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The obligations of the owner seller
When a person decides to sell their house or apartment, it is necessary, before they sign a pre-contract (sales promise or sales compromise) which will set out the main conditions of the future sale, that they find out themselves about the status of what it is they are selling, because they have an obligation to supply any relevant detail or information to the future buyer. Failure to do this will render their right to exonerate themselves from any future hidden fault which may undermine the property.
The obligations which the seller has are generally to do with the following aspects :
• protection of people (lead and asbestos)
• protection of the property (woodlice)
Moreover, when the salesman sells an apartment which is dependent of a property which is regulated by a co-owner status, it is imperative that the 'area' of said property be indicated in line with the criteria determined by law (Loi Carrez).
All of these provisions appear in the table hereafter.
| Property concerned |
Elements controlled |
Duration of the efficiency or validity of the diagnosis |
Sanctions |
| ASBESTOS |
| Any building built, for dwelling purposes or not, constructed before 1 July 1997 (check the date of issue of the building permit) |
- Flockings, thermal insulations, false ceilings.
- All construction products or materials containing asbestos. |
No specific validity duration once the diagnosis has been made. |
Limit on the exemption possibilities of its guarantee by the vendor for hidden faults. |
| LEAD |
| Any building located in a zone defined as being 'risky' by the Préfet and constructed before 1 January 1948 (check the date of issue of the building permit) |
- Paint |
1 year maximum on the day of the sale |
Limit on the exemption possibilities of its guarantee by the vendor for hidden faults |
| WOOD LICE |
| Any building constructed in a zone defined as being 'risky' by the Préfet |
- The whole building |
3 months maximum on the day of the sale |
Limit on the exemption possibilities of its guarantee by the vendor for hidden faults |
| AREA DEFINED BY THE CARREZ LAW (LOI CARREZ) |
| Properties which are dependent on a co-ownership status: apartments |
The area of each individual lot that is to be measured and given is that of the floors of the enclosed and open premises, once the areas taken up by the walls, the partitions, steps and staircases, door and window embrasures have been deducted. The floors in the premises which are lower than 1,80 m are not taken into account.
Advice of the Notary :
* It is preferable to call upon the services of a professional who will provide a diagram with the calculations
* Each one of the lot should be measured up distinctly. |
Once the measuring certificate has been delivered its duration is not limited in time. |
Should the effective area of a lot proves to be smaller by over 5% to what is expressed in the sales act, the vendor will pay the buyer for the pro-rata difference. However, should the actual area be superior to the expressed area, this will have no bearing on the price.
Any action must be undertaken within one year after the definite sales contract is signed. |
| Any cost relating to such searches, diagnoses and official acts will be met by the vendor and must without fail be in the possession of the notary at the latest on the day the pre-contract is signed. |
The rights of the buyer
In an effort to combat impulse buying, the legislator has introduced a delay of 7 days which may be either a retraction pull-out delay (Article L 271-1 paragraph 1 of the Code de la Construction et de l’Habitation) if it concerns an act signed privately, or else a 'cooling down period' where it concerns signing an official authentic act (Article L 271-1 paragraph 3 of the Code de la Construction et de l’Habitation).
Only a non-professional buyer who is acquiring a property (apartment or house) for dwelling purposes or for a mix of dwelling and professional purposes can make usage of the aforementioned delays.
This legislation does not cover the buying of building land.
If this legislation is not adhered to, the buyer, which the law is seeking to protect, the buyer may call upon the nullity of the act for a period of five years following its signing.
IMPOSITION OF CAPITAL-GAINS
New régime, applicable since 1 January 2005
TAXABLE OPERATIONS: SALES, swaps, sharing in situations other than in a conjugal situation or inheritance, shares in a company.
MAIN CASES OF EXEMPTION
Any property held over 15 years is exempted
The ownership delay is calculated by 12 month period from the date of buying until the date of selling.
MAIN HOME
The usual and actual residence of the owner on the day of the sale, regardless of how long the property has been owned (even less than 5 years)
Sales of 15 000 Euros or less
This limit is to be understood per lot.
If the property is held in joint tenancy, the limit of 15.000 € must be seen as referring to each undivided commission.
Old Age Pensioners and invalids on low income
There are 2 conditions which must both be met :
- the sellers must not be subject to the I.S.F tax (Impôt de Solidarité sur la Fortune)
- their taxable income of the year prior to the one before the sale (N – 2) must be less for a capitals-gain made in 2005 to:
* 7.116 € for the first part of the first part of the income splitting system in application
* 1.914 € for each supplementary part (that is to say 10.993 € for a couple with no dependent child).
DETERMINATION OF THE CAPITAL-GAINS
The capital-gains, calculated by subtracting the buying price from the selling price is, for property held for over five years, has a deduction on it, which is calculated according to the length of time it has been held. The capital-gains thus worked out is then diminished by a flat rebate of 1.000 €.
| DEDUCTIONS |
COSTS
7,5 % of the buying price or
actual costs |
DEDUCTION OF THE COSTS RELATING TO CONSTRUCTION, EXTENSION, REPAIRS, RENOVATION
- Only official company invoices are deductible. It is no longer possible to deduct invoices for raw materials or equipment.
- If the property is sold over 5 years after being acquired, one can deduct a fixed cost of 15% of the original acquisition price. |
ALLOWANCE FOR LENGTH OF OWNERSHIP
10 % per year of ownership of the property beyond the 5th year.
Said allowance is calculated by 12 month period, without taking into account parts of a year. |
FIXED ALLOWANCE
1.000 € for all |
| TAXATION METHOD |
Calculation of tax :
• proportional rate : 16%
• social contributions : 11%
• Total : 27%
It is due immediately the ownership of the property is established, in the two months following the date of the notarial instrument.
The tax will be levied by the notary on the sales price. |
Example
A person sells on 20 January 2005 a secondary residence bought on 1st October 1994. No special exemption applies. The sales prices is 120.000 € whereas it had been bought for 400.000 Frs (60.980 €). The seller had done the following work on the house: rewiring of the electric system in the year the property was bought (30.000 Frs which is 4.753 €) and changing the old boiler for a new one the following year (7.000 Frs which is 1.206 €).
a) – Calculation of the capital gains
Sale price 120.000 €
Buying price 60.980 €
Buying costs (fixed cost of 7,5 %) 4.574 €
Surcharge of the buying price for work done,
flat rate of 15 % 9.147 €
(The fixed price is more advantageous than
adding up the company invoices : 4.753 € + 1.206 € = 5.959 €
Buying price readjusted 74.701 €
___________
Capital-Gains 45.299 €
Deduction of 10 % for the property being held over 5 years,
calculated over 5 years (parts of year are not considered) :
45.299 € x 50 % = 22.650 €
Fixed deduction 1.000 €
__________
Capital-gains that are taxed 21.649 €
b) – Calculation of the tax
Tax on the revenue generated by the capital gains
21.649 € x 16 % = 3.464 €
Social contributions 21.649 € x 11 % = 2.381 €
Total tax due 5.845 €
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