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NOW THAT YOU OWN YOUR PROPERTY
First of all, Med-Estates congratulates you on the acquisition of your new residence, and wishes you many happy moments in this new abode on the Côte d'Azur.
We now advise you to read attentively the following points and advice.
I. Taxes on your house.
II. The valorization, protection and upkeep of your property.
III. Inheritance Law and Taxation.
Some definitions.
IV. To rent your property.
I. Taxes on your house.
When becoming a land or house owner in France, you will be liable to two local taxes, both of which are based on the property's theoretical rental value, adjusted in line with inflation.
1. La Taxe d'Habitation : (Inhabitant tax).
Local duty due by the occupier (owner or tenant) of a lodging occupied on January 1st of the taxable year.
2. La Taxe Foncière : (Land tax).
Local tax due by any owner of a dwelling on the 1st of January of the taxable year. This tax is also known under the name of 'Impôt foncier' (Real estate duty).
Unlike the Taxe d'Habitation, most deeds of sale anticipate an apportionment (prorata temporis) of the Taxe Foncière between the buyer and the seller.
As a private individual, you can enjoy an exemption for the taxe foncière. For more information related to this point, it is best to seek specialist advice from a tax consultant or via the website of the (French) Ministry of Economics and Finances : www.impots.gouv.fr.
For both local taxes, there are exonerations for old or handicapped persons or of poor means.
We would advise you, before the purchase, to ask the vendor or estate agent, for the last tax advices, in order to know the rate of tax: the rates of tax vary considerably from one region to another.
A last point on taxation:
As a non-resident property owner in France, you may be liable for income tax (in general, if you rent out your place and/or have paying guests/B and B,..), value added tax, inheritance tax (droits de succession), ...
Individual situations vary considerably and we would advise you to take up specialist information from a tax consultant. (See our paragraph on 'Useful Services').
II. The valorization, protection and upkeep of your property.
To keep your property in good order and insure complete comfort and security, we advise you to take the following points into account (before/after the purchase). Please read also our chapter "Useful Services", providing you some useful addresses.
a. House protection Please insure yourself as soon as you sign the purchase deed! Have you thought about: an alarm system that works properly; electronic surveillance; window protection (gates? bars?); doors with multipoint locks?
b. The 'undesirable', 'unwelcome': termites, mice, dormice, bugs, ... How to get rid of these?
c. Insulation: soundproofing; thermal insulation; heating and humidity, ...
d. Furniture: do you buy furnished or unfurnished? Think of the removal, the access, ...
e. The upkeep of the garden We are in the South: flowers and plants are often thirsty,… also when you're not around… Think about the security rules for your pool, the terraces, fires and barbecues!
f. Outdoor upkeep Terraces, the plaster coatings, the swimming pool, the front of the house, the humidity in the walls, ...
g. Indoor work and security: to be verified: the kitchen, the fireplace, the electric installation and its equipment ...
III. Inheritance Law and Taxation.
It is important to realize that, in becoming a home/land owner in France, the French Law will be applied to your property, irrespective of your nationality and marriage contract.
Therefore, it is important to be aware of some points in the French Law (Civil Code).
In this paragraph, we will only try to explain some general principles of the French Civil Code related to this point. However, as always, and especially with subject to such important matters, we would advise you to seek related specialist advice.
The purchase 'en indivision'. (joint-ownership) is one way of buying property in France. The indivision creates a legal situation whereby several persons have rights of the same nature on an estate, without having the material division of their parts. This implies that, in the event of death of one of its owners, the surviving spouse is not the preferential heir, and faces the co-ownership of this property with the children of this marriage PLUS the children of any previous marriage. If there is no "convention d'indivision", one of the children can ask for the share of the proceeds, which may lead to the sale of the property.
Another embarrassing situation , even with the clause "en indivision', occurs when the surviving spouse is left with children under 18 years old. In this case, the surviving spouse cannot sell the property without asking the French Court for permission to sell, a rather costly and time consuming procedure.
The main point to bear in mind is that French Inheritance Law is weighted in favor of the children. You will not be able to avoid this, unless you create a Société Civile Immobilière (S.C.I.). (see further).
In order to avoid these embarrassing inheritance situations, quite unfavorable to the surviving spouse, several options are to be considered, depending however on the marriage contract of the couple :
- l'usufruit. ( the usufruct)
- donations
- a will
- 'en tontine' (joint ownership)
In the absence of a donation or a will, the surviving spouse is, as mentioned above, in competition with the other heirs, and, depending on the rank these are placed, the surviving member of the couple will receive all or part of the estate in form of usufruct. Please recall that the inheritance is only composed of the goods and properties of the deceased, depending on its marriage contract.
Some definitions :
'Full ownership' of a property (or good) implies that it is yours and that you have the full rights over it: i.e. you may sell it, rent it out, dwell in it, demolish it, give it away,… You have 'full ownership' as well as its usufruct.
The usufruct is the right to use an asset (to occupy it, to use it, to rent it out, to collect rents,…) of which its real owner has the full ownership (owner without use). The usufruct ends at the death of the person holding the asset in the usufruct.
[To obtain more information on the situations in which the surviving spouse is to inherit the full possession of the estate, or a fraction of it, or more, or only its usufruct, please contact a lawyer, specialized in inheritance law.]
Donations. All couples are not married,... Some individuals prefer to favor a child, a friend, a company, an association,… Everybody has the freedom to either make a donation, or write a will. Fiscally more advantageous, a donation is often preferred by the individual who prefers to distribute his/her assets* during his/her lifetime; *these assets, or at least part of them, as one must always remember that the 'privileged' heirs, who cannot be totally disinherited, (ascending or descending), will always have their share.
According to the Civil Code (Article n° 931): a donation inter vivos is an act by which the donor divests himself now and irrevocably of the good/property, given in favor of the receiver who accepts it.
This is a legal act, which must be homologated by a solicitor (notary).
In reality, donations between spouses differ on numerous points from this rule. (As for its conditions, forms and contents, please consult lawyers.)
A will. A will is a written document in which a person (the testator) takes his/her disposition for the transmission of his/her assets after his/her death. One person can only make this document: man and wife, for example, cannot write their will in one and the same document. A will can be modified at any point in time the testator.
[There are several forms of will: holographic (handwritten); authentic (at the solicitor's) mystic (sealed will); each form has its own legal form of wording, advantages and disadvantages.]
Usually, part or whole of assets are willed, taking into account the reserves for the privileged heirs, ascendants or descendants.
In any case, whether you are a resident or non-resident, and indifferent from your marriage contract, and whatever the form of your will, the inheritance law and taxation of your French property will be governed by French Law. A will or a donation will attract inheritance taxes on your death (droits de donation/succession). These taxes may vary a lot and must be paid by the legatees.
One way of avoiding the effects of French Inheritance law is to set up a company for the purpose of buying property, called: 'Société Civile Immobilière'. (S.C.I.). If you own shares in a S.C.I., which owns the property, you can dispose of them in accordance with the law where you are domiciled. This will not lead to the avoidance by your heirs of inheritance tax; it merely means that you will be able to dispose of the property as you see fit (during your lifetime!). An S.C.I. is quite expensive to set up and expert advice should be sought before doing so.
Finally, you can buy a property jointly, or 'en tontine' as opposed to "en indivision". This clause can mitigate the effects of French inheritance Law, but cannot avoid it! The 'tontine' is a legal structure, which allows the insertion in the purchase deed of real estate called 'd'accroissement' ('increase'). In case of death of one of the owners, this clause provides that the surviving owner receives automatically the share of the deceased, without the direct heirs of the deceased being able to claim a right on it.
IV. To rent your property.
To obtain more information on the possibility and modalities of renting your property, we advise you to contact us : renting@Med-Estates.com
Med-Estates is well placed to provide you names and addresses of qualified agents, specialized in renting properties (seasonal or not).
Here's a checklist to consider (and prepare?) before taking the decision to rent your property :
How to find a suitable tenant?
- via an agency or renting out 'directly'?
- hiring the services of a professional: for the management of your property, its administration and the earning capacity of your real estate portfolio?
- how to enhance the value of your rental estate? What is the correct rent?
What type of rental contract?
- to rent out furnished or unfurnished?
- to rent out seasonally?
- to rent out an 'empty' property for (permanent) occupation?
Which legislations, according to what type of rental contract?
Details of the contract, the lease?
- its duration
- its termination
- the inventory of fittings and fixtures
- guarantees
- the notice
Duties and rights of the owner ?
- the rent
- the charges
- repairs
- insurance
- what to do in case of sub-tenancy? Unpaid rent?
As you may notice, these are some of the many points to consider if you decide to 'buy-to-rent'.
Expert advice may be necessary.
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