Acquisition of real estate in France by foreigners: legal framework, urban planning

1 Legal framework for the acquisition of real estate

France does not impose any nationality restrictions on real estate ownership. Foreigners, whether they are residents or not, are free to buy real estate in France (housing, commercial premises, land, etc.). Unlike in some countries, the purchase of a home in France does not automatically entitle you to a visa or a residence permit – a foreign owner does not have any particular privilege to reside on French territory. On the other hand, the French law of the place where the property is located applies to the transaction: if the property is located in France, it is French law that determines the ownership, the legal conditions of the sale and the tax regime applicable. French property rights, protected by the Civil Code, give the buyer full control of the property (usus, fructus, abusus), subject to public order laws (town planning, environment, etc.).

Role of the notary.

In France, any real estate sale must be finalized by a notarial deed. The deed of sale must be signed by the seller and the buyer before a notary – only this public professional is authorised to give legal force and enforceability to the transaction. The notary plays a central and surprising role for many foreigners: he is mandatory, impartial (he does not represent a party but the State), and his mission goes far beyond the simple signature. He advises the parties, verifies the legal validity of the sale, gathers the documents (seller’s title deed, land registry, technical diagnostics, etc.) and publishes the deed at the Land Registry Service to formalize the transfer of ownership. He is also responsible for collecting taxes (registration fees) and ensuring the legal origin of the funds – anti-money laundering legislation requires him to do so (Tracfin declaration if necessary). For example, the notary will have to verify the origin of a foreign buyer’s funds and may require bank receipts, in accordance with Tracfin. This importance of the notary, a public officer who guarantees the security of transactions, may surprise an Anglo-Saxon investor who is used to dealing through private lawyers.

Preliminary contracts and withdrawal period.

The acquisition usually involves a preliminary contract signed a few months before the final notarial deed. There are two main forms: Unilateral promise of sale, whereby the seller (or buyer) grants the other an option to buy, and the preliminary sales agreement, which is firmly binding on both parties (firm sale subject to conditions). In both cases, the signing of this preliminary contract is often accompanied by the payment of a Locked-in allowance or security deposit (usually around 5 to 10% of the price) deposited with the notary or real estate agent. Above all, the law offers The non-professional buyer one 10-day right of withdrawal after signing the preliminary contractparis.notaires.frparis.notaires.fr. This mandatory period (SRU period) allows the buyer to change his mind without reason, by simple registered letter, and to recover the deposit paid, all within 10 days of the notification of the contratparis.notaires.frparis.notaires.fr. This right, which does not exist in some countries, is a consumer-investor protection in France. For example, a foreign buyer who hastily signed a sales agreement has the option to withdraw within 10 days without penalty – a welcome flexibility in case of doubt or discovery of a major problem. After this period, the preliminary contract is definitively binding: failure to carry out the contract for another reason (refusal of a bank loan, etc.) may result in the loss of the deposit or legal proceedings, unless there is a condition precedent clause.

Checks and due diligence.

Between the preliminary agreement and the final deed (generally a period of 2 to 3 months), the notary carries out extensive legal due diligence. He ensures the “security” of the title: verification that the seller is the owner, that there is no mortgage or undeclared charge, or  hidden easement encumbering the property. He obtains a mortgage statement and the  informative urban planning certificate to find out about the applicable urban planning rules (see section 2). The notary purges any pre-emption rights: if the property is located in an area where the municipality has an urban right of pre-emption (often in the city centre or an area to be renovated) or if it is agricultural land where the SAFER can intervene, he must notify the proposed sale to these authorities. During a period of time (generally 2 months), the town hall or the SAFER may decide to buy the buyer instead at the price agreed. A foreign investor may be confused to learn that a municipality can thus interfere in its transaction – for example, the sale of land to an American buyer could be cancelled if the SAFER exercises its right of first refusal to install a young local farmer. This is a particularity of French law aimed at the general interest (social housing, protection of agricultural land, etc.). In addition, the seller must provide a file of technical diagnoses annexed to the deed: state of the presence of lead, asbestos, termites, energy performance, sanitation, natural risks, etc. These diagnoses alert the buyer to possible defects or environmental constraints. The foreign buyer will be well advised to have these reports analysed by a technical adviser to avoid unpleasant surprises (for example, discovery after the fact that the house is in a seismic or flood zone – points discussed below).

In short, the French legal framework offers a high level of protection in real estate transactions, via the essential role of the notary and a strict legal framework (regulated preliminary contract, legal deadlines, multiple controls). Specificities such as the notarial profession or the right of withdrawal distinguish the French system and must be well understood by non-residents. Surrounding yourself with an experienced notary (and possibly a bilingual lawyer) is strongly recommended to navigate this process safely

2 Urban planning and environmental constraints

French urban planning law is often perceived as rigid and technical by foreigners, because it closely regulates what can be built or transformed. Each municipality has a Local Urban Plan (PLU), a document that zones the territory by defining for each zone the authorised uses and constructions (urban, agricultural, protected natural zones, etc.). Before buying a plot of land or a property to be renovated, it is strongly recommended to consult the PLU and to request an urban planning certificate from the town hall. Indeed, the urban planning certificate (CU) is an information document specifying the rules applicable to a given plot. The UC is not a building permit, but an official document that lists the urban planning rules, easements and urban planning taxes applicable to a plot of land. There are two types: the information CU (known as the “CUa”) which gives the general provisions (zoning, building rights-of-way, easements, risk prevention plans, existence of a right of pre-emption, etc.), and the operational CU (“CUb”) which also indicates whether a specific project would be feasible on the land. A foreign investor can apply for an urban planning certificate (free of charge) to avoid acquiring a property that is unbuildable or subject to strong restrictions without knowing it. For example, a Dutch buyer planning to buy a plot of land to build a villa on will find out via the urban planning certificate whether the land is buildable, within what limit (surface, height) and under what conditions (e.g. obligation to connect to the sewer, or presence of an archaeological area requiring prior authorisation). This preventive approach avoids post-acquisition disappointments.

Zoning and local restrictions.

The PLU may have surprises in store for the uninitiated: a plot of land in a natural (N) or agricultural (A) zone  will in principle be unbuildable (with exceptions for agricultural use or public facilities). Similarly, some municipalities classify sectors as protected areas for landscape or ecological heritage, where the possibilities of building are almost nil. A foreigner attracted to an isolated farmhouse should be aware that extensive renovation or extension may be limited if the area is protected. The rules may impose architectural constraints (e.g. a slate roof is compulsory in a certain village, a ban on masonry fences in a rural area, etc.). Urban planning in France is highly regulated, and any project must scrupulously comply with it.

Building permit and refusal for risk.

Carrying out major works (new construction, significant extension, change of use of a building, etc.) requires prior planning permission: generally a building permit. The permit file is examined by the town hall, which verifies compliance with the PLU and the various standards (accessibility, connections, fire safety, etc.). This process can be long (legal investigation period of 2 to 3 months minimum, more in the event of an investigation or opinion of the architect of the Bâtiments de France). Above all, the municipality can refuse the permit if the project contravenes the rules or presents risks. A common reason for refusal is the situation in  a flood zone: a plot of land located in a red flood risk zone is a legitimate reason for refusing a building permit. Case in point: a British investor had acquired a plot of land on the banks of a river in Provence to build a charming guest house. When the permit was filed, it was refused on the grounds of the risk of flooding: the risk prevention plan classified the area as a no-build zone after serious flooding in previous years. Even though he proposed improvements (building the house on stilts out of reach of the water), he had to give up, as the mayor was opposed to any new housing in this sensitive area. This case illustrates the primacy of public safety considerations over property rights: “Land located in a flood zone can be grounds for refusing a permit,” says a legal expert. Similarly, in mountain areas or areas of land movement, a project may be refused for natural risks.

Heritage and environmental protections.

France attaches great importance to the preservation of historical heritage and the environment, which translates into additional constraints. If the property is located within the perimeter of a historic monument or listed site, the architect of the Bâtiments de France will have to give his or her consent to any exterior change (façade colour, materials, height) – a process that may surprise a foreigner who discovers that he or she cannot freely modify his or her own listed house. Similarly, the Coastal Law prohibits practically all construction within 100 meters of the shore in coastal natural areas, and the Mountain Law limits dispersed urbanization at altitude. Some municipalities have subdivision regulations or green space protection regulations: for example, a remarkable tree on your plot may be protected, making it illegal to cut down. A foreign investor should therefore expect to have to deal with very meticulous local planning rules, whereas in his country of origin the regulations would be more flexible.

Illustration: an American national buys a Provençal villa and wants to build a swimming pool and a pool-house on the land. However, the urban planning certificate reveals that the property is in  a landscape protected area due to a classified panorama. The town hall imposed strict conditions: the swimming pool had to be modest in size, the pool house had to be refused because it created a new visible built area, and trees had to be planted in return. Disconcerted, our owner realizes that even on his private land, the freedom to build is conditioned by the collective landscape interest. Tip: it is wise to call on a local architect or an urban planning lawyer to study the development potential of a property before acquisition, especially for extension or major renovation projects.

In summary, French urban planning law may seem restrictive, but it guarantees a planned development of the territory and the protection of the general interest. A foreign investor must prepare for this by collecting as much information as possible beforehand: urban planning certificate, consultation of the PLU, meeting with the town hall’s urban planning services. This will allow you to know exactly what is possible or forbidden on the coveted property, and to adjust your project accordingly. It is better to find out before buying that a plot of land is not buildable, than after signing and paying the price… The real-life examples of permits refused because of zoning or heritage show that in France, you can only build in strict compliance with local rules.