Transaction costs

An important element often overlooked by buyers is the cost associated with buying property in France. Transaction costs, which include real estate agents’ commissions, notaires’ fees and various taxes, typically amount to 12% of the purchase price, although this figure can vary considerably.

The convention in France is for the real estate agent’s commission to be paid by the buyer, rather than the seller. It is not uncommon for the advertised sales price of a property to include the agent’s commission. However, if the buyer is responsible for paying the agent’s commission, this should be clearly stated in the sales particulars. It is therefore important to make sure that you know at the outset not only the level of commission but also who is responsible for paying it.

Real estate agents’ commission varies considerably but is typically set at 5% of the purchase price. As French value-added tax (TVA) of 19.6% is payable on this amount the actual level is in fact closer to 6%. While for some higher value transactions the commission might be lower some agents charge as much as 10% of the purchase price while others charge both the seller and buyer. Whatever the level of commission it is important to remember that the agent is a party in the transaction so the commission is subject to negotiation.

Other fees and taxes can amount to between 7% and 10% of the purchase price and include the notaire’s fees, stamp duty and other disbursements. The notaire’s fees are fixed by law and vary according to the price of the property but typically work out in the region of 1% of the purchase price, or 1.2% including TVA. The scale is as follows:

Fraction of sale price                   Rate               Rate incl. TVA @ 19.6%

Up to €6,500                                4.00%           4.784%

Between €6,501 and €17,000     1.65%           1.9734%

Between €17,001 and €30,000   1.10%           1.3156%

Above €30,001                             0.825%         0.9867%

The notaire will also add various expenses, typically amounting to a few hundred Euros, to cover searches and other disbursements.

The other major expense item is French stamp duty, known as the “droit d’enregistrement”, which is made up of various state, departmental and local taxes. This is levied at a rate of 5.09% for buildings that are more than 5 years old. For buildings less than five years old, and thus considered new buildings, VAT is charged, at a rate of 19.6%, but stamp duty is payable at the much lower rate of 0.7%. Unlike the agent’s commission, the notaire’s fees and the “droit d’enregistrement” are not negotiable. It is worth noting that any purchase made through a regional SAFER is exempt from the “droit d’enregistrement”, which can mean significant cost savings on higher value purchases.

If you intend to finance the purchase with a mortgage then you should allow for around 2% of the loan in fees and costs, including registration costs, the additional professional fees of the notaire (0.26%) and the lender’s fee.

Vineyard buyers might also choose to engage technical experts to advise on elements such as the health of the vineyard and the quality of the technical installations and overseas buyers are also likely to incur additional costs related to professional fees for lawyers and accountants to advise on more complex legal, accounting and tax issues.

Not all vineyard acquisitions will be subject to the costs outlined above however. Where it is the shares in a company that are being sold, rather than land and other assets, the “droit d’enregistrement” is not levied and it is not necessary to use a notaire. Although the parties will still incur legal and other professional fees these are likely to be much more modest than the obligatory fees and taxes incurred as part of a standard property transaction.

Alexander Hall