Guide to buying property in the French Alps

This buying guide has been designed to give you a general overview to purchasing and owning your own property in the French Alps and Lakeside regions of Annecy and Geneva.

It is meant to provide you with an insight into the steps you will take, as well as answer some of the questions you may have. It is not meant to as the definitive guide to purchasing French Ski Property but to assist you with some of the knowledge you will need.

The information provided details some of the extensive knowledge we have accumulated during work with Notaries for clients buying apartments, ski chalets and other property for sale in the French Alps.

We hope it assists you with your decision to purchase one of the many properties for sale in France we are marketing on behalf of the agencies, developers and constructors we work with.

Legal Fees

If the property of choice is new, the legal costs (a combination of Notary fees and taxes), typically amount to approximately 3% of the purchase price. In the case of resale French properties the fee is approximately 7%, but this can sometimes be reduced, where the seller wants to sell quickly.

It is sometimes worth purchasing a finished property in the name of a French Company that you set up known as an SCI, particularly if friends or two families are buying together. While there are no savings on purchase, the company is not liable to pay any annual Wealth Tax, minimises Inheritance Tax and allows you the ability to change ownership more easily.

However any usage of the property free of charge by the company members, or any rental income, must be declared in their personal tax returns. Similarly on selling the property, all Capital Gains must be declared on selling.

In the case of land purchase to build a chalet, this is better done as a personal sale vs a SCI to avoid VAT. Taxes are only levied on the plot and not the chalet to be built.

If you would like more information on setting up an SCI, we would be pleased to discuss this further with you when you visit. The information above merely acts as a basic guide to what you can look at when purchasing. We would be pleased to provide details of legal professionals to speak to in more detail that can advise you further on the merits / disadvantages of the SCI.

Commission

No commission is paid by the buyer. The agency commission is included in the sales price. The buyer is however responsible for paying the Notary fees, as described above.

Mortgages

We work with a number of UK and French Banks specialising in Mortgages for property purchase in France. We would be very pleased to provide you with a list of contacts to assist you in this process, once you have decided on the property you wish to purchase. 70% mortgages are now most common (subject to circumstances) with typical lending terms over 15 years.

Under French Law, French lenders are not allowed to offer mortgages where the purchaser’s repayments total more than 30% of their monthly income. This 30% must also include any existing mortgage you may have in your home country.

Purchase Payments

The details below are meant as a guide. Once you decide on the property you can discuss the payment structures specific to the property you wish to purchase.

New builds

These take the form of stage payments and are typically:

• 5% reservation
• 15% la signature de l’acte authentique: Signing of the final Contract: Clients actually own the property at this point although not of course built
• 10% achievement des foundations: Foundations
• 10% au demarrage de l’elevation de rez de chaussee: Ground floor
• 10% au demurrage du plancher haut de rez de chaussee: Floors in place
• 10% au demurrage de la dalle sur le 1 etage: 1st floor concrete down
• 10% a la mise hors d’eau: Watertight
• 10% au debut des travaux de cloisons/doublage: Walls and internal insulations
• 10% au debut des travaux de peinture
• 5% a l’achevement: Finished building
• 5% a la remise des cles: Snagging and handing over of keys

Note: some developer will have less stage payments and therefore higher % amounts at each stage

Re-sales

• 5 - 10% deposit on signing the Le Compromis de Vente. Balance when transfer of ownership takes place.

Construction Guarantee’s

All new build construction in France must have a 10 year guarantee against defects, that is supported by an insurance policy to protect the purchaser should the constructor cease trading, thereby protecting the purchaser.

Currency Exchange

Working with several different currency brokers who have helped many clients over the years, we would be happy to make appropriate introductions should you wish. Please contact us for details.

Inheritance

Most importantly are the French inheritance laws which will relate to your new French home, even if you are a resident outside France. The fact that you may have a Will in your country of residence, will not necessarily mean that it is appropriate to be translated to relate to French Law.

Succession must be dealt with in France, as the laws are complicated and effectively prevent a parent disinheriting one or more of their children. Similarly if a French Will is not drawn up, the succession of the property to the surviving spouse may not be in its entirety, with portions been passed to children.

It is thus strongly advised, that those purchasing French property make a French Will to deal with your property. Any Will outside of France, should then exclude your property in France.

For those making a very expensive purchase it is worth speaking to legal representation about the purchase, to minimise the effects of French Inheritance, thereby ensuring the property passes to directly to the surviving spouse.

Capital Gains Tax

This is the difference between purchase price (plus any renovation work completed) and the sale price. The gain is then taxable at a set rate of 16% for European’s (extra 10% Social tax for French Residents) or flat 33% for non Europeans. The new rules state renovation work, is that completed by a French artisan having produced an invoice for the work.

There are however deductions based on how long you have owned the property. There is no deduction for the first 5 years of ownership but every year from then on allows you to deduct 10% off your Capital Gain.

Currently properties owned for more than 30 years are free of Capital Gains Tax but you will still be liable for tax in the UK, this will be reduced down to 22 years from September 2013

Renting

Local rental agencies can be found in all major resorts in the French Alps, providing full rental and management services. There are two forms of rental options, touristic (weekly) and long term lets. In the former, this is the most popular form of renting, where owners use the property for themselves a few weeks a year, while the latter is certainly an option in those resorts which are open all year round such as Morzine.

For best rental returns you need to consider the resort and location. In the higher resorts such as La Plagne, Les Arc’s and Val d’Isere, there is a good winter rental return thanks to the long winter season. However these resorts tend to be single season and have little or no summer rental potential.

Resorts such as Morzine, Les Gets and Megeve all have dual season potential and therefore offer a summer return as well. For best rental returns apartments and chalets should be well located in the resort, close to the lifts, restaurants and shops.

We would be happy to advise you on rental potential of the properties you might be interested in, but we do recommend clients who plan to rent the property they are purchasing, talk directly with the local agencies to get an accurate idea of what occupancy and returns they can expect, as well as what the charges are.

One option of ensuring a rental return (often guaranteed) is the Leaseback Property scheme run in France, where owners lease their apartment or chalet back to the developer, having a set number of weeks where they can use it themselves. Read our detailed guide about French Leaseback Property.

By leasing back the property for more than 9 years, it is also possible to reclaim the VAT of 19.6% from the French Government. Some developers will deduct this from the advertised sale price automatically.

Rental Taxes

All rental income in France is subject to tax and must be declared to the French Tax office by 30th April each year. For amounts under 75,000 Euro’s per annum, the owner can simply pay tax on 30% of the gross income.

For more information on this subject, we would be happy to make an introduction to one of the tax advisors we work with as part of your purchase procedure.

Running Costs and Taxes

The two local property taxes in France are "taxe fonciere" (exempt for the first 2 years in a new build) and "taxe d’habitation".

In the case of re-sale properties these figures are readily available and can be obtained for you when you decide on the property you wish to purchase.

It is very difficult to calculate and provide an estimated general figure for the annual service charges as this depends on the size of the apartment/chalet as well as extraneous costs such as lift, shared swimming pool, caretaker and need for a grounds man (snow clearing / grass cutting).

We would be happy to provide an estimate of these costs on the property you choose, to assist you with the decision making process.

Surveying

It is not a legal requirement to carry out a survey. However, the seller has to provide the buyer with asbestos, termite and lead Certificates and certified area measurements, according to the type of property and area in France.

Should you wish a survey to be carried out for the peace of mind of your purchase, we do know professionals that will do this for you at a cost and you can discuss this further once you have found the property you wish to buy.

Wealth Tax

If you are resident in France, then all of your worldwide assets will be taken into consideration for the purposes of calculating tax.

However non-residents are only assessed on the net value of any assets held in France, so if a property in France is purchased through a mortgage, then this can be deducted from the value of the assets, before calcuating the tax owed. In addition, if the property is owned by two families, related or otherwise, then the value is essentially reduced by half.

Wealth Tax is complicated and we would be happy to put you in touch with someone who specialises in this field.

Useful Glossary

To help you during the process of purchasing ski property or land in France we have produced a simple glossary below for your use.

For more information on our properties for sale in the Portes du Soleil (including Avoriaz, Morzine, Les Gets, Chatel, La Chapelle de Abondance, Montriond & St Jean d’Aulps ), Essert Romand, La Grand Bornard, Val d’Isere, Megeve, Evian, Annecy, La Plagne, Les Arcs, Chamonix, La Tania, St Gervais, Sainte Foy, Tignes, Thonon Les Bains and much more, please visit our properties for sale.

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