The Cost of Purchasing and Owning Property in France

What’s your property purchase going to cost you?

Besides the price of the property, there are some additional costs associated with your purchase:

AGENCY FEES

First of all, the agency fees, normally about 5%, are included in the advertised purchase price. Whether the seller pays it or the buyer pays it, it is determined by the mandate between the seller and the agency. If the seller pays it, then the price on the deed includes it. If the buyer pays it, then the price on the deed will be reduced by that amount — a benefit to the buyer as the notarial taxes and fees are based on the price on the deed. Here are the tricky parts: 1) the mandate can often be changed to benefit you, but only BEFORE the Notaire has a copy of the mandate! So, be sure to ask this question when you’re considering a property. 2) If you’re taking a mortgage, the mortgage will include the agency fee if the seller is paying it, but won’t if the buyer is paying it! So, while you will save on notarial taxes and fees by paying it as the buyer, you will need more cash for your purchase if you can’t include it in the mortgage!

NOTARIAL TAXES AND FEES

The buyer pays the notarial taxes and fees. The notarial taxes and fees are about 7% of the price of the property and because the Notaire fulfills a function of public interest, the remuneration for the notarial service is highly regulated and subject to a tariff. There is no negotiation on the taxes. You can negotiate up to 10% of the Notaire’s fees — but, there is nothing you can do about this expense, so just accept it. The Chambre de Notaires website offers a calculator so you can estimate what your taxes and fees at closing will be. Remember to consider if the price will include the agency fees or not. Also note that should there be furnishings sold with the apartment, their values can be deducted, further reducing the price on the deed and therefore your notarial taxes and fees.

The taxes are calculated as follows:

Price from 0 to 6,500€: 3.945%
Price from 6,500 to 17,000€: 1.627%
Price from 17,000 to 60,000€: 1.085%
Price above €60,000: 0.814%

Add it up and then add VAT of 20%, and round to the nearest euro. In addition, there will be taxes applied if a loan is involved. One nice surprise is that the Notaires always calculate a bit more than the government finally assesses, so months after you close the sale on a property, you may get a check in the mail representing a refund…like new found money!

You’ll be pleasantly surprised to learn that ongoing operating expenses are very low in France.

ANNUAL TAXES

There are two annual taxes imposed on property:

1. “Taxe foncière” is the primary property tax, on the building and on the land, and is paid by the owner annually, due on January 1. When purchasing a property, the taxes are apportioned to both the seller and the buyer based on their amount of ownership during the year.

2. “Taxe d’Habitation” is paid by the occupant of the property on January 1, whether owner or tenant. The city administrators assess this tax. It is calculated on the basis of the “notional rental value of the property” — the rental value multiplied by the tax rate in that locality. There are variations applied if the residence is principle vs secondary or low income or with dependents.

Each of these taxes tend to equate to about .0001% of the value of the property in densely populated areas, such as Paris and higher in lower densely populated areas. This is because the “pie” — the budget — can be shared among many more contributors in urban areas where geographically there are many more residents and commercial establishments.

When making a purchase, the taxes paid in the past are normally disclosed to the buyer in advance of the purchase in order for the buyer to be able to make prudent financial decisions. There is no way of knowing if those taxes will change or increase in the future — these are decisions legislators make without the property owners’ permission! (Sorry!)

HOMEOWNER ASSOCIATION FEES

The Annual Homeowner Association Fees are amazingly low, too.

Nationally, co-owners pay on the average about 2,021€ per year in building maintenance charges, or about €47 per square meter per year. Paris rates range between €46 and €57 per square meter per year. The Provence-Alpes-Côte d’Azur area charges are low at about €34 per square meter per year thanks to lower heating costs.

The costs are set by the apartment owners themselves through a general meeting, on the advice of the managing agents — the syndic. The charges depend on a variety of factors — but you can expect higher fees if the building employs a “guardien,” has an elevator or provides the heating for all the units. Heating is the largest single expense for a building, followed by care-taking/cleaning, general maintenance, management, water, elevator maintenance, insurance and parking. The level of the charges will depend on numerous factors — the location of the property, the services provided in the property, the size of your apartment and the maintenance and improvement requirements of the building. Your specific charges are determined by what portion or ration your property is to the whole.

UTILITIES

Utilities expenses are a lot lower in France than you might think. The cost of electricity in France is still about the cheapest in Europe because most is generated by the country’s nuclear energy program. Basic electricity, heating, cooling, water, garbage pick-up for an 85 square-meter apartment averages about €134 a month. Internet/VOIP Phone/Satellite TV is just €30 a month. Add to that a cell phone for another €16 a month for unlimited usage with free calling to almost everywhere in the world. Amazing, right?

INSURANCE

Homeowner or renters insurance is mandatory, but the good news is that it’s very affordable. The national average is about €350 a year.

Here’s a summary

Annual cost of ownership for an 85 square meter apartment valued at €1,020,000:
        
Property tax                    € 2,040
Homeowners insurance    € 350
Utilities (water,
electricity, gas,
telephone, Internet)         € 2,160
Copropriété ‘charges’       € 4,250

Total cost of ownership     € 8,800/€733.33 per month

Not so bad, right?

A bientôt,

Adrian Leeds
Adrian Leeds Group

Respond to Adrian:
[email protected]

 

 

  

 

P.S. For those of you living in Southern California, I’ll be in Los Angeles and open to meeting with clients for two-hour property consultations in person sometime between April 30th and May 4th. Special rate $350. To book your consultation, email me at [email protected]