BUYING a holiday home in France as a group of friends or family is a popular option and can be a good investment.
However, with the present economic climate it is becoming common for some part-owners to want to sell their shares - an issue which can cause complications, as Laurent Delanoë, a notaire from DSDnotaires, Savoie, (www.dsdnotaires.fr) explains.
RELATIVES or friends often think they have found the perfect solution for buying a property in France when they decide to purchase it together as a holiday home which they can visit either together or separately.
There are, nevertheless, several issues which need to be reflected upon prior to making such a commitment.
If you buy as a group of people, the default regime is called indivision - this is where there is a purchase under several individual names.
This type of structure will always govern the relationship between the parties. Under this regime there is no obligation for the co-owners to keep their rights of ownership and to remainin the indivision ownership.
It is therefore important to keep in mind that in the case of a dispute with a party wanting to leave, the others might be forced to sell the whole property, find another buyer for the other's share or buy it back themselves.
If necessary, the party wanting to leave can go to court to seek a judge's ruling to force the sale so his or her share in it is paid back.
An amicable sale will, of course, require the agreement of everyone and the objection of any of the parties could bring the situation to a standstill - again requiring court action to force a sale and share out the proceeds.
On resale of a share, there would be fees, costs and taxes due of approximately 6.18% plus €1,000.
These would be paid by the purchaser. In principle, the vendor would be liable for the cost of the pre-contract searches, the repayment of any existing loans and any capital gains tax due on the
sale of his or her share.
Theoretically, the funds corresponding to each co-owner’s share of ownership must be individually transferred by them. Sometimes this is not the case - for example where two parents buy a house with their three children, but they pay for it.
In such a case, the beneficiaries of any transfer of funds (ie. the children) could be liable for gift tax for a non-revealed gift.
Again in such a case as this, the bank charges for securing a mortgage could be more expensive if all the co-owners are not also co-borrowers.
The bank would need the agreement of the others to secure the mortgage. This agreement is called a caution hypothécaire and would generate additional tax and costs.
The bank would also have to send a contract to each of the co-owners.
In the vast majority of cases this is required, though should the bank not require a charge to secure the loan (for example they are very confident of the client because they are wealthy) there would be no additional costs.
The indivision regime can also cause problems when one of the co-owners dies. According to French law, property cannot be freely disposed of by will - descendants, and, if there are none, a surviving spouse, have an inalienable right to a proportion of it.
A deceased co-owner's heirs would therefore receive their part of ownership in the property. The main disadvantage of this would be if any minors become co-owners.
A French judge would not be able to make a ruling allowing the English minor to sell and would expect an English judge to rule - but under English law a minor cannot own property (unless through a trust).
This can cause legal complications. The practicalities and reality of buying a property in France with other people should be considered at the outset. If you explain your plans to a notaire they can advise you on methods which can help you avoid these pitfalls.
These could include setting up a property investment partnership (SCI - a kind of holding company), signing a contract between the coowners agreeing set terms, called a convention d'indivision, or holding the property under a tontine.
The Connexion has a helpguide Buying Property in France - the SCI option produced in association with the Conseils des Notaires. It is available for download from our website at €7.50 or by post.
