Selling your French property

FOR every person looking to buy in France there has to be another willing to sell, but what are the steps involved when putting your home up for sale?

As in England, selling a property in France is generally more straightforward than buying, but there are still plenty of traps for the unwary, writes Guillaume Barlet.

Some areas, which need careful attention, include:

Latent defects (vices cachés)
Under the general French law, the seller of a property is liable for all latent defects in the property sold which render it unsuitable for the purpose for which it was sold, or diminish such suitability to such extent that the buyer would not have bought it or would have paid a lower price if he had been aware of them.

This is known as the garantie de vices cachés.

However, a seller is not liable for defects that are apparent, i.e. which a buyer could have been aware of himself.

But the buyer is not expected to seek the advice of an expert, so a defect may be considered latent even though an expert could have discovered it. The fact that the seller is unaware of a defect does not prevent him from being liable.

Liability for latent defects gives rise to an action in damages. If the seller was aware of their existence, because this involves a lack of good faith, the buyer may claim back the sale price and also damages.

In other cases, the buyer has the choice of either claiming repayment of the price or retaining the property and claiming an appropriate reduction in the price.

Any action by a buyer based on a seller’s liability for latent defects must be instituted “within a short time” having regard to the nature of the defect and what is customary in the area in which the property is situated.

To avoid these problems, sale contracts generally include provisions stating that the seller gives no guarantee as to the state of the building, and also excludes all liability for defects both latent and apparent.

However, such an exclusion clause does not extend to any defects detailed in the mandatory surveys.

Mandatory surveys
The vendor pays for these surveys, which are required by law; and which ones have to be carried out depends on the location and situation of the property.

Even if one or more of these surveys were carried out when you bought the property and were clear, new ones still have to be obtained when you sell.

In particular an asbestos survey is compulsory if the property was built before July 1, 1997, and a lead survey is necessary if the property was built before January 1, 1948.

Also, if the property is situated in an area declared by the Maire or the Préfet as susceptible to termite infestation, a survey will have to be carried out.

The affected areas can change, so even if a termite survey was not required when you purchased, it might now be compulsory.

If the property is not situated in one of the affected areas, the vendor can still retain liability if termites are discovered within a short period after completion.

In certain circumstances, other surveys can be mandatory and it is always sensible to seek specialist advice.

Capital Gains Tax
Any gains arising from the disposal of a property can be subject to capital gains tax, although if you sell a property, which is not your primary residence, within 5 years you are usually liable for income tax instead.

Calculating whether there has been a capital gain involves deducting the purchase price from the sale price. You can then deduct the agent’s commission and legal fees, and the costs of renovating your French property provided you have kept proper receipts, which must include VAT!

If you sell within 5 years, you will usually not be allowed to claim any of the special allowances.

Selling property contents
A recent change in the law provides that if a property is sold with furniture and other contents, a document proving the existence of such contents is necessary and this has the effect of excluding the price for the contents from any capital gains tax calculation.

If this is not provided, the value of the contents has to be included in the sale price. This would have the effect of increasing your capital gain (and therefore the amount of tax due).

So even when selling a property in France, getting good advice at an early stage can save a lot of time, trouble and tax!

Update August 13, 2010: Tips when selling your French property

Guillaume Barlet is a French lawyer specialising in French assets and wealth management issues for Bank House Investment Management Limited. Guillaume can be contacted by e-mail or by telephone on 01242 520074.

Related article:
A walk through property minefields

Comments

[DaveChees]

When selling I heard that a percentage based on house price increases was deductible from CGT. Is this true?