SELLING PROPERTY: 5 WORDS TO FIND YOUR WAY
Previously, we defined 5 terms to help you through the process of buying property in France.
Today, we invite you to step into the seller's shoes. When you sell your property, whether it is your main residence, a second home or a rental investment, you need to be aware of a number of obligations.
David Notaires – Aix en Provence invites you to get to grips with 5 concepts that are built into the deed of sale drawn up by your notaire.
In what follows, the terms "the seller" and "the buyer" apply equally to women and men, individually or as a group.
"MAINLEVÉE" (RELEASE OF CHARGES)
When you sell your flat or house, there must be no registered charge outstanding on the property being sold. A charge registered by creditors allows them, if the seller fails to repay them, to recover what they are owed by seizing the property given as security.
To avoid any risk of this kind, the seller undertakes at the time of the sale to remove all charges registered on the property.
The act of removing a charge registered on the property is called a "mainlevée" (release).
The release results in the full and final cancellation of the registration. It can therefore only take place with the agreement of the registered creditor. The creditor will approve the removal of the charge provided its debt is repaid (or an equivalent new security is obtained).
In the deed of release, the notaire certifies, with a receipt, the creditor's agreement to cancel the registration. The notaire then asks the land registry (service de la publicité foncière) to make this change in the property register.
The costs of this deed are borne by the seller.
The notaire will then repay the creditor directly. To do so, the notaire deducts the amount still owed from the sale price received from the buyer, and finally pays the balance of the price to the seller.
To find out whether there are any registered mortgages, your notaire will first rely on your declarations made in good faith. The notaire can also identify registrations through a document issued by the land registry: the état hypothécaire (land charges search). This document lists all the rights and charges affecting the property, including registered mortgages.
"PLUS-VALUE" (CAPITAL GAIN)
The capital gain, and more precisely whether or not capital gains tax on property is payable, is one of the decisive points for the seller.
The capital gain is the increase in the value of the property between its original purchase and its sale.
This gain may be taxed. For individuals, capital gains tax is charged at 19%. Note that a surtax applies to gains above 50,000 euros. There are also specific additional taxes on land that has become building land.
Social security contributions also apply, at a total rate of 17.2%.
Several factors are taken into account in calculating the taxable gain. On the one hand, the costs borne by the seller on the sale, such as property diagnostics or the estate agent's commission, reduce the sale price. On the other hand, expenses such as notaire's fees, agency fees and building works increase the original purchase value. In some cases, these costs can be replaced by a fixed allowance.
The calculation of the taxable gain then applies a progressive allowance depending on how long the property has been owned.
Finally, there are many situations in which the gain is partly or fully exempt.
Among the best known are owning the property for more than 30 years and selling your main residence.
Other specific exemptions exist depending on the value of the property (less than 15,000 euros), the conditions of the sale (sale to buy your main residence) or the seller's tax profile (non-residents).
We strongly recommend that you contact your notaire at the very start of your sale. The notaire will be able to tell you quickly about the possible exemptions and, where applicable, will calculate the amount of tax payable on the day of the sale.
For people living abroad, appointing an accredited tax representative is compulsory in certain cases. This may involve additional costs.
"ÉTAT DATÉ" (CO-OWNERSHIP STATEMENT)
The état daté is a complete accounting and financial document prepared by the managing agent (syndic) when a property in a co-ownership building is sold. It is a snapshot of the accounts of the co-owner and of the co-ownership at the time of the sale.
It has three parts:
- the sums that may still be owed to the co-owners' association for the property sold (such as provisions for service charges and works, earlier arrears, advances due);
- the sums the association owes to the selling co-owner (such as reserves and provisions for periods after the current one);
- and finally, the sums that will fall to the buyer after the sale (such as replenishing advances and provisions for service charges and works that are not yet due).
The état daté also states whether the provisional budget has been exceeded and/or whether there have been expenses outside the budget.
Lastly, it mentions any legal proceedings brought by or against the co-owners' association.
Its price is capped and the cost is paid by the seller.
Generally, the état daté (required for the deed of sale) is preceded, when the preliminary contract is signed, by a pré-état daté. This document gathers the basic accounting information needed for the buyer's cooling-off period to start running.
"DIAGNOSTICS TECHNIQUES" (PROPERTY DIAGNOSTICS)
A technical diagnostics file (dossier de diagnostics techniques, DDT) is compulsory for a sale. Its content varies according to the type of property sold, its use and whether it is built or undeveloped.
It may include diagnostics covering the following:
- Electricity;
- Gas;
- Lead;
- Asbestos;
- Termites;
- Dry rot;
- Energy performance;
- Natural and technological risks;
- Individual sewage system.
Each diagnostic has its own period of validity. All of them must be valid on the day of the sale.
The aim is to give the buyer the best possible information about the parts of the property that may present health or safety risks, and to identify energy-inefficient homes. On this last point, a new version of the energy performance diagnostic (DPE) has been in force since 1 July 2021. From 1 January 2023, homes rated G under the new criteria may no longer be let.
The DDT is paid for by the seller.
The file must be drawn up by a professional diagnostician, insured as such and certified by an accredited specialist body.
The exceptions are:
- the risk statement (état des risques), which the notaire can prepare directly;
- and the diagnostic of the individual sewage system, which is carried out by the dedicated public service (SPANC).
Providing these technical diagnostics is crucial for the seller. Without them, the owner is liable for the corresponding hidden defects, and the buyer's cooling-off period does not start to run.
"VICES CACHÉS" (HIDDEN DEFECTS)
The French Civil Code provides that the seller must guarantee the buyer against hidden defects. These defects must make the property unusable, or reduce its use or value so much that the buyer would not have bought it, or would have paid much less for it.
This legal guarantee is in principle owed even if the seller was unaware of the defects.
To soften this strict rule, it is customary to include a clause in the deed of sale exempting the seller from the guarantee against hidden defects where the seller was genuinely unaware of them, in good faith, on the date of the sale. Conversely, if the seller acted in bad faith, the exemption does not apply.
Of course, this exemption does not apply to defects that the diagnostician must examine. These must always be checked, and the report must be attached to the deed of sale.
Furthermore, the exemption does not apply to property professionals, such as property dealers or developers. Because of their profession, they are presumed to know the defects of the property they sell.
Your notaire supports you throughout your sale
In conclusion, your notaire will be your guide throughout the process of selling your property.
We recommend that you contact your notaire even before you accept an offer, as this already commits you firmly.
The notaire will gather all the documents needed to ensure a smooth and efficient transaction, and will calculate any capital gain. Where necessary, the notaire will also contact the registered creditors and draw up the deeds of release. More generally, the notaire will make sure your buyers have been properly informed.
For David Notaires – Aix en Provence, Elodie Letouche