Payment delays after selling a French property

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The proceeds of your French property sale might not go straight to your bank account and there are many reasons why there may be a delay, as Matthew Cameron explains

It is generally expected by Brits that when any property is sold, the proceeds are delivered to the seller on the date of completion, or at the latest the following working day. That is, after all, what happens as standard in England and Wales. It may be of great importance that the proceeds will be released – especially if they are to finance a subsequent purchase.

Normally, a notaire will indeed be in a position to remit the proceeds directly to the seller on the date of completion. Recent finance regulation changes mean that the proceeds will have to be submitted by bank transfer rather than a cheque or banker’s draft, and that transfer should take place straight away. There are, however, some cases where this immediate remittance of funds will not take place, and we will look at some instances where this might be so. The list will not be exhaustive, as there may be other reasons why a notaire has held on to the funds.

One perhaps rather prosaic situation that does come up from time to time relates to the fact that a notaire’s office tends to be smaller than many firms of solicitors in the UK. There are many notaires who work in sole practice or with one other partner and they may not have a full-time accounts team. We’ve seen instances where the only reason the funds had not been delivered to the seller was that the cashier wasn’t in the office for a few days.

Most buyers and sellers will be aware that it is not always necessary to attend the completion meeting at the notaire’s office on the sale of a house, as authority can be delegated through a power of attorney.

However, one benefit of attending the completion meeting, even as a seller, is that it should be easier to obtain a confirmation from the notaire that the funds will indeed be remitted immediately. If the sale deed is signed on the seller’s behalf by someone else by virtue of a power of attorney, it may be a little harder to obtain that confirmation.

A more common instance where the proceeds are not to be remitted in their entirety to the seller is when a retention is agreed. This may be, for example, where the sellers have not observed their obligations under the terms of the contract. Such retentions may be required by the buyer where the seller has not carried out agreed works, or has perhaps not vacated the property.

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Occasionally, as part of a sale agreement, a seller will retain the right to occupy the property for a period after the sale completes. In such cases, it is reasonable that the buyer will have some financial hold over the seller to guarantee that the property will eventually be delivered up with all the work carried out, and without any of the seller’s possessions, rubbish or family remaining.

Another instance in which the proceeds will not be remitted immediately is where there is a mortgage to discharge. The notaire will normally have obtained a breakdown of the amount required to clear the mortgage charge. This would include not only the loan itself, but any amount for outstanding interest, charges and early repayment penalties.

It is important for the seller to note that there will also be a fee for clearing the charge from the mortgage register. Occasionally, this will not be available – perhaps where the calculations from the lender are out of date. In such a situation, the notaire may hold on to the proceeds until up-to-date figures are obtained.

It is perhaps self-evident that a retention would be made where there is a capital gains tax liability in France, to ensure the tax is paid. There are occasionally doubts as to the exact amount payable, possibly due to whether the cost of certain works would be admissible to reduce the tax, in which case the notaire may wish to hold back an extra amount to cover any further sum.

When dealing with the sale of a property, a notaire can occasionally receive notice from third parties that the seller owed other debts, requiring that these be reimbursed out of the proceeds. A typical example of this is where the tax office believes the seller owes tax. If a notice is served on the notaire, a retention would have to be made.

In saying all of this, it is important to bear in mind that the starting point for notaires is that they should not deliver the proceeds until they have received the results of a land registry search known as the état sur formalité. This is a search that will confirm that the seller has not attempted to register any mortgages, or to enter another sale, relating to the property, such that the buyer can purchase free of any new third party rights. In general, however, this point is covered by insurance, so in reality it should not present a problem.

In most instances, a seller would be fully aware of the position, and would understand why some of the sale price is being held back. That certainly should be the case, as the notaire should clarify such issues in advance of any steps being taken. Again, however, if a seller has signed a power of attorney so as to avoid attending the notaire’s office for the completion meeting, then the attorney may have been able to make any relevant decisions on the seller’s behalf.

Matthew Cameron is a partner at AshtonKCJ Tel: 01603 703070