Expert Insights: Navigating Common Challenges in French Property Ownership

Our Head of French Legal Services, Matthew Cameron, answers some common questions about French property.

1. The mairie of the tiny French village where I own a second home recently approved a decision to give the main road through the village and all the little side roads ‘proper’ names. Previously, everyone in the village had the address ‘Village’, followed by the name and postcode of the village. Could someone please enlighten me as to what happens about the address shown on the acte authentique, which now bears no resemblance to the new, official address for my cottage? Utility companies require an attestation de voirie in order to amend account addresses, which is pretty straightforward to arrange, but I’m intrigued about whether I need to do anything to update the deeds to the property. As this process appears to be affecting much of rural France, there must be others in a situation similar to mine.

The short answer to the question is that nothing needs to be done to the deeds. Residents of rural France will no doubt be well acquainted with the typical format of addresses in a small village. These are often extremely scant in detail – often without specific street names.

Such references will also appear in the title deeds to the property – often called the ‘Acte Authentique’, or the ‘Titre de propriété’, or ‘Acte de Vente’. It is clear that this is an important document, as it constitutes the owner’s proof of title to their home in France. So, it would seem reasonable to expect that this should be updated to ensure the details remain correct.

Yet that is not a requirement. At the time of a future transaction relating to the property, the notaire will include confirmation of the original address details, along with an explanation of how the address was changed. This will allow for any future owner to be able to trace the history of the property correctly.

In a similar manner, the land registry references to a property, the ‘cadastral’ references, can occasionally be changed unilaterally. Amendments to these references will usually arise when a plot of land is split into two or more parts, in which case each new part will be attributed a new reference number. However, the register can sometimes be updated for different reasons, with new numbers conferred to a whole area. In such cases, the notaire would update the title deeds in the same way – at the time of a future transaction.

It is also important to bear in mind that the actual original of the title deed is retained at the notaire’s office. Notaires have an obligation to ensure the safekeeping of land registry documents. The version of the document held by any owner will, at best, only be a certified copy.

2. I am planning to buy a holiday home in France. I have a lot of cash in my English company, and my accountant says that if I buy the house in the name of the company I can avoid having to pay tax on the dividend. But I have heard that this can cause problems. Is that correct?

Anyone buying a property in another jurisdiction must give full consideration to the legal and financial implications arising in both countries. What might be beneficial in one country can be disadvantageous in the other.

This general warning can certainly apply to a proposal to buy a French property through a UK-based company. First of all, a French property owned in a non-French company is likely to be treated as a wasting asset of that company. This means that the value of the property would be reduced at the time of its sale, resulting in a greater exposure to French capital gains tax.

If the property is rented out, then it would be for the company to declare any rental income in France, which can result in complex overseas.

There is a requirement for non-French companies to file all details about the company (such as the shareholders, overall share capital and registered office) and to keep them updated, at risk of an annual penalty of 3% of the property value.

A well-intended exercise in tax planning can result in various problems, including complications when any shares are transferred.

3. We live in France. Our financial advisers in England have suggested that we should transfer the home into our offshore trust.

Given that France takes a sceptical view of trusts, it is very likely that structuring the ownership in this way is to be discouraged. The French State recognises that trusts exist, but there is an intention to establish who the actual beneficial owner of a property really is. After all, while trusts are often established with a view to the tax-efficient holding and transfer of assets within a family, they can also be used to hide the identity of the eventual owner.

There are strict requirements to declare the existence of any trust that has a suitable link to France. That link can, for example, be the residence of the person who set up the trust, the trustees or the beneficiaries; it will also be where the trust includes a property in France as one of its assets.

Failure to declare the existence of a relevant trust can give rise to penalties. Declaring the trust can also generate tax liabilities.

Such planning should only be undertaken with caution and with detailed professional advice from people with suitable knowledge of the tax and legal implications both in France and in any other relevant jurisdiction.

If you are in any doubt about French Property Law, you should seek expert advice.

Contact our French law solicitors today

If you have any questions or would like advice on creating a French Will, cross-border estate planning or buying/selling a French property, please get in touch with our specialist French Legal Services team through this website or by calling 0330 404 0768.