Annualized percentage rate (APR)

An interest rate calculated on all the sums paid by the borrower during the life of his property loan. It includes the repayment instalments, initial loan administrative fees, expenses related to the surety agreement and adivitional insurance premiums.

Deposit

Sum paid by the buyer to the builder, not to exceed 5% of the total price.

Insurance

Apart from insurance related to the loan (life insurance), occupiers of property (owner-occupiers or tenants) are required by French law to take out comprehensive household insurance. The insurance premium is paid annually, and falls due on the anniversary of the acquisition.

Interest rate

1 Fixed:
An interest rate that does not vary over the term of the loan.

2 Adjustable or variable:
An interest rate calculated against a money-market index (such as the Euribor) and adjusted periodically according to the rules governing this revision.

Deed of conveyance

A document signed by the buyer in the office of the notaire to make the property sale official and legally binding. In France, it is mandatory that the sale of property be signed in the presence of a notaire, the only public official empowered to witness this type of agreement. The buyers notaire draws up the deed and the seller’s draws up the real-estate file for him (origin of ownership, existing condominium regulations, etc.), when two notaires are involved in the transaction. In this case, the fees of the notaires are divided in half. The deed of conveyance must specify the identity of the seller and buyer, the description and origin of the property subject to transfer, certain provisions related to urban planning and the means by which the buyer has financed his or her acquisition.

Loan offer

A contract by virtue of which the lender grants a property loan to a borrower, who accepts the conditions. The offer is valid for 10 days before acceptance. It must specify the identity of the borrower, the adivress of the property financed and the terms and conditions of the loan to be arranged, including a depreciation schedule.

Moneylender's priority lien

The privilège du prêteur de deniers is a priority lien granted to the lending institution, enabling the lender, should the property be sold before full repayment of the loan, to recover the outstanding debt before any other creditors receive payment – and without necessarily obtaining the approval of the borrower. The privilège du preteur de deniers is less expensive than a mortgage, being exempt from the 0.5% public land record registration fee (taxe de publicité foncière).

Mortgage

A guarantee demanded by a bank, secured on property. In the event of default on the related loan, the lending institution may take legal action to force the sale of the debtor's property. This is most frequently applied to the asset being financed. The mortgage must be recorded in the local mortgage registry and is subject to a charge equal to 0.60% of the amount borrowed.

Personal capital contribution

This refers to the savings used by the investor to complete his or her operation. If your borrowing capacities and guarantees allow it, Crédit Foncier will offer to finance your investment in its entirety, without requiring you to make any personal capital contribution. In terms of tax relief, this solution can prove to be extremely advantageous in investment operations.

Power of attorney

A legal document authorising another person (the agent) to carry out one or several predetermined legal acts on the principal's behalf. When a private individual grants this power to an estate agent, he or she grants full or limited power of attorney.

Project manager

The person who manages and supervises the execution of construction work. He is responsible for organising the building site. His responsibilities frequently include the building design stage, the coordination of studies and related work, administrative procedures and the delivery of the final plans and proposed completion date. The project manager is the one who decides whether to launch the building project and who finances it. He is the owner of the building land and is consequently the beneficiary of the planning permission.

Property developer

An economic intermediary who commissions construction companies to erect buildings, with a view to selling the properties himself.

Provisional sales agreement

A provisional contract used for the acquisition of property or building land. It is the term habitually used for the promesse de vente (unilateral agreement to sell). This contract lists the names and adivresses of the seller and buyer, their reciprocal obligations, the description of the property in question, its surface area and price. It also lists the conditions of avoidance making it possible to terminate the agreement, notably the buyer's failure to obtain a loan (or planning permission in the case of the acquisition of building land). If these conditions cannot be met, the agreement will be declared null and void. When the provisional sales agreement is signed, the buyer will be asked to pay a deposit by the seller. If the buyer withdraws from the agreement before signing the deed of conveyance, the seller is entitled to retain the deposit. If the seller wishes to withdraw from the agreement, he must pay the prospective buyer twice the sum of the deposit.

Notaire

A public and legal officer (on oath) responsible for legalising the various judicial documents passing through his hands and for giving private individuals advice related to their investments.

Estate agent

An intermediary representing an owner during a property-transfer transaction. The estate agent takes charge of finding a buyer or tenant, in accordance with the act passed by the French parliament in January 1970

Reservation agreement

A contract by virtue of which a buyer reserves a property to be purchased “off plan”. This provisional property sales agreement is the legal equivalent of a compromis de vente.

Taxes

Property tax (taxe foncière) is paid by the owner of the real estate, while local taxes are paid by the occupier (tenant or owner-occupier). They are paid to (and finance the expenses of) the local authority. They are due annually, usualy in October or November, and may vary considerably in amount depending on the geographical location of the property.

Unilateral agreement to sell

A legal document whereby the seller alone undertakes to sell while the buyer simply enjoys an option to buy – i.e. he is free to buy or not, during a certain period. The sale is completed the day he takes up the option. In exchange for this option, he must pay a deposit, usually equal to 10% of the selling price. If the buyer does not proceed with the acquisition, the seller retains the deposit, unless avoidance clauses allow the return of the deposit come into play.

VAT charged on renovation work

It is worth knowing that renovation work has enjoyed a special tax status since 2000. VAT is charged at the lower rate of 5.5% on the products and invoices of companies specialising in this kind of work, instead of the standard rate of 19.6%.

VEFA – Homes purchased “off plan”

VEFA is short for Vente en l'Etat Futur d'Achèvement, meaning purchased a home “off plan”. This approach allows the buyer to become the owner of property as and when the construction work progresses. The property developer makes his calls for funds on a contractual basis specified in the provisional sales agreement. The lender releases the funds in accordance with the property developer’s calls for capital.

 
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