Fairytale chateau in Poitou-Charentes

Auxiliary costs when buying French property

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Notice to all aspiring French property owners!

Have you thought about the auxiliary costs that accompany all real estate acquisition in France? Expenses of notaries, real estate agencies, filing of the real estate load…

Many expenses will be added to the purchase price, and if you aren’t careful, you could quickly be disappointed with the amount you pay. Here is a list of a few additional expenses:

  • – Capital allowance (reservation fee)
  • – Administrative fees (in case you apply for a loan)
  • – Death/Disability insurance
  • – Unemployment insurance
  • – Real estate agency costs
  • – Notary costs (frais de notaire)

1. Capital allowance (reservation fee)

It is common to sign a ‘unilateral promise of sale’. The seller will usually present the ‘unilateral promise of sale’ at a certain price, and if it is accepted, the property will be sold at the price stated on the ‘unilateral promise of sale’.

If you decide not to buy the property in question, you then leave the landlord with a capital allowance.

It is also rather common practice to stipulate a capital allowance clause because of this impossibility of selling, which is imposed upon the seller.

Where a capital allowance is stipulated in the contract, it is often that the seller considers the compensation if the sale does not take place.


2. Administrative fees + Caution

If you are applying for a loan, the application fees are intended to remunerate the bank in consideration of the study and assembly of your application. Payment is only made when your loan application is approved by the lending institution. Administrative fees are requested by the bank when the loan is finalised, often when the funds are granted.

Fees are not charged if:

  • – You are taking out a regulated loan (for example, the zero-rate loan)
  • – The bank that approves the loan launches a promotional offer with a free application fee.
  • – The application fees are proportional to the amount of the mortgage, usually between 1% and 1.5% of the loan. Obviously, fees may differ depending on the bank.


3. Disability-Death Insurance

A Disability-Death Insurance is an insurance policy that includes coverage for death or disability.

In France, the underwriting of a death and disability insurance is, in practice, a condition imposed by the banks for the subscription to a mortgage (this is not a strict legal obligation). If the bank impose the insurance cover, they can also offer an option to cover the risk of loss of employment. This is more commonly known as Unemployment Insurance, the latter exempts, in the event of loss of exployment, there is a risk that the monthly instalments of the load will not be paid.


4. Loss of employment insurance

Loss of employment insurance covers the risk of dismissal. This is generally associated with a home loan, and the insurance will refund your home loan (or partly), if you are licensed.

It is necessary to verify the clauses of these contracts, as some different types of employment may be exempt.

Chateau in Gillonnay, Rhone-Alpes
Exquisitely-renovated chateau in Gillonnay, Rhone-Alpes

5. Real estate agency fees

Agency fees must be paid when using a real estate agency for selling or buying a property. The rules that specify the calculation, distribution and payment of these commission fees are between the buyer and the seller.

The agency fees are therefore freely fixed, and can therefore be negotiated between the agency and the seller, in connection to the sale of property. Usually, similar calculation rules are found within most French property contracts.

Agency costs are therefore, in principle, borne by the seller who has used the agency, except for when there is a contractual clause that dictates that such a payment will be due by the purchaser or an apportionment between the buyer and seller.

The payment of the commission for the real estate agent must not take place until the sale has actually been concluded, that is to say at the time of its signature with the notary.


6. Notary fees

Incorrectly called ‘notary fees’, the acquisition costs are added to the purchase price of the property.

They are, in principle, settled by the buyer but do not return to the seller of notary.

In addition to the remuneration of the notary, the notary fees that a buyer is required to settle throughout a property purchase includes disbursements and transfer taxes, commonly known as ‘registration fees‘.


Notary fees and transfer taxes

Transfer duties, or registration fees, constitute the largest percentage of notary fees. As the Chamber of Notaries of Paris say on their website: ‘The amount of money returned to the State can reach 4/5th of what is paid by the buyer,”

Percentage of notary fees

Several factors are taken into account when calculating the amount of notary expenses, such as the type of property (e.g. old property, new construction, plot of land etc…), whether the furniture is sold with it or not (e.g. chandeliers, bedroom and kitchen furniture, appliances etc…) and its location. Because of this, it is rather difficult to estimate an average percentage of the selling price. However, it can be presumed that notary fees usually come to anywhere from 7 – 8% of the purchase price for older property, and 2 – 3% for newer property.

Notary fees for old property

Notary fees in older property are higher than in new property. Transfer taxes, which constitute the largest portion of this, represents about 5% – 6% of the purchase price of the property.

These transfer taxes consist of the municipal tax(1.2% of the purchase price of the property), the departmental tax (which was raised to 4.5% for sales concluded until the end of February 2016 in the majority of French departments) and the tax collected by the State (2.4% of the amount of the departmental tax).

Notary fees for new property

Notary fees are lower for new properties than in old property. The fees for the public treasury – which makes up the largest part of the notary’s cost – are lightened for new property; since 2011, only the departmental tax, at the rate of 0.71%.

For any more information on this topic, contact Cabinet Roche for in-depth detail about the topic of auxiliary costs when purchasing French property.

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