer, qualified to practice in France (as I am in the U.S.). Thus, my position as expressed here must be viewed in that context.  However, I think you will find, after reading this entry, that my opinion is not biased but rather is based on common sense, practical experience and a feeling of concern for foreigners who purchase real estate in France without full knowledge of the process and risks.

What is the process?  Once you have identified a property – usually with the help of a real estate agent – you will enter into a purchase-and-sale agreement (PSA), known as a “promesse de vente” or “compromis de vente”.  The PSA is eventually followed by the actual closing, i.e., transfer of title to the property, the closing usually occurring two to three months after signature of the PSA.  An essential player in the purchase transaction is the Notaire.  The Notaire is legally trained, specializing (after extra and intense supplemental education) in various forms of property transfer.  The forms include transfers of title to real estate, transfers by gift or at death, etc.  It is the Notaire and his team who usually prepares the PSA and sees to it that all legal and administrative steps involved in the eventual transfer of title are carried out.  This includes, among many other items, checking property title (there is no title insurance per se in France—the Notaire is responsible for the passage of good title), seeing to it that various municipal compliance tests (lead, asbestos, termites, electricity) are done and made available to you, clearing the purchase with the municipality, etc.  There may be one Notaire acting for both buyer and seller, or one Notaire for each chosenby each party.  As the buyer pays the notarial fees, if there are two, the single fee is split if there are two.  We usually recommend one for each. 

Sources of legal advice.  Buyers are often under the impression that they are getting all the legal advice they need about their property purchase from the Notaire.  Notaires are certainly well-informed about their subject matter but, due either to their limited view of your particular needs, to cultural limitations, or to language limitations, they usually restrict themselves to offering basic information or perhaps responding to your direct questions—which may not cover all the questions you should be asking.  Further, many real estate agents—who are not lawyers—have acquired a certain amount of knowledge of a real estate transaction due to their involvement in many and, though they should not, do indeed offer advice of a legal nature.  Anyone who has been involved in a matter that requires input from a lawyer, knows that lawyers view a transaction in a special way.  For one thing, we see it holistically, meaning that we see each element in terms of the overall transaction.  So, while a bit of advice may be accurate, it may not be correct in terms of the buyer’s short-term or long-term goals.   

What value can a lawyer add?  A lawyer especially one versed in the laws of the U.S. and France, will be able to advise you on some or all of the following:

  • Should you create a holding company for your property and if so, what form of company?  What are the advantages and disadvantages of a holding company?
  • What possible opt-out clauses can be added to the PSA to protect your interest in the purchase?
  • What estate planning measures should you be thinking of when purchasing a property?
  • What are the French and U.S. income tax and capital gain implications of your property holding?
  • What are the French wealth tax implications?
  • The lawyer will read the PSA line by line and point out any irregularities or other points of interest of which you should be aware.
  • He will coordinate with the Notaire or both Notaires, which will relieve you, the buyer, of that chore and also be much more efficient. 
  • He will advise on such mundane issues as whether your purchase should ultimately be held by your U.S. revocable trust (the answer is decidedly no!), and help you explore how else your planning objectives can be realized.  
  • He will help you understand the current problems in France with short-term rentals. 
  • He will explain the French forced heirship rules (ie, the rights of children) and how to minimize their effect.
  • There are other issues too numerous to raise here, but the reader can see that there is valid justification for why a lawyer should be brought into the picture.  Also, if the lawyer is American, as is yours truly, he understands “where you are coming from” or, better, “where you should be going”.
  • Finally, of the various fees the buyer must pay when purchasing a property – notarial fees, broker fees, possibly bank fees in the case of a mortgage property, the lawyer’s fees are usually based on time spent and, as a percentage of your total transaction cost, are by far the lowest, while his advice is of considerable value he may make the day or save the day for you.