Conveyancing and estate planning
There are many aspects of French law that are not found in the systems operating in common law countries.
3 French conveyancing 3
The worry for some buyers is that they might acquire property which they cannot sell in future years. Several recurring themes include buyers left with a half-built property because of the builder’s insolvency, lack of a clean legal title, outstanding mortgages or tax liabilities against the property. In rural areas rights of way, agricultural tenancies, septic tanks can also be a problem.
Examples of unfair, unethical and potentially illegal practice within the French estate agency industry include putting forward false offers to sellers, misleading surveyors and faking signatures on key documents.
French notaires have a cartel in the French conveyancing process, but are not usually involved until the parties have entered into an enforceable contract. Legal services in France are not as developed or regulated as in the UK. Few notaires speak legal English and any explanation they may give about French law may not unreasonably be doubtful because they are not using the correct English technical terms. By the same token, unless the parties are proficient in speaking legal French, they will not be able to explain the full nature of their enquiry.
3 French estate planning 3
The following common problems can usually be avoided by planning your French property affairs in a language you can understand before you contract to buy French property. For example, without advance planning:
• You cannot always leave your ‘French estate’ (see Fact Sheet below) to your surviving spouse, partner or other beneficiary of your choice. Instead, if you leave children, of any relationship or age, they will usually automatically inherit a major proportion if not all of your French estate. These and other provisions of French succession law override any contrary provisions you may have made in your English Will or other dispositions. For example, your English Will is invalid if it tries to give all of your French estate to your spouse and nothing to your children.
• It is not usually possible to automatically exclude your children from your French estate.
• Making a lifetime gift (donation) of all or part of your French estate to your spouse and/or to one or more – but not necessarily all of – your children is not necessarily a simple solution.
• If any of your children or other descendants are minors when you die, the sale or other disposal of your French estate must usually be postponed until the youngest of any minor child reaches the age of 18.
• French IHT is currently payable between spouses.
• Most unmarried couples are exposed to French IHT at the highest rate of 60%.
• French wealth tax is payable on assets currently worth more than € 760,000.
• If you are a resident of a country which (unlike the UK) does not have a suitable double tax treaty with France, you may have to pay a tax of three times the annual rental value of the French immeubles you own.
Most problems stem from a lack of care and planning on the part of the buyers themselves, rather than the fact that the property is in France and is governed by a different legal system.
You should not be the victim of these and other possible problems if you take separate independent bilingual legal/tax advice before the point when there is a legally binding agreement for the purchase of the property.
[(Stephen Smith is a bilingual independent French lawyer whose contact details are:
Tel: 01473 437186
E-mail : firstname.lastname@example.org->email@example.com])]
3 FACT SHEET 3
The law and tax applicable to the succession of an individual’s French estate is largely dependent on two factors:
• his residence
• whether his property is classed as immeubles (realty) or meubles (personalty).
If you own a secondary home in France it is liable to French succession law and to French inheritance tax, even if you die domiciled in the UK. If you move to France then French succession law and French IHT will apply to all your worldwide assets other than non-French realty and certain life assurance investments.
The French concept of residence is not at all the same as the UK concept of domicile. In brief, you will be considered to be resident in France if (a) your family home is in France, or (b) you spend more than 183 days per calendar year in France, or (c) you work or have your centre of economic interests in France.
As tax residence rules differ in the UK, there are cases where you may end up being dual resident, in which case tie-breaker rules will apply. The double tax treaty between France and the UK will in most cases ensure that double taxation is mitigated by giving credit for taxes paid in one state aga