Buying New Developments / Off Plan Properties in France

New Builds in France and Offplan Properties Investment

When buying a property in France that has not been built yet – ie buying ‘off-plan’ - you will need to be prepared to wait for your property, as normally building doesn’t start until much of the development is sold. You will be able to view the site and situation of your property. You may also be able to view similar properties that the developer has completed.

Occasionally we can offer a development in a refurbished property, in which case you can view the building.

Procedures for Purchasing Off-Plan Property

Once you have decided on the property you will sign a ‘Contrat de Reservation’ and pay a deposit of up to 5%. The contract will specify the building schedule and payments to be made at each stage of the construction. Normally the first stage payment will be due once the foundations are laid, at which time you will be asked to pay 25%, making your payments so far add up to 30%. At this time you will sign the ‘acte authentique’ and become the owner of the property; the Notaire’s fees are payable at this time. For new properties there are reduced Notaire’s fees: between 2.5 – 4% of the purchase price.

French regulations regarding purchase of new properties are very protective of the purchaser. The developer must have a bank guarantee in place which gives the purchaser a guarantee that he will get his property come what may – even if the developer runs into financial problems.

As the property construction progresses, further stage payments will be requested until 95% has been paid, you should then visit the property to check that all is in order and give the developer a snagging list if necessary, before paying the final 5% and receiving the keys.

If you are taking a mortgage to purchase French property, the lender will pay the stage payments as necessary once you have paid your contribution; they will however check with you prior to handing over any money.

Advantages of Buying New Build Properties

New build properties are built to comply with modern regulations and will have a 10 year guarantee. Good insulation and low maintenance materials mean that the upkeep is likely to be low.

New developments provide a ready to move into property and also offer the possibility of making friends as most purchasers will be taking possession of their properties at the same time, so it is an opportunity to meet like-minded people of different nationalities.

We have seen the prices of these properties rise so that their value is often higher before you even take possession. You need to be aware that many developers will increase prices every few months for the properties not yet sold on a development. Prices for new developments are not usually negotiable.

Investing in French Property

If you are looking to invest in France it is definitely worth considering purchasing a property giving you a guaranteed rental. Latitudes offer a selection of properties that are to be purchased off-plan where an insurance-backed guaranteed rental is offered by a rental management company on a three year lease.

This is a classic purchase where some of the development will be purchased by people wishing to use them for permanent or holiday homes. Therefore if you wish to purchase in order to achieve a good capital increase on your investment they offer excellent potential, as much of the development will be owner occupied and therefore easily saleable on the open market.

Buy To Let - Guaranteed Rental

French properties are available with rental returns of approximately between 3.8% - 5.5% guaranteed. The management company will find a tenant and collect rents etc. The property is let unfurnished. The charges that the rental company will make for managing the property plus the rental guarantee will amount in total to just over 10% of the rental. The guarantee will provide that should the property not be let, or rent not be paid, you will still receive the rental quoted to you. Should the property be let for more than the guaranteed amount, you will receive in full the extra amount whilst the tenant is in situ. The rental is also index linked.

What happens when the Lease Term is Complete

If you wish your tenant to leave at the end of the 3 year term you must write to give him notice 6 months prior to the end of the agreement and you can then use it for your own purposes or sell. If the tenant wishes to leave before the end of his tenancy he can give 3 months notice at any time, and if you wish to relet the management company will do this for you, but in the event that you have a void, your guaranteed rent will be paid. Alternatively, you can take the property for your own use at that time.

After each three year lease is over you can renew with the management company for a further period of three years if you wish. A deposit from the tenant is held by the management agency against dilapidations.

This type of purchase gives you more freedom to sell or move in when you wish but it does not allow any personal use whilst letting. Also of benefit is that the development is lived in by many of the owners, not just renters, so that it may be more saleable on the open market. The properties are generally well priced and have good potential for capital increase due to their location.

See also Leaseback Purchases

See our Glossary for more common terms you are likely to come across when Buying or Selling Off Plan New Properties in France.