Finance in France: Buying off-plan

Laying the Foundations for a New Life

Although perhaps not on the same level as its neighbour Spain, France has still experienced an explosion in off-plan developments as it tries to quench the thirst from foreign buyers for properties which are, in most cases, relatively effortless to purchase and simple to maintain. 

But with so many traditional or renovation housing options available, from gorgeous gites to chic châteaux’s, why are more and more Brits considering an off-plan property? 

Put simply, off-plan offers the opportunity to buy at today’s prices, pay in instalments and complete on a property which is low maintenance and, if required very rentable. This probably sounds too good to be true but as with all house purchases there are a number of steps buyers must take to ensure they make a sensible, cost-effective and safe purchase.

Failing to plan is planning to fail
Be as careful as you would be if you were purchasing a new home in the UK.  Undertake as much research as possible on developers, lawyers and the legal regulations that apply.  Only buy off-plan from a reputable developer whose work you can inspect and ask local agents and residents if he/she has a reputation for problems.

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Buying a property off-plan means you have to make your choice from models and plans, or on occasions a show home.  Ensure you are absolutely clear on what the end product will be from the start, including confirmation of room sizes and specifications, and make sure this is all documented in your contract.   

Signing on the dotted line
Do not sign any contract until you are completely happy with its contents and fully understand its legal implications.  Recruit an independent lawyer who is fluent in French and English, and ask them to review the contracts you are expected to sign.  Double check that all the off-plan documentation is adequate, that planning permission has been granted, and that your stage payments are fully ensured.

Every contract should contain clauses governing time of delivery, and most importantly a bank guarantee or insurance policy covering the developer for non-completion.

Another legal area to consider is the deposit.  You will be asked to pay a deposit of between 2 and 5 per cent, with a maximum of 5 per cent set by law in France.  However, if the developer states in the contract that the property will not be completed within a year, then the maximum is 2 per cent.  You should also ensure that the contract makes provision for the deposit to be either held in a bank account in your name set up by the developer or alternatively, held by the notaire until the date that the legal title to the property is transferred to you.

Finally, research how you are going to exchange your deposit to Euros and how to transfer your funds to the developer.  If you choose to use a bank, not only could you lose valuable money due to uncompetitive exchange rates but you will also be charged up to £30 just for the privilege of sending your money to France.  Consider utilising a foreign exchange specialist who can offer much better rates than the banks and can arrange your transfer cost-effectively and efficiently.

The waiting game
During construction you will normally have to make a series of payments.  Although you will have agreed to the dates and euro value of your payments it can be hard to predict how much you will actually pay due to currency fluctuation. 

Again, finding yourself a reputable and reliable foreign exchange specialist can be very beneficial for staged payments.  Currencies Direct, for example, has a forward contract which enables you to fix an exchange rate for up to two years so you will know how much each of your payments will be well in advance.  This means that you can budget accordingly and won’t find yourself committed to buying a property that, due to unfavourable currency fluctuations, you suddenly can’t afford.

The key to a new life
It is now time to get the keys.  You may be excited but make sure that before you take possession your lawyer carries out checks on necessary certificates and guarantees – Garantie extrinsique and Garantie intrinsique – and that the developer is not passing on any unexpected debts or charges. 

Little hiccups
Any new-build home incurs occasional small faults as it settles, known more commonly as snagging.  Don’t trust the developer to notice them or put them right, so document any of these issues within days of taking possession and have the developer correct them as soon as possible.  As an overseas buyer it is often a good idea to hire a chartered surveyor to handle the snagging process for you.

Sit back and relax
One of the main benefits of a new home is that everything is ready to go on completion and you can simply move your furniture in without worrying about renovation, decorating or DIY.  So now you can just sit back and enjoy your new home in the sun.  Bonne chance!

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