The Same Rent Since 1948
Volume I, Issue 27
There is a building on rue Charlot just behind my own apartment where recently one owner sold off six apartments at once, all of which fell under the rent control law number 48-1360 of September 1st, 1948. The owner likely sold them at a greatly reduced price to the current market value, just to get out from under the burden, but the buyer takes a big risk.
The law, which has been changed as recently as October 2002 to phase out properties with this restriction, maintained the rents at their 1948 values plus allowing for small cost of living increases, so in most cases, the rents landlords achieved didn’t even cover their costs taxes, utilities, maintenance.
Tenants cannot be evicted! And only the surviving spouse, the ascendants, handicapped or minors can inherit the lease if they lived with the primary tenant more than one year. Article 17 of the law specifies that “the habitation of the property is a right exclusively attached to the person and is non-transferrable.” The amendments to the law enable the owner to offer similar accommodations in another property and the tenant must be willing to relocate.
We should only be so lucky as to inherit a lease which falls under the law of 1948. A friend lives in one on rue de l’Hôtel de Ville in the 4th arrondissement. She acquired it from an ex-husband whose family lived in it since before 1948. In fact the whole street and many of the surrounding streets (rue Saint-Paul and rue Louis-Philippe among them) were part of a program at the time for “habitations à loyer modéré” (“HLM” or low income housing). Even today, the government owns many of these buildings, including hers. Her rent is as little as 250 euro per month for three rooms in 65 square meters on the top floor with an elevator, a terrace and views of the Seine and Notre Dame on one side, Eglise Saint-Gervais on the other. At today’s rates, the apartment would normally rent (unfurnished) for well over 2000 euro and sell for more than 400,000 euro.
Buying an apartment in which the tenant has a lease of this nature can be profitable but risky. Often, they can be purchased at well below market value, but the risk is in when you’d be able to revise the lease. As long as that tenant or his rightful heirs maintain the property, you’re out of luck. Sad to say, but you’d be betting on the tenant dying before you go broke! Just think if your tenant had been Jeanne Calment, a woman born in Arles who lived to be 122 and outlived all her heirs!
Editor, French Property Insider
Email: [email protected]
P.S. For a more detailed information about the Law of 1948, contact us to connect you with the professionals we recommend (notaires, attorneys and legal advisors) by emailing me.
Volume I, Issue 27, August 14, 2003
In this issue:
* What Property Taxes You Can Expect to Pay
* Clarifying the Tax Implications
* How Many Beds There are in France
* What Can You Ship to France and Avoid Customs Taxes
* What’s the Latest Rate of Exchange
* The Next Meeting is in September
* Hot Property: Your Own Château Just Outside Paris
* Property For Sale: A Guaranteed Returning Overlooking Monte Carlo
* General FPI Information…
FRENCH PROPERTY TAXES
LAND TAX ON CONSTRUCTED OR NON CONSTRUCTED PROPERTIES (taxe foncière) This tax is to be paid if you are the owner on the first of January of the year of purchase. It is set for the whole year, according to your situation on the first day of the year.
LOCAL TAX ON DWELLINGS (taxe d’habitation) This tax is to be paid by inhabitant of the property.
WEALTH TAX (impôt de solidarité sur la fortune) In France, there is a tax on physical persons whose capital assets reach a certain ceiling . If the value of your capital assets, real estate properties and movables (minus debts, principally loans…) in France exceeds 720,000 Euro(on January 1st, 2003) you will be taxable.
THE RESALE OF YOUR PROPERTY – CAPITAL GAINS TAX
When selling your property, whether that be an apartment, a house or a piece of land, you will have to pay, as a non-resident, a French tax to be calculated on the basis of the difference between the sale price and the purchase price, but this after the following tax deductions:
– the initial purchase price will be indexed to your advantage (i.e. raised) according to the inflation rate over the period of ownership and according to any sorts of expenses you may have made on the property.
– this capital gains tax will be reduced by 5 % as well for each year of ownership starting the end of the second year.
– there are also tax allowances for each vendor, each spouse and per child in the case of a sale of a first taxable second home.
The basic rule here is that the inheritance of French real – estate is subject to the French Law.
The French inheritance law differs from that of many countries, mainly because a surviving spouse does not necessarily inherit the total amount of his/her partner’s patrimony. In order to modify this inheritance system, and especially toughen up the surviving spouse’s rights, there are many possibilities. The rate of the inheritance tax depends on the relationship between the beneficiary and the deseased and the value received.
CLARIFYING THE PROPERTY TAXES IMPLICATIONS IN FRANCE
By Jean Taquet
We plan to buy a property in the south of France in the future. Do you have information on the tax implications? My understanding is as follows:
Under the tontine*, taxes are paid by the individuals. An SCI is transparent, but if the owner is a foreign company, it has to pay a 3% tax per year, and any capital gains are taxed as regular corporate income. When only buying one property as a second residence, it seems a tontine is cheaper during the ownership period – or am I missing something?
The information you have lacks precision and, therefore, can be misleading. Before answering your questions, I shall first explain the legal framework
for all of the possible solutions. Tontine is, indeed, a term that deals ONLY with the consequences of the death of an individual real-estate owner who is in partnership with another. This partnership can be based on a marriage, a PACS (a type of common-law marriage), or even without any specific legal framework. The tontine clause must be put in the title of the property and, therefore, must be done at the closing, since it can! never be set up afterwards. The tontine clause deals only with one issue and does only one thing:
At the time of death of one partner, it automatically transfers the ownership of said real-estate property to the other partner(s). If the partner(s) is/are not the lawful heir(s) according to French law, problems can then arise. Indeed, it is impossible to disinherit your children, your parents and, since Dec. 1st, your spouse. Therefore, only a specific and often small portion of the estate can be bequeathed to a 3rd party (i.e., outside the blood link). Therefore, this clause has no bearing or any specific consequences on the amount of estate taxes to be paid by the heir, and it is, thus, the responsibility of the surviving partner(s) to clean up the situation and assume the tax liability. This can cause a lot of trouble, since the tax ratio is 60% for people outside the blood link and not legally tied to the deceased.
This is what can happen: the partner must first indemnify the lawful heirs for the portion of the estate they are not getting because of the clause; then, the 60% estate taxes must be paid within 6 months. As you can see, this can be not only very expensive, but also quite counter-productive.
An SCI (Société Civile Immobilière) is a French corporation whose sole purpose is to own and manage real estate. Its shareholders can be individuals or corporations. An SCI owned by a foreign corporation does not automatically owe the afore-mentioned annual 3% tax. To be more precise, the law states that every piece of real estate owned directly or indirectly by a foreign corporation will pay to France an annual tax equal to 3% of the market value of the said property, unless (a) all of the following requirements are met; and (b) a declaration to this effect is made every year:
– There must be a tax treaty between the 2 countries:
– the foreign corporation must have almost all its interests in the ownership of the French real-estate property;
– there must be a yearly disclosure of the individuals who control/own the foreign company.
Therefore, this 3% tax can easily be avoided. However, an SCI has no consequences on ! the estate taxes owed, as such. If, for example, the deceased was not a French resident, then, for purposes of settling the estate, the transfer of shares must follow the law of the deceased’s country of residence. This can be very good news if the said law offers more flexibility and lower estate taxes. Also, without going into the complex issue of what happens if one of the shareholders dies, the transfer can involve shares of the SCI, of the foreign corporation owning the SCI, or even the foreign corporation owning the foreign corporation. In any case, there is an estate tax question which may not be a French one.
No, you are not missing something, as such, since these legal tools do not involve the same issue. As said above, tontine can be horrendously expensive for the heir, so, in some instances, it can do more harm than good. Changing the marital regime, signing a PACS, buying a life insurance policy or bequeathing usufruct could be ! better solutions. Everything depends on who your partner is: If it a spouse or your child, then the outcome could be extremely positive; if it is a romantic partner and you are still married with children, then it will create a very complicated and costly situation which should be avoided as much as possible.
*An investment plan in which participants buy shares in a common fund and receive an annuity that increases every time a participant dies, with the entire fund going to the final survivor or to those who survive after a specified time. 2. Each member’s share of a tontine. 3. The subscribers to a tontine. French, after Lorenzo Tonti (16351690?), Italian-born French banker.
Editor’s Notes:Jean Taquet is a French jurist and associate member of the Delaware Bar Association. He frequently speaks at our International Living WORKING AND LIVING IN FRANCE CONFERENCE here in Paris. He helps many in their personal and business legal issues with individual consultation, has been well-known in Paris for his informative Q and A columns and is the author of THE INSIDER GUIDE TO PRACTICAL ANSWERS FOR LIVING IN FRANCE.
STATISTICS ON TOURIST HOUSING IN FRANCE
The France Ministry of Tourism reports that in France there are:
1,201,000 beds (hotel), 365,200 tourist lodgings, 2,764,500 campgrounds,
264,000 vacation villages, 540,600 furnished tourist apartments, 55,900 bed & breakfasts and
14,700 youth hostels.
MOVING YOUR BELONGINGS TO FRANCE
Moving your belongings to France is not much different from moving within the United States except that your possessions enjoy an ocean cruise before reaching you. France permits you to bring the normal contents of your apartment or home free of import duty as long as youve owned those belongings for at least six months. This helps prevent enterprising souls from sneaking in items for the express purpose of becoming free-lance importers.
- Original Visa, Residence and Work Permit (requirement may vary according to nationality)
- Certificate of Change of Residence obtained from the French Consulate with Customer’s signature indicating dates of stay abroad
- Attestation de non-cession (signed original stating Customer has lived abroad for at least one year, has owned all items for more than six months, and that goods will not be sold for twelve months)
- Proof of residence in France (Certificate of Residence, lease contract or utility bills)
- Letter of professional transfer from employer indicating date of employment abroad
- Valued inventory in French (valued in French Francs) dated and signed by Customer — three copies
- Inventory must indicate contents of each carton
- List all electrical items separately (purchase invoices required) must show brand name and serial number
- Delivery address in France with access, floor, entry code if any
- Used household goods duty-free if owned abroad for six months, if the owner is moving his principal residence to France, and the items arrive within one year from the arrival date reflected on the Change
- Regulations are different if the Customer is establishing a secondary residence
- If SECOND shipment anticipated, it must be stated at the time of the first importation
- Declaration from notary with inventory of goods, date of death, relationship & French Resident
- The goods must be shipped within one year from date of death
- Wedding presents:
- Marriage Certificate and French Resident Permit
- Goods must be shipped within one month of wedding
- Official attestation of attendance at school or university. The scholar’s goods must be shipped within one month from date of registration at school or university.
Dutiable / Restricted Items
- Alcohol must be inventoried separately with brand name, type, amount, number of bottles, and value (Import License or Liquor License may be required)
- Tobacco products are allowed, but subject to duty or tax
- New items (less than six months old) are subject to tax if arriving from EEC countries or tax and duties if coming from other countries and must be documented with sales invoices
- Works of Art, oil paintings, sculptures, antiques, etc. should have Certificate of Authenticity
- Video tapes, fax machines, telex machines and books will be held temporarily by customs until necessary authorization is obtained for each item
- Paints, polishes, and cleaning solvents
- Drugs and narcotics
- Live plants
- Ivory, all animal skins
- Pornographic material
- Explosives & matches
- Guns, weapons and ammunition are highly regulated, and require various registrations and certificates and have the authorization from the French Defense Ministry (provide make, caliber, serial number and purpose)
- Some weapons strictly prohibited
- Do not ship with household goods
- Expatriates who intend to remain in France for a period of time may import one auto duty-free as personal effects
- Foreigners may import an auto duty-free provided the owner has been living abroad for more than one year, the car has been owned for six months prior to import, and the car is correctly registered as a commercial car
- Auto must not be disposed of within two years of entry into France
- MUST BE LISTED ON INVENTORY (giving year, make, model, chassis engine, horse power and registration numbers)
- Certain makes are not permitted
- Vehicle must pass inspection for compliance with French standards and must be road-worthy
- Documents required:
- Purchase Invoice (original)
- Original title showing owner’s name and vehicle serial number (original)
- Insurance Certificate from French insurer
- Registration Card (original)
- Plate numbers
- Must be at least three months old
- Subject to quarantine
- Endangered species and exotic animals prohibited
- Pets should be accompanied by their owner with vaccination card and certificate of good healthFor a recommendation of a moving company, contact French Property Insider.
TODAY’S CURRENCY UPDATE
A service of http://www.xe.com
Subscribe for free at: http://www.xe.com/cus/
Rates as of 2003.08.21 06:31:40 GMT.
1 U.S. dollar equals euro 0.903933 (0.882822 euro last week)
1 euro equals U.S. dollar 1.10628 (1.13273 last week)
PARLER PARIS APRES MIDI MEETS TWICE A MONTH
Please note no meeting August 26th!
NEXT MEETING: September 9, 2003, 3 p.m. to 5 p.m.
AND EVERY SECOND AND FOURTH TUESDAY OF THE MONTH
This is your opportunity to meet twice a month, often with local professionals who can answer your Working and Living in France questions. You are invited to come for drinks and share your questions and comments about what it takes to create a life here, own property and enjoy what France has to offer. It is also an opportunity to network with other Parler Paris readers.
For a detail description of this past week’s meeting and for more information about Parler Paris Après Midi, visit
FOR SALE: FPI HOT PROPERTY OF THE WEEK
We are constantly looking at properties for sale to offer to our subscribers only. Each week we will be bringing you one or two properties we believe are especially worth your consideration. As a subscriber, you will have an exclusive first look at these before they are added to the listings on our website.
CHARMING CHATEAU WITH FRONTAGE ONTO THE RIVER SEINE WITHIN EASY COMMUTING DISTANCE OF PARIS
This manageable family château is set on the edge of a charming village in the Seine et Marne region, approximately 30 minutes south of the Périféerique and central Paris. The house is beautifully situated on the banks of the Seine with its own river frontage and the right to build a jetty. The house offers comfortable accommodation on three main floors with 4 reception rooms and 10 bedrooms. All the principal public rooms and bedrooms have a double aspect as the house is one room in width and is surrounded by a walled park which extends to 2.5 hectares which provides both formal and amenity areas and includes terraces, pollard lime avenues, a productive orchard and a small paddock. To learn more, and see more photos, click here: Château Gabriac
Asking Price: €1,640,000
Serious inquiries can be di
rected to Email: [email protected]
FPI PROPERTY LISTINGS
The International Living Paris Office is not a real estate agency. We do not maintain a list of available properties. These listings are meant to provide readers with examples of what is on the market. They are generally selected for their relevance to articles appearing in the current issue of FPI.
— LEASEBACK PROPERTY OVERLOOKING MONTECARLO
Offering Studio and one bedroomed apartments with a guaranteed rental income of 5% net over a nine year term. It is a pure investment product over a 9 year lease and offers freehold apartments run by a management company. Here the net guaranteed rental income is 5 %. Of course, you could use it as often as you wish, however you income will be reduced.
This residence consisting of three blocks, finished with the finest quality materials and to the very highest standards. Each apartment will come fully furnished throughout. Many apartments, will also have full sea views. Also there will be a restaurant , laundry service and a fitness centre in the building which will also offer excellent conference facilities making it attractive for prospective tenants. With the added bonus that all apartments have fantastic panoramic sea views.
Prices: Studio from 164,00 €, One bedroom and 2 bedroom from 250,000 €
*All prices are inclusive of Parking
Serious Inquiries email: Leaseback Overlooking Monte Carlo
— DUPLEX ON THE LEFT BANK
Paris Left Bank — 13th arrondissement bordering the 5th, duplex on the 3rd and last floor plus a loft, total 87 m2 with 71m2 Loi Carrez (above 1.8m2). Quiet, sunny, lots of character (wood beams, traditional staircase) with stairs from living room to loft. Main bedroom downstairs overlooking east courtyard and living room overlooking rue Pascal. Two rooms upstairs, living room 27m2, toilet/shower/bath separate, equipped kitchen, storage room, cellar, double glazed windows and pine wooden floors. Rental history 1850 euro per month.
Price: 445,000 euro
Call for private sale: +33 (0) 6.74.98.08.27 or Email: Duplex_on_the_Left_Bank
FPI CONSULTATION SERVICES
We’re equipped to assist you with every aspect of buying an apartment. We can create a package for as much or as little assistance as you need. From merely locating an apartment to helping you set up utilities or do a renovation, we can help.
Full details are posted on the French Property Insider website at https://adrianleeds.com/wp-content/uploads/newsletters/frenchproperty/insider/propertyconsultation.html
INSIDER PARIS GUIDES DISCOUNT FOR FPI SUBSCRIBERS
Don’t forget that with your FPI subscription you are entitled to a discount on the purchase of any Insider Paris Guides. You’ll find details of the guides at http://www.insiderparisguides.com. When ordering, a box will pop up allowing you to enter the following username/password
Order more than one guide at a time and you will receive an additional discount!
“DR. DEREK’S” ARCHITECT’S ADVICE AND SERVICES
If you have basic questions concerning apartment and home renovation, contact our resident expert Derek Bush by visiting https://adrianleeds.com/wp-content/uploads/newsletters/frenchproperty/insider/services.html
RENTING AN APARTMENT IN PARIS OR HAVE AN APARTMENT TO RENT?
If you are seeking to rent a furnished apartment for a week, a month or a year or you have an apartment you wish to rent, there are a couple of ways we can be of assistance. Click here for more information: https://adrianleeds.com/wp-content/uploads/newsletters/frenchproperty/insider/forrent.html
THINGS YOU NEED TO KNOW
– FPI Website: To access any password protected pages, the username is: fpiuser and the password is: paris1802. If your computer utilizes cookies, once you log into a subscriber only section, the login information will remain active for seven days, after which you will have to login again.
– Past issues of FPI are available on the website. You will find the “Past Issues” link on the left under “Subscribers Only” or by going to https://adrianleeds.com/wp-content/uploads/newsletters/frenchproperty/insider/subscribersonly/archives.cfm
– Instructions for upcoming conference calls are on the FPI website. You’ll find the link under the “Subscribers Only” section on the left of any page.
– Get In On The Discussion: Care to weigh-in on current HOT topics of discussion on France? Get in on or start your own thread on our bulletin board at http://www.agora-inc.com/forums/index.cfm?cfapp=15
2 lovely apartments in the 1st arrondissment across the street from the Tuileries Gardens, 3 minutes form the Place Vendome. Available for rent by the week or longer term: 6 months to 1 year. 2-3 bedroom duplex w. 2 baths/ Tuileries view. OR 1-2 bedroom same building. Both are elevator accessible, non-smoking and no pet properties.
Check them out at http://www.youlloveparis.com and contact us for more information.
Stay in your own 17th-century pied-à-terre in the heart of Saint-Germain-des-Prés, Paris, by the week or month. Sleeps 4. Newly furnished and redecorated. Totally charming. From $150 per night. Visit https://adrianleeds.com/wp-content/uploads/newsletters/frenchproperty/insider/rentals/mazarine.html or contact Rendez-Vous à Paris at [email protected]?subject=IL_Reader or call +33 (0) 126.96.36.199.
Guest Room or Two-Bedroom Apartment…
Located in a 17th century Le Marais Hôtel Particulier, this 70 square meter apartment two-bedroom apartment with lots of light is nicely
furnished and is perfect for a single woman in the freshly renovated guest room when owner Adrian Leeds is in or for up to 4 people when she’s traveling.
The Guest Room is offered at $575 per week ($250 deposit required). The Entire Apartment is offered at $875 per week ($350 deposit required). References are mandatory. Pictures and more details available here: https://adrianleeds.com/wp-content/uploads/newsletters/parlerparis/apartments/rentals/leeds.html
For information and reservations contact: [email protected]?subject=ABLGuestRoom
For the latest listing of vacation rentals, click here:
SEEKING A MORTGAGE IN FRANCE?
The International Living Paris Office can help you secure a mortgage in France with interest rates as low as 3.35%.
Contact [email protected]?subject=Mortgage for more information.
HELPFUL CONVERSIONS FOR REAL ESTATE
To convert square meters to square feet, multiply 10.763 by 3.281 and for more conversions, refer to:
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Copyright 2003, Agora Ireland Publishing & Services Ltd.