In periods of great change and shifts in global markets across all sectors, investors become curious as to how they can protect and grow their portfolios. Real estate has always been an important segment of any investment portfolio and remains heavily influenced by the changes and challenges facing us today.
Real estate along the French Riviera has always been unique, in that only 62% of homes are primary residences. The allure and charm of this part of the world has attracted international investors for decades with its unparalleled beauty, highly regarded art and culture and its ability to perfectly match a lavish lifestyle. The question is however, is now a good time to buy a property on the French Riviera? And if so, who can assist you in making the best decision for you and your family.
Rosemont was pleased to answer a selection of often-asked questions, in order to help you better navigate the French Riviera real estate market.
What do first time foreign buyers need to know before purchasing a property in the south of France?
Any client purchasing real estate (residential or commercial) in France may be faced with an increasingly complex array of tax, regulatory, inheritance and legal issues.
Remember: buying a property is a very important step and it is always easier to structure your real estate purchase in the beginning than to change it afterwards. Make a plan and stick to it.
Choose a reliable real estate broker.This is the person you are trusting to ensure that your transaction is finalised in the best way. They should have a good understanding of the technical issues in a real estate purchase, and should do their full due diligence of the property purchase (eg: covering title, urbanism and construction issues). They should follow the transaction on your behalf from beginning to end. Take your time to make a good choice.
Don’t deny yourself the luxury of having a tax and legal advisor to assist you during the whole purchasing process. They will ensure that all stages of the purchase are prepared well in advance and are followed as agreed with you. If you bring them into the process even before any offer is made you won’t regret it, because the purchase process can be full of complications.
The work of all professional bodies involved in the purchasing process will depend on these two choices. Each of them has vital knowledge and competencies, and they will work together for your interests.
Rosemont International can provide a personalised, tailor-made service, from planning the purchase to the finalisation of a possible sale or throughout the period of ownership of the property.
What are the top 5 tips important for international property investors to know in the South of France?
All deeds relating to purchase of property located in France must be drawn up in authentic form, i.e. by a French notary. This principle is mitigated in the case of an indirect purchase, by buying the shares of a company which itself owns the property.
- The notary’s obligations will include informing the purchaser of the rules applicable to town planning, particularly in the south of France due to the constraints of the coastline (easements, rights of way, alignment strikes (“frappé d’alignement”, etc…).
- All real estate transactions (direct or indirect) are subject to registration duties in France, for which the rate is between 5.09% and 5.8% for direct sales depending on the department, and 5% for sales of shares in real estate companies.
- All income related to real estate located in France (income or capital gains) is taxable in France in almost all situations under French law and international tax conventions.
- In addition to the utility bills of a property (electricity, insurance, etc.), the ownership of a property in France on 1 January of a tax year automatically leads to its owner being liable to property tax. This property tax is supplemented by a habitation tax which can be recharged to the tenant in case of rental.
- In France, ownership of real estate assets with a net value (i.e. after deduction of specific expenses) of more than €1.3 million is liable to wealth tax at a rate of between 0.5% and 1.5%.
Rosemont’s free guide to owning real estate in France is available on request.
What properties around Monaco attract the interest of your clients?
Given the economic and urban configuration of Monaco, the vast majority of property purchases are for apartments. However, the profile of our clientele allows them to look for properties with a surface area of more than 100m², corresponding to flats of 5 rooms or more.
We also have many clients who decide to invest in luxury properties on the outskirts of Monaco (Saint-Jean-Cap-Ferrat, Cap d’Antibes, Cannes, Mougins, Beaulieu-sur-Mer, Villefranche-sur-Mer etc.).
What properties for sale in Saint Tropez attract the interest of your clients?
In Saint Tropez, it is above all the reputation of the place that motivates purchases. Our clients invest in luxurious villas next to the beaches of Pampelonne or, for those who want anonymity and tranquillity, in the hinterland in places like La Garde-Freinet or Plan-de-la-Tour, in remote properties surrounded by vineyards and the Maures hills.
What legal entity would you advise to set up before a client's first purchase of real estate on the French Riviera ?
Our advice depends above all on the nationality but also on the wishes of our clients.
In the case of a structuring in France, we typically orient our clients towards S.C.I. (société civile immobilière) or S.A.R.L. de famille (limited liability company for family), depending on whether or not the property will subsequently be rented.
In Monaco, given ease of incorporation and administration, an SCP (société civile particulière) is the most common.
A Monaco SCP can be used for purchasing real estate in France.
SCP or SCI? For non-French residents, the SCP will be of interest for long term estate planning. According to our experience, each purchase is unique and advice must be tailored to the specificities of each case.
Can you offer short-term holidays rentals from a property purchased with an SCI?
Of course, seasonal rentals on the French Riviera are possible through an SCI/SCP. But the SCI/SCP may then surely not be the appropriate structure. Indeed, the furnished rental activity makes the structure (originally transparent, i.e. whose income is taxable at the level of the shareholder) liable to corporate income tax.
The main disadvantage of this situation is that the company will be obliged to book a “deemed rent” in its accounts, corresponding to the period of occupation of the property by its shareholders. On the other hand, the value of the property can be depreciated over its period of use.
In a nutshell, the fact that a seasonal rental is envisaged must be anticipated in order to foresee all the tax consequences that it entails.
What legal and administrative pitfalls should international first time buyers watch out for when acquiring a property on the French Riviera ?
There is an enormous variety of attractive real estate on the French Riviera, from ancient to modern. The purchasing process is reasonably straightforward with expert assistance to avoid common pitfalls. It is difficult to mention all of them but here are some:
- The purchase contract: The contract is signed early in the transaction. It usually includes several conditions precedent that, if unfulfilled, allows the buyer to withdraw within a fixed period and the deposit will be returned. Typically, the sale could be subject to the buyer obtaining suitable financing or the confirmation of the regularity of the building.
- Surveyor’s Report and Compulsory Reports: We would recommend that a surveyor familiar with French properties be instructed to report on both the structure and, if required, planning issues.
- Structuring the Purchase: A property can be directly owned but there are French tax and succession law issues that may make ownership through a company preferable.
What role do Family Office play in the selection and purchase of a luxury property ?
The family office concept was created in the early 1900’s by US based families to oversee the management of their wealth. With the growth of wealthy families there developed a multi-family office that enabled a number of families to share together the benefits of a family office.
Single Family Office: Support can be provided for the family across a wide range of matters through the centralisation of administration and reporting. The office may deal with the practical needs for the family in such matters as travel arrangements, the management of the family assets, including property management, and family meetings and governance.
Multi-Family Office: For individuals or families who want the advantages of a family office but do not wish to establish and operate their dedicated family office or do not consider the cost of running an office can be justified, there is the alternative of engaging a multi-family office.
As the name suggests a multi-family office administers and manages the affairs of a number of families.
So, taking into account all said above we can say that a family office is an independent advisor to a family/families, overseeing asset management including real estate investments. The family office team can assist to find the ideal properties for their clients. They will work with known real estate companies and independent brokers, looking for private deals following the requests of their clients and pre-selecting properties according to their wishes. The added value of a family office is a one-stop shop approach where the client saves time – the most precious asset today!
What are the benefits of using a Family Office ?
The advantages are numerous in that the clients have a dedicated team of experts working specifically for them, reducing the need to employ third party experts. In particular, when a multi-family office is involved this may avoid the investment in time and the expense for a family to establish their own dedicated entity, plus the on-going cost and responsibility of operating the office while securing all the advantages of a dedicated family office.
In addition to the centralisation of the administration and reporting for the family’s assets and onshore and offshore entities, there are the following practical benefits:
- Advice from a wider range of professionals with diverse backgrounds, experienced in the coordination of other advisers.
- Sharing of ideas resulting from solving issues for multiple families.
- Negotiated cost savings with financial providers (e.g. investment management, custody, trading costs) benefiting from economies of scale.
The realm of Family Offices is one built on trust; trust that the wealth of one’s family is protected for future generations. It is for this reason that it is pertinent to choose the perfect service provider to fit the unique needs of each family.
For more information, please contact us at contact@rosemont-mc.com