The financial crisis, Brexit etc. have all had a dampening effect on the number of Brits buying property out here and hence the number of unscrupulous individuals trying to rip them off. However it still pays to be careful and the advice below is sound.
Stephen Smith answers your questions on how to avoid the pitfalls of dealing with rogue agents.
Do you need any special qualifications to sell French property?
The business of estate agents in France is highly regulated, quite unlike the position in England, despite the English Estate Agents Act 1979.
French estate agents are governed by a law of 2 January 1970 (known as the Loi Hoguet ) and a Decree of 20 July 1972. These laws were passed to protect the public from unacceptably low standards of ethics and competence and were updated in September 2013 to tighten them up in the face of the effect of the internet, AirBnB etc. They are strictly enforced in France.
Under these laws, estate agents or others who deal or assist in dealing with the sale/purchase of French realty must hold a carte professionnelle (license). The licence is valid for one year and is renewed annually. It must be produced to anyone who requests to see it. This license is not easy to obtain. The licence will only be issued to a person who can provide evidence of his professional competence (e.g. various French diplomas in French property law and/or practical experience in the field over a period of time); provides professional indemnity insurance cover; and also provides a satisfactory financial guarantee. For example, although many estate agents are allowed to hold deposit monies paid by a buyer when he signs a contract to buy French property, it is forbidden for the agent to receive deposit monies from buyers or any other funds which go above the amount of their financial guarantees. If the amount of the deposit that an estate agent can hold is small this can indicate that the agent has been in some kind of trouble in the past.
So rule number one is to check that the estate agent you are dealing with is fully licenced and insured?
Yes. French estate agents must by law display at their premises, where it can easily be read, a notice showing the number of the licence, the name (or the trading name) and address of the agent, the amount of the financial guarantee and by whom it is granted, and details of their bankers. The same information must also appear on all official paper such as business cards, headed paper and so on.
How are French estate agents paid?
French estate agents are normally instructed by the seller with whom they have a form of written contract (known as a mandat de vente) which includes the rate of commission and who must pay it.
The buyer, not the seller, is often required to pay the estate agent’s commission, on top of the purchase price.
Even if the seller is apparently liable to pay the estate agent’s commission, remember that the selling price will usually be ‘padded out’ by the amount of the agent’s commission, so the buyer is in effect again paying the commission.
What sort of rates of commission are we talking about?
There are no legal controls on the amount of commission which an estate agent can charge. As a general rule of thumb, however, the commission charged is in the region of between 8% decreasing to about 5% if the asking price for the property is above about 100,000 Euros.
Remember that French VAT at 20% is payable, so it is important to find out whether the commission charged is inclusive or exclusive of French VAT.
Are English estate agents legally qualified to work in France?
Article 3 of the 1970 Law makes it very clear that the rules which apply to Frenchmen operating as estate agents in France are not avoided simply because, for example, the person involved is an Englishman working in France, or operates from the UK or elsewhere outside of France.
For example, many self-employed English negotiators work in France for licensed estate agents on a commission-sharing basis. These negotiators (agents commerciales) must by law be registered with the local police and other authorities.
As you might be aware French estate agents have woken up to the fact that their business and profits are being leeched away by self-styled English state agents. Such agents are taking commissions payable in the UK which escape the clutches of the French Revenue.
The French authorities are fully aware that there are a number of unlicensed operators based in France and England.
It is only a question of time before these operators are reported to and prosecuted by the French authorities.
Are there cases where a license is not required?
Yes. The operator only requires a license if he deals or assists in dealing with the sale/purchase of French realty. “Deal or assist in dealing with” means actual involvement. The French word for this is ‘entremise’. There are many reported cases in French law about the meaning of this word. For example, no entremise exists (and thus no license is required) if the operator confines his activities to marketing lists of French realty for sale. Similarly, if the operator acted as a post box only in the sense of putting a potential buyer in touch with a potential seller (e.g. via a licensed French estate agent who would then complete the transaction), that operator would not require a licence.
However, the operator would require a licence if he became involved in negotiations about the purchase price or about any other matters on behalf of either party, or otherwise acted as an intermediary.
Entremise may also exist if an operator enters into a commission-sharing or other remunerative relationship with a licensed French estate agent. It is also possible that they need to be registered for French VAT in France (which, surprise, surprise, many of them are not). However, there may be no problem with an unlicensed operator based in England entering into a commercial relationship with a licensed estate agent in France, pursuant to which the operator in England is remunerated for the introduction of the client once the client pays the French estate agent his commission.
Operators (wherever based) should therefore review any commission-sharing or other contractual arrangements made with licensed French estate agents or others. The vast majority of UK-based operators engaging in entremise are unlicensed. Any person offering French property to English buyers in England, on a commission basis, would probably not require a license if that person (a) restricts himself to the territory of the UK; and (b) confined his activities to seeking clients who may be interested in possible French property transactions; and (c) put those clients in touch with a licensed French agent who would then complete the transaction.
What can the consumer do if he finds himself out of pocket due to an estate agent?
Unless there are changes in UK law the English consumer is unfortunately limited to taking action under French law.
In France, an agent’s duty is to apply a reasonable standard of care to what is said or done. Failure to perform this may amount to a breach of Article 1382 of the French civil code – which makes anyone liable if his error or mistake causes someone to suffer loss or damage. Recourse to the French courts (or any other courts) should however be viewed as a measure of last resort.
One could also review all the papers/agents publicity to determine whether it complied with French law. If not, the consumer could commence an action under French law for recovery of the deposit.
Recourse to the French courts (or any other courts) should however be viewed as a measure of last resort.
The other possibility is to refuse to pay the agents commission on the basis that the transaction was negotiated by a representative who did not have a licence. An estate agent, French or UK-based, is not permitted to receive commission or fees (or for that matter practise or advertise) without a licence issued by the French authorities.
The only other possibility is a complaint to the Office of Fair Trading. Although they only police the activities of estate agents dealing with property in the UK, they may be interested to intervene to iron out any unfair business practices.
The Office of Fair Trading can also take action against an estate agent in the UK if a ‘trigger’ event, as set out in section 3 of the Estate Agents Act 1979 has occurred. This can include a conviction for an offence under French law. The fact that UK agents are/may be breaching French law is not itself a ‘trigger’ under section 3 of the Act until a conviction for the offence occurs. The Office of Fair Trading may then be able to consider the conviction as a suitable ‘trigger’ and take appropriate regulatory action.
First contact with an estate agent should enable the consumer to judge reception, organisation, presentation, service and general efficiency. Whatever the line, the charm, the purring seductive accent, even the old school tie – don’t be fooled. Professionals are busy people who don’t have the time to hang around in cafes on the off chance of selling a property or two. Nor would they dream of whisking you off on a high speed jaunt to see properties without any preliminary discussions as to your requirements. Ask for a business card, ask where the agents offices are, and say you will be in contact later to make an appointment to see them. By being business like yourself, you’ll discourage the opportunist who thinks you’re an Innocent Abroad. It’s not easy to tell if you are being duped by an unscrupulous estate agent, and if you are, then under current law there is not always that much you can do about it.
Agents in any country who deal with foreign property should be licensed, trained and robust monitoring and sanctions should be introduced to ensure that the industry is adequately policed.