French title transfer process

French title transfer process

Elise Klein Wassink, Specialist Broker, Title Protection Europe

Most transactions in France include properties that have, at some point in time, benefitted from a building permit. Usually the building permit per se forms part of the file presented to the acquirer. However, paperwork documenting the next steps in the building process up to proof of conformity of the construction works as executed with the building permit, may be missing or incomplete. And in some cases, the buyer when visiting the building plan in hand finds that the construction work as executed does not correspond to the building permit as granted. In both cases, when documents are missing or when the actual construction and the permit do not coincide, the negotiations between buyer and seller may turn sour: should the price of the property be reduced, should the seller give extensive guarantees and put a part (which portion?) of the sales price in escrow, and when does the risk actually lapse, if ever?

We have assisted on a number of such occasions recently, proposing to take the risk off the shoulders of seller and buyer, thus taking the sting out of the negotiations, allowing the transaction to be concluded within the planned time frame and without the buyer or the seller incurring extensive cost.

It is noted that such a known risk policy involves the obligation for the insurer to defend the title against claims of third parties, including but not limited to the municipal authorities.

Having met with a number of market players in France, we find that in the Paris area properties may sometimes present a tax liability relating to the so-called "redevance pour création de bureau". Legal experts have different views on if and when this risk lapses over time. All agree that the financial impact will be substantial due to fines/penalties and interest charges.
Buyers and sellers in the Paris market are accustomed to this issue, and may take a commercial view. We have reason to believe that banks and other financial institutions may not. In the current economical climate, the cost of debt will increase or lending conditions will become more stringent, if a property presents this type of latent liability.

Together with FAF, I am willing to study any case presenting this type of risk, in order to develop a product that caters to this need, specific to the properties in the Paris area.