Real Estate

In France, the sources of real estate law are many and varied, depending on both the nature and use of the property.

Real estate law has its roots in the Civil Code, which constitutes France’s general law. In accordance with the adage “Specialia generalibus derogant” (ie, what is special derogates from what is general), special real estate law is comprised of several other texts designed to be applied depending on the nature and/or use of the property.

The applicable statutes include:

• the Commercial Code (for buildings used for professional or commercial purposes), which sets out the applicable rules governing the status of commercial leases;
• the Construction and Housing Code;
• the Town Planning Code;
• Law 65-557 of 10 July 1965 on co-ownership;
• Law 70-9 of 2 January 1970, known as the Hoguet Law, governing the activities of real estate agents;
• Law 89-462 of 6 July 1989 on buildings used as a main residence;
• Law 2000-1208 of 13 December 2002, which imposes obligations in terms of social housing and sustainable urban development;
• Law 2014-366 of 24 March 2014 (‘ALUR Law’), which introduced major reforms to the real estate sector, particularly in terms of:
• • rentals;
  • co-ownership; and
  • town planning;
• Law 2014-626 of 18 June 2014, known as the Pinel Law, which radically changed the commercial lease regime; and
• Law 2018-1021 of 23 November 2018, known as the ELAN Law, which deals notably with development, construction and social housing policies.

In France, several special regimes apply to properties depending on:

• their nature (eg, residential, commercial, agricultural);
• their use (eg, rental, professional);
• their particular status (eg, historic monuments, protected areas); and
• the purpose of the transaction (eg, sale, letting, renovation).

Co-owned properties are governed by Law 65-557 of 10 July 1965 and its Implementing Decree 67-223 of 17 March 1967.

Properties classified or listed as historic monuments are governed by:

• the Malraux Law (Law 62-903 of 4 August 1962); and
• the Law on Historic Monuments of 31 December 1913.

Properties in protected or classified areas (natural or environmental zones) are governed by:

• the Water Act (Law 92-3 of 3 January 1992);
• Law 2016-1087 on the preservation of biodiversity, nature and landscapes; and
• the Environmental Code.

Properties in dense urban areas are subject to a special regime designed to:

• regulate the real estate market; and
• limit excessive rent rises.

Rents are regulated in certain urban areas by the ALUR Law and the ELAN Law, which impose a cap on rents in these areas. There are also rural revitalisation zone and urban revitalisation zone schemes that provide tax exemptions and aid for construction or renovation to encourage sustainable urban planning and housing affordability.

A tax is also imposed on vacant dwellings to combat the housing shortage in dense urban areas.

Finally, there are special regimes applicable to rental properties:

• Real estate used as a main residence is governed by Law 89-462 of 6 July 1989; and
• Professional or commercial used property is governed by:
• • the Commercial Code;
  • the Pinel Law; and
  • for certain provisions, the Civil Code.

In France, the ownership right is a fundamental right that can be broken down into several types, each with its own characteristics and legal implications:

• Full ownership (absolute right to the property): The owner has:
• • usus (ie, the right to use and live in the property);
  • fructus (ie, the right to exploit the property – that is, to rent it out and collect rent); and
  • abusus (ie, the right to dispose of the property – that is, to sell it).
• Dismemberment of ownership (shared ownership): This involved dividing the attributes of ownership (usus, fructus and abusus) between several people. The bare owner owns the walls of the property and can sell it freely (abusus) but cannot use or live in it. The usufructuary does not own the property but can live in it or rent it out (usus and fructus).
• Co-ownership: This is a legal system that applies to buildings where ownership is divided between several people, each owning a fraction of the building, called a ‘lot’.
• Undivided ownership: In this situation, several people own a property together, without their respective shares being materially divided. Each joint owner has rights over the entire property.
• Separate ownership of land and buildings: This is a new form of home ownership that enables people to own a home without having to acquire the land on which it is built. It is a real estate and solidarity lease, created by the ALUR Law of 24 March 2014 and implemented in 2017.

The most common structures are as follows:

• The most common is the civil real estate company, which is a legal structure that enables several people to jointly own a property in the form of a company. It is often used to manage personal or rental property assets.
• The civil real estate investment company (SCPI) is an investment company that enables private individuals to invest in a diversified real estate portfolio, without having to manage the assets directly. SCPIs collect funds from investors and use this money to buy and manage real estate assets (eg, offices, retail, housing).
• Real estate investment schemes (OCPIs) and listed real estate investment companies (SIICs) are vehicles dedicated to indirect investment in real estate (similar to SCPIs). Unlike SCPIs, OPCIs are made up of both real estate and financial assets, while SIICs are listed on the stock exchange.
• The civil construction-sale company is a company whose purpose is to buy, build and then resell one or more properties, with the aim of realising a capital gain on the transaction.
• A trust (fiducie) is an instrument whereby a person (the settlor) transfers ownership of a property to a third party (the trustee), who manages it for the benefit of one or more persons (the beneficiaries).

Real estate ownership in France is subject to various legal restrictions that may limit the exercise of property rights. These restrictions are often justified by considerations of general interest, such as:

• town planning;
• environmental protection; or
• heritage preservation.

For example, there are restrictions relating to town and country planning. Real estate is regularly subject to strict urban planning rules laid down by the local urban plan, which determines:

• which areas are buildable;
• which areas are protected; and
• what types of construction are permitted.

There may also be restrictions on:

• building height;
• location;
• materials; and
• density.

Certain areas – such as agricultural, natural or flood areas – are protected. As a result, any change in land use (construction or transformation of a property) may require specific authorisations or be prohibited.

To this end, local authorities and land development and rural establishment companies have a right of pre-emption which enables them to acquire, as a priority, a property that is put up for sale on their territory, with the aim of carrying out:

• urban development projects; or
• other objectives of general interest.

In addition, prior to any construction, conversion or alteration of a property, a building permit or prior declaration of works may be required by the local council.

Some properties may be subject to servitudes, such as:

• easements of passage; or
• servitudes of view.

These easements impose a burden on the servient land for the benefit of the dominant land.

Restrictions may be imposed in architectural, urban and landscape heritage protection zones and on listed sites, such as nature parks or buildings listed as historic monuments –particularly in relation to the development, maintenance, alteration and renovation of buildings.

Restrictions may also apply to commercial and residential leases. For example, Law 89-462 of 6 July 1989 lays down rules on:

• rent increases;
• lease termination; and
• tenants’ rights.

As for commercial leases, the Pinel Law also imposes restrictions – notably on rent increases.

Article 552 of the Civil Code states that ownership of the ground entails ownership of the land above and below it.

In some cases, however, there are legal mechanisms that allow for the separation of this ownership, temporarily or for specific situations. These exceptions create real property rights distinct from the classic right of ownership. The main mechanisms are as follows:

• Right of superficies: This a real property right that allows a person (the superficiary) to own the buildings (or plantings) located on the land of another (the landowner). This right is temporary (maximum duration of 99 years, often renewable) and is generally established by a contract (notarial deed). The superficiary has the rights of an owner over the buildings (ie, it can sell them, rent them or mortgage them) for the duration of the right of superficies. At the end of the right of superficies, the landowner, in principle, becomes the owner of the buildings again (by accession), unless otherwise agreed (eg, a clause providing for compensation to the superficiary).
• Construction lease: This is a long-term lease (18 to 99 years) under which the lessee (the tenant) undertakes to build on the land of the lessor (the owner). The lessee is the owner of the buildings for the duration of the lease. At the end of the lease, the buildings generally revert to the lessor (by accession), unless otherwise stipulated. Clauses may provide for compensation to the lessee or the removal of the buildings. The construction lease grants the lessee a real property right.
• Emphyteutic lease: This is a long-term lease (18 to 99 years) that gives the lessee very extensive rights over the land, including the right to build. The emphyteutic lessee is considered almost the owner of the land for the duration of the lease. It can:
• • build on the land;
  • improve the land; and
  • derive income therefrom.
• However, it must pay a fee to the owner. At the end of the lease, the buildings generally revert to the lessor (by accession), unless otherwise agreed.
• Sale in the future state of completion: This is a special case concerning buildings to be constructed. The buyer acquires ownership of the land and gradually becomes the owner of the buildings as they are built. There is a temporary dissociation of ownership, but the objective is the final unity of ownership.
• Volumes (co-ownership of built properties): The Law of 10 July 1965 on co-ownership applies to built properties where ownership is divided among several people into lots, each comprising a private part and a share of the common areas.
• Party wall agreement: In the case of a party wall (shared wall), a wall or construction can straddle two properties. There will be co-ownership of this construction only, and not a dissociation of the land and the constructions.

Under Article 2375 of the Civil Code, security interests on real estate property include:

• liens;
• pledges; and
• mortgages.

Ownership of the property may also be retained or assigned as security.

Property liens, which are granted by law, are general and exempt from registration (unlike pledges and mortgages).

These privileges:

• cover all of the debtor’s assets (movable and immovable); and
• give the right to be preferred to other creditors, without conferring a right of pursuit, as specified in Article 2376 of the Civil Code.

General liens include civil liens, such as:

• liens on legal costs; and
• liens on wages.

With regard to security interests that relate exclusively to real estate, a distinction must be made between a mortgage and a pledge on real estate:

• A mortgage enables a creditor to guarantee payment of a claim by attaching real estate belonging to the debtor, without dispossessing it of the real estate. It can be:
• • legal (imposed by law); or
  • contractual (freely entered into by the borrower and the creditor, notably in a loan contract).
• A real estate pledge is defined by Article 2379 of the Civil Code as the assignment of a property as security for an obligation, with dispossession of the pledgor.

With regard to the priority order, general privileges take precedence over the preferential right attached to a real estate pledge and mortgage. The priority order between pledges and mortgages is determined by the order of registration with the Land Registry.

The Land Registry service is responsible for storing and distributing information relating to real estate ownership. It ensures the legal security of real estate transactions by registering deeds that:

• modify the ownership of a property (eg, sale, donation, inheritance); or
• create real rights over it (eg, mortgage, easement).

In France, it is compulsory to register real estate transactions and security interests. Failure to do so may result in:

• the deed’s unenforceability against third parties;
• relative nullity; and
• financial penalties.

When signing the final deed of sale, the buyer must pay the notary the property transfer tax. The notary is then responsible for:

• paying these duties directly to the tax authorities; and
• registering the property with the Land Registry.

The same applies to property security.

The notary files the deed with the relevant Land Registry office at the place where the property is located. In most cases, this is done electronically. The Land Registry checks that the deed is in order and registers it. A registration number is assigned to the deed, making it easy to identify and locate. The deed is then published in the property register, making it enforceable against third parties. The original deed is kept at the notary’s office for 75 years, after which it is entrusted to:

• the national archives in Paris; or
• the departmental archives in other cities.

Yes, anyone can access this information free of charge to find out the legal status of a property.

There are three main types of commercial leases.

• Classic commercial lease (or ‘3-6-9’ lease):
• • Term: This is the most common type of lease. It is concluded for a minimum term of nine years.
  • Subject to commercial lease status: This type of lease is subject to the mandatory rules governing commercial leases set out in the Commercial Code.
  • Three-year periods: The tenant can give notice every three years, subject to six months’ prior notice (hence the name ‘3-6-9’). The lessor, on the other hand, cannot give notice before the end of the nine-year period, except for serious and legitimate reasons (eg, non-payment of rent).
  • Right to renewal: At the end of the nine-year term, the tenant has the right to renew the lease. The lessor may refuse renewal, but must then pay the lessee an eviction indemnity, barring exceptions (eg, serious and legitimate reason against the lessee or reconstruction of the building).
  • Rent capping: On renewal, rent is in principle capped at the variation in the commercial rent index (ILC) or the index of rents for tertiary activities (ILAT), barring exceptions (eg, significant changes in local commercial factors).
• Derogatory lease (or short-term lease):
• • Duration: The contract is for a maximum of three years.
  • Not subject to the status of commercial leases: This type of lease is not subject to the mandatory rules governing commercial leases. There is no right to renewal or eviction compensation.
  • Objective: This enables the parties to test an activity or a location before committing to a conventional commercial lease.
  • Transformation into a commercial lease: If, on expiry of the derogatory lease, the tenant continues to occupy the premises, then – with the agreement of the lessor – a new lease is concluded, subject to the status of commercial leases (3-6-9 lease).
• Precarious occupation agreement:
• • Temporary and exceptional: The agreement is entered into for special, temporary circumstances that justify short-term occupation of the premises
  • Precariousness criterion: A precarious occupancy agreement is characterised by the objective precariousness of the circumstances justifying the occupation, which can put an end to the agreement at any time.
  • Not subject to the status of commercial leases: This is not subject to the rules governing commercial leases.
  • Examples:
  • • Occupation of premises pending sale; or
    • Occupation of land prior to construction work, etc.

In France, the terms of a commercial lease are partly regulated (public order) and partly negotiable. The regulated part (governed by Articles L145-1 and following of the Commercial Code) is designed to protect the lessee, which is considered to be a weaker party than the lessor.

Regulated part (public order): Certain provisions of the statute on commercial leases are of public order, which means that they cannot be derogated from by an agreement to the contrary. The main public policy provisions are as follows:

• Minimum lease term: This is nine years, with the option of giving notice every three years.
• Right to renewal: Tenants have the right to renew their leases when they expire, except in the limited number of exceptions stipulated by law.
• Eviction compensation: If the lessor refuses to renew the lease without a serious and legitimate reason, it must pay the lessee eviction compensation in order to offset the loss suffered.
• Rent ceilings on renewal: Renewed rents are in principle capped at the variation in the indices (ILC or ILAT), with some exceptions.
• Unilateral termination clause in favour of the lessor: The lessor may not insert a clause enabling it to terminate the lease early, except in the event of serious misconduct on the part of the lessee (eg, non-payment of rent).

Freely negotiable part (in compliance with public policy): In addition to the provisions of public policy, the parties are free to negotiate certain clauses of the commercial lease – in particular, the following:

• Initial rent: This is freely determined when the lease is signed.
• Security deposit: The amount and return terms are negotiable.
• Charges and taxes: The distribution of charges and taxes between the lessor and the lessee is negotiable, in compliance with the Pinel Law, which provides a framework for this distribution.
• Purpose of the premises: The activity or activities authorised in the premises are defined in the lease. An overly restrictive destination clause may be abusive.
• Subletting: Subletting is prohibited in principle, unless the lessor agrees. The subletting terms (authorisation, conditions, rent sharing) can be negotiated.
• Work: The division of work between the lessor and the lessee is negotiable.
• Resolutory clauses: These provide for automatic termination of the lease in the event of a breach of a contractual obligation (eg, non-payment of rent). Their application is governed by law.
• Indexation of rent during the lease: Indexation is possible, but must comply with legal rules (eg, reference index, frequency).

There are no formal requirements, since the commercial lease contract is by nature a consensual act (it is formed as soon as the parties agree).

However, a written document is strongly recommended, and in some cases mandatory:

• Written form required for leases of over 12 years: When a commercial lease is signed for a term of over 12 years, it must be drawn up in the form of an authenticated deed (ie, before a notary).
• Written agreement recommended for leases of less than 12 years: Although not required by law for nine-year leases (minimum legal duration), it is strongly recommended that a written agreement be drawn up, either:
• • privately (between the parties); or
  • in the form of a notarised deed.
• In the event of a dispute, a written document can be used to prove the existence of the lease and its terms

The written document will generally contain the following information:

• the identity of the parties;
• a precise description of the premises;
• the purpose of the premises;
• the lease term;
• the rent and payment terms;
• any security deposit, if applicable;
• the allocation of charges and taxes; and
• specific clauses (eg, resolutory clause, sublease clause, renewal clause).

In addition, in application of the commercial lease statute, several documents must be attached to the lease in certain cases – in particular:

• an inventory of charges, taxes and fees;
• details of the condition of the premises;
• a statement of work over the past three years and a forecast of work for the next three years;
• risks and pollution status;
• an energy performance diagnosis;
• an asbestos diagnosis;
• an environmental diagnosis;
• a radon diagnosis; and
• an environmental appendix (provided for in Article L125-9 of the Environment Code).

The procedure for concluding a commercial lease in France generally involves several stages, which can be summarised as follows:

• Preliminary negotiations: Visit to the premises; discussion of the main conditions (eg, duration, rent, excess, security deposit).
• Negotiation and drafting of the lease: It is advisable to be accompanied by a professional, particularly in relation to compulsory information, important clauses, appendices etc.
• Signature of the lease: Careful proofreading; signature by both parties; optional registration; payment of any security deposit; handover of keys and entry inventory.
• Tenant registration (if not already done): To benefit fully from the status of commercial leases, and particularly the right to renewal, the tenant must register with:
• • the Trade and Companies Register, if a commercial company; or
  • the Employment Repertoire, if a craftsperson.

The main obligations of the lessor under a commercial lease are as follows:

• Obligation to deliver: The lessor must provide the lessee with premises that comply with their contractual purpose, in a good state of repair of all kinds (Article 1719 of the Civil Code).
• Obligation of guarantee: The lessor must guarantee the lessee peaceful enjoyment of the premises for the entire term of the lease, including through the following:
• • Guarantee against legal disturbances: The lessor must guarantee the lessee against any third-party claim to ownership of the premises.
  • Guarantee against de facto disturbance: The lessor must not disturb the lessee’s enjoyment of the property (eg, by carrying out major work without its consent).
  • Warranty against latent defects: The lessor is liable for latent defects in the premises that render them unfit for use (Article 1641 of the Civil Code).
• Major repairs: Major repairs (eg, load-bearing walls, roof, main pipes) are the responsibility of the lessor (Article 606 of the Civil Code). The Pinel Law regulates the allocation of charges and unfair terms.
• Keeping the premises compliant: The lessor must ensure that the premises comply with current safety and accessibility standards, unless otherwise agreed.

The main obligations of the tenant under a commercial lease are as follows:

• Payment of rent and utilities: The tenant must pay rent and utilities on the agreed dates.
• Use of the premises in accordance with the contractual destination: The tenant must use the premises in accordance with the activity provided for in the lease.
• Routine maintenance and repairs: The tenant is responsible for routine maintenance and repairs (Article 1754 of the Civil Code).
• Insurance: Tenants must take out professional indemnity insurance and comprehensive business premises insurance to cover any damage that they may cause to the premises or to third parties.
• Return of premises in good condition: At the end of the lease, the tenant must return the premises in the condition in which they were received, except for normal wear and tear (comparative inventory).
• Compliance with lease clauses: The tenant must comply with all the lease’s clauses, particularly those relating to subletting, assignment of the lease, work, etc.

In the event of non-performance of one or more of these obligations, either party may take the matter to court in order to obtain:

• compulsory performance of the obligations;
• damages;
• termination of the lease; and
• where applicable, eviction of the lessee.

In France, rent reviews during the term of a commercial lease are governed by law and can be carried out using two main mechanisms: the legal triennial review and the indexation clause (or sliding scale clause).

• Triennial revision (legal revision):
• • Legal right: Article L145-38 of the Commercial Code provides for a three-yearly rent review. This right exists even if the lease does not mention it. It is a provision of public order.
  • Frequency: The revision may be requested every three years, from:
  • • the date on which the tenant takes possession of the property;
    • the lease renewal date; or
    • the date of the previous revision.
  • Request: Revision is not automatic. It must be requested by the lessor or the lessee by registered letter with acknowledgement of receipt or by bailiff’s deed.
  • Revision calculation: In principle, the revised rent is capped at the variation in:
  • • the ILC for commercial and craft activities; or
    • the ILAT for tertiary activities (eg, offices, warehouses).
  • These indices are published by the National Institute of Statistics and Economic Studies.
  • De-capping the rent: In certain cases, the rent may be de-capped – that is, its increase may exceed the variation of the index. This is possible when there has been a significant change in local commercial factors, resulting in a variation of more than 10% in the rental value. These factors may include:
  • • the construction of new infrastructure;
    • population growth; or
    • the creation of commercial zones.
• The burden of proof lies with the party requesting the removal of the ceiling.
• • Procedure in the event of disagreement: In the event of disagreement over the amount of the revised rent, the parties may refer the matter to:
  • • the departmental commercial leases conciliation commission; or
    • the court.
• Indexation clause (or sliding scale clause):
• • Contractual clause: Unlike the triennial revision, the indexation clause is a contractual clause (ie, it must be included in the lease).
  • How it works: This clause provides for automatic rent review at regular (usually annual) intervals, based on changes in a reference index – most often the ILC or ILAT.
  • Advantages: The indexation clause offers greater simplicity and automaticity in terms of revision, avoiding the need to negotiate at each three-yearly expiry date.
  • Legal framework: The law provides a framework for indexation to avoid excessive and sudden increases. In particular, it requires:
  • • the choice of an index directly related to the tenant’s activity or to construction costs. ILC and ILAT are the most commonly used indices;
    • no retroactive indexation, unless agreed by the parties; and
    • the nullity of indexation clauses that would have the effect of only increasing the rent.
  • When, as a result of the sliding scale clause, the rent varies by more than a quarter compared with the previous rent, either party may request an immediate review of the rent. It will then be up to the judge to set the rent at the rental value. The increase may not exceed 10% of the previous rent.
• Cap clause: A cap clause can be inserted to limit rent increases to a certain percentage, even if the reference index has risen more. This protects the tenant against major index variations.
• Revenue clause: This clause stipulates that the rent varies according to the lessee’s sales. The rent includes:
• • a variable portion corresponding to a percentage of the lessee’s sales; and
  • a fixed portion (guaranteed minimum rent).
• This provision is often used for premises located in shopping centres.

The taxation of rental income from commercial leases differs from that of residential leases. Income is taxed according to:

• the nature of the lessor’s activity; and
• the type of rental (bare or furnished, although furnished rentals are much less common in commercial leases).

Here is a simplified summary:

Under the 2014 Pinel Law and its implementing decree, it is no longer possible in France to enter into a commercial lease that fully transfers the three ‘net’ charges (property taxes, insurance and maintenance/repairs) to the tenant. Certain charges – such as property tax and major repairs – must still be paid by the lessor.

It is always possible to negotiate a division of charges between the lessor and the lessee, in compliance with the Pinel Law. For example, the tenant may be responsible for certain routine maintenance costs or part of the insurance. However, the lease must be precise and comply with the applicable mandatory rules.

There are several ways of resolving a dispute between a landlord and tenant.

If an amicable solution is not possible, it may be necessary to:

• send letters of formal notice and attorney letters;
• carry out seizures; and/or
• initiate legal action (notably concerning rent payment or eviction of occupants).

Legal proceedings can be initiated before:

• the judicial court; or
• the commercial court.

Specific procedures also apply, notably to setting the lease rent.

To guarantee tenants’ obligations, several guarantees can be requested, such as:

• a security deposit;
• a first-demand guarantee; or
• unpaid rent insurance.

Real estate transactions in France are carried out in the form of authentic deeds (concluded before a notary), which guarantee their validity and enforceability against third parties. This legal requirement is designed to ensure the legal security of real estate transactions.

The players generally involved in a real estate transaction in France are:

• the seller (owner);
• the buyer (purchaser);
• the real estate agent, when entrusted with the sale and/or purchase of the property;
• the bank, when a loan is requested by the future purchaser;
• the notary; and
• the tax authorities, which collect taxes related to the transaction.

Depending on the nature of the transaction, the following parties may also be involved:

• Mortgage broker: Helps buyers to obtain financing for their purchase by comparing offers from different banks.
• Real estate diagnostician: Carries out the mandatory technical diagnostics (eg, asbestos, lead, energy performance) that must be appended to the deed of sale.
• Real estate lawyer: Advises the parties in the event of a dispute or complex situation. Involvement is optional but recommended in the event of particular difficulties.
• Real estate expert: Evaluates the market value of a property objectively and impartially. Intervention can be useful:
• • in the event of disagreement over the sale price; or
  • in the context of an inheritance or divorce.
• Condominium syndicate: In the case of condominiums, provides the necessary information on the operation of the condominium (eg, condominium regulations, charges, works).
• Renovation or works companies: Can intervene before or after the sale to carry out work on the property.

The seller of a property has a pre-contractual obligation to inform the buyer. This obligation is explicitly mentioned in several articles of the Civil Code and confirmed by case law.

The seller must disclose all the important information about the property that is likely to influence the buyer’s consent – in particular:

• the surface area;
• the condition of the property;
• easements;
• technical diagnoses;
• information about co-ownership;
• nuisances; and
• natural and technological risks.

If the seller fails in its obligation to provide this information, the buyer can request:

• cancellation of the sale;
• a reduction in the sale price; or
• payment of damages.

The seller is also bound by:

• the obligation to deliver the goods;
• the warranty against eviction; and
• the warranty against latent defects, if this has not been contractually waived (see question 5.7).

The due diligence generally carried out as part of a transaction consists of a series of checks prior to the sale. The main points to check in a real estate transaction in France, depending on its nature and complexity, include the following:

• Legal due diligence:
• • Verification of title and origin of ownership;
  • Easement review;
  • Review of mortgages and other charges;
  • Review of co-ownership documents (if applicable); and
  • Review of planning permission.
• Technical due diligence:
• • Mandatory technical diagnostics;
  • Review of the conformity of installations (eg, electricity, gas, plumbing); and
  • Property inspection.
• Environmental due diligence:
• • Natural and technological hazards; and
  • Soil pollution.
• Financial due diligence:
• • Financing capacity;
  • Total acquisition cost; and
  • Condominium fees (if applicable).
• Urban planning due diligence:
• • Local urban development plan; and
  • Right of pre-emption.

A real estate transaction is concluded by the signing of a notarised deed of sale.

Before signing, the notary will carry out several checks on both the parties and the property.

In particular, they will check:

• the legal capacity of the parties (identity verification, matrimonial regime and absence of incapacity);
• the ownership of the property (title deed, origin of ownership, mortgage status, existence of easements);
• that the obligatory technical diagnostics have been obtained (eg, energy performance diagnosis, natural and technological risk assessment, asbestos, lead, gas and electricity diagnostics, termites);
• the town planning situation (applicable town planning regulations, purging of pre-emptive rights, building permit or prior declaration of works);
• financial aspects (sale price, payment and financing arrangements, acquisition costs); and
• compliance with legal provisions and the balance of interests between the parties.

Finally, the notary will take care of the formalities following the sale, including:

• remittance of the sale price;
• registration of the deed; and
• publication of the sale.

Typically, the buyer makes an offer. If the offer is accepted by the vendor, a preliminary sales agreement is signed by both parties. If the buyer is a non-professional acquiring a residential property, they have a period of 10 days from signing of the agreement to exercise their right of withdrawal (Article L271-1 of the Construction and Housing Code). Once this period has elapsed, the buyer is committed to the purchase and cannot withdraw from it unless one of the suspensive conditions stipulated in the preliminary sales agreement is not fulfilled.

The preliminary sales agreement generally includes:

• suspensive conditions, such as the buyer’s obtaining financing;
• the obligation to complete certain administrative formalities (eg, building permits); and
• confirmation of:
• • the absence of easements;
  • the absence of pre-emption rights; and
  • the purging of mortgages.

A deadline is set in the preliminary sales agreement for the lifting of these suspensive conditions (generally between two and three months, sometimes extendable). An immobilisation indemnity (generally equivalent to 10% of the sale price) is provided for in the event that the buyer voluntarily withdraws from the purchase.

Regarding financing, the buyer (if non-professional) has an incompressible 10-day cooling-off period, which begins on the day after it receives a loan offer. On the 11th day, the buyer can sign the offer and return it within the offer validity period (generally 30 calendar days, as explicitly stated in the loan offer).

The final step is to sign the deed of sale at the notary’s office.

In addition to agency and broker fees, the following costs are incurred:

• transfer taxes (or registration fees) levied by the state and local authorities when property is transferred. The rates vary according to:
• • the type of property (old or new); and
  • the department;
• the notary’s fees for:
• • drafting the deed;
  • providing legal advice; and
  • carrying out formalities;
• miscellaneous expenses incurred by the notary (eg, civil status, mortgage, publication of sale, diagnostics, surveyor’s fees); and
• guarantee fees if the buyer finances the purchase with a mortgage or surety bond.

To sum up, acquisition costs represent on average:

• 7–8% of the purchase price for older homes; and
• 2–3% of the new-build purchase price.

These fees can be simulated online, notably on the French notaries website (notaires.fr).

The seller of a property is bound by:

• a pre-contractual obligation to provide information to the purchaser;
• an obligation to deliver the property;
• a warranty against eviction; and
• a warranty against hidden defects, if the latter has not been contractually waived (which is generally the case).

As part of the pre-contractual information, the seller must communicate all important information about the property that is likely to influence the buyer’s consent – in particular:

• the surface area;
• the property’s condition;
• easements;
• technical diagnoses;
• co-ownership information;
• nuisances; and
• natural and technological risks.

Under the obligation to deliver, the seller must make the property available to the buyer on the agreed date, in the condition it was in when the preliminary contract was signed (unless otherwise agreed). It must hand over the keys and the documents needed to use the property (eg, invoices, instructions).

Under the eviction warranty, the seller guarantees the buyer peaceful possession of the property. It:

• must not disturb the buyer’s enjoyment of the property; and
• must defend the buyer against disturbances caused by third parties (eg, a person claiming ownership of the property).

The warranty for latent defects is generally excluded by French real estate sales agreements. Thus, the seller of a property is not liable for apparent or hidden defects existing on the day of sale, except in cases where:

• the seller is a real estate or construction professional (unless the buyer is also a real estate or construction professional); or
• the buyer proves, within the legal timeframe, that the hidden defects were known to the seller.

If the seller fails to meet any of these obligations, the buyer may request:

• cancellation of the sale;
• a reduction in the sale price; or
• payment of damages.

The buyer is obliged to pay the sale price (Article 1650 of the Civil Code). If the buyer fails to comply with this obligation, the seller may request:

• compulsory execution; or
• rescission of the sale.

In the event of the prior conclusion of a sales agreement with a suspensive condition of obtaining financing, the buyer is also obliged to take the necessary steps to obtain financing, failing which it will be liable for the earnest money (generally 10% of the sale price).

The buyer must also pay other costs related to the sale of a property, such as:

• notary fees;
• agency fees; and
• any condominium charges and taxes (eg, property tax).

The main taxes payable on a real estate transaction are as follows:

• For the buyer:
• • Transfer taxes: Between 5–6% for old properties and 0.715% for new properties.
  • Land registration tax: Applies only to the purchase of a new property. The rate is 0.715% of the sale price.
  • Value added tax: Payable only on the purchase of new property. The standard rate is 20%, but there are reduced rates (5.5% or 10%) under certain conditions (eg, social housing, ANRU zones).
  • Property tax: Payable as of 1 January following the purchase.
  • Council tax: For second homes only, from 1 January 2023.
• For the seller: Capital gains tax is due when the seller makes a profit between the sale price and the purchase price of the property. The tax rate is 19% on the gross capital gain, plus social security levies (17.2% since 1 January 2018), giving an overall tax charge of 36.2%. Allowances apply depending on the length of time for which the property has been held.

In France, the main providers of real estate financing are as follows:

• Retail banks: These are still the major players in the French mortgage market. There are:
• • national banks;
  • mutual or cooperative banks; and
  • online banks.
• Specialised institutions: These organisations focus exclusively on real estate lending. They can offer specific solutions, particularly for subsidised loans. Examples include:
• • Crédit Logement; and
  • Compagnie de Financement Foncier.
• Financing companies: Some companies offer financing solutions, often for specific projects (eg, social home ownership).

Several regulations and recommendations govern real estate financing in France:

• Usury rate: Set by the Banque de France, this is the maximum legal rate that lending institutions may charge. Its purpose is to protect borrowers against abusive rates. It is revised every quarter.
• Recommendations of the High Council for Financial Stability (HCSF): For individuals, the HCSF issues recommendations to banks to control the granting of mortgages and limit the risk of overindebtedness. The main recommendations concern the following:
• • Debt ratio: It is recommended not to exceed 35% of the borrower’s net income, including loan insurance.
  • Loan term: This is generally limited to 25 years, with exceptions of up to 27 years:
  • • for the purchase of a new sale in future state of completion property; or
    • in the case of major renovation work.
  • Personal deposit: Although not compulsory, banks generally require a personal deposit to cover at least notary fees and guarantee costs.

In France, several forms of commercial real estate financing are available for companies wishing to acquire or develop real estate for professional use (eg, offices, commercial premises, warehouses, land). Here are the main options:

• Conventional bank loans:
• • Amortisable loan: This is the most common type of loan. The company repays part of the borrowed capital and interest each month. The term is generally shorter than that for a residential mortgage.
  • Term loan: The company repays only the interest during the term of the loan and the capital is repaid in a single instalment at the end. This type of loan is often used for rental investments or real estate transactions. It often requires financial investment as collateral.
  • Real estate cash credit: This is a short or medium-term loan designed to finance cash requirements linked to a real estate project – for example, for building work or land purchasing – while awaiting longer-term financing.
• Real estate leasing (or property leasing for private individuals): Leasing enables a company to use real estate without acquiring it immediately. A financial institution buys the property and leases it back to the company, with an option to buy at the end of the contract (usually 15 or 20 years). This is an attractive solution for preserving debt capacity and not tying up capital.
• Loans from specialised finance companies: These companies offer tailor-made financing solutions for professionals, with conditions and rates that can vary according to the project and the company’s profile.
• Public subsidies and incentives:
• • Assistance from local authorities: Some regions, departments or municipalities offer financial assistance or tax exemptions for companies investing in commercial real estate on their territory.
  • Tax incentives: Schemes such as urban tax-free zones or rural revitalisation zones can offer tax advantages to companies setting up in these areas.

Various investment financing solutions are also available:

• Mezzanine financing: This is hybrid financing, halfway between debt and equity. It is generally used for larger projects and offers greater flexibility than traditional bank loans, but at a higher cost.
• Real estate investment funds: These funds invest in professional real estate projects, either by contributing equity or by participating in structured financing.
• Business angels and venture capital: For innovative or high-growth companies, it is possible to raise funds from business angels or venture capital firms to finance a real estate project.
• Real estate crowdfunding: Participatory financing platforms enable companies to raise funds from individuals to finance a real estate project. This solution is becoming increasingly popular, particularly for real estate development projects.
• Real estate club deal: A group of private investors who come together to invest collectively in one or more large-scale real estate projects. This is an alternative form of investment that gives access to opportunities usually reserved for institutional investors. The sums raised are generally far greater than those raised by real estate crowdfunding.

Individual borrowers: Various personal documents must be provided to the lending institution, such as:

• proof of identity;
• proof of marital status (marriage certificate, civil partnership certificate, family record book); and
• proof of current address less than three months old or, in the case of free accommodation, a certificate from the person accommodating the borrower.

The borrower must also provide proof of any personal contribution (eg, home savings plan, family loan/donation, inheritance).

The borrower will also need to provide documents relating to the property project, such as:

• a signed preliminary contract for a new-build property;
• a construction plan or floor plan, or an estimate in the case of a new build; or
• a signed promise to sell/compromise to sell.

If the property in question is old and in need of renovation, an estimate of the work involved must be provided. Similarly, if the borrower is taking out a bridging loan, they will need to provide the lender with:

• the title deeds to the property that they are selling in order to buy another; and
• possibly, an estimate of the property’s price from a real estate expert.

Professional borrowers: Lenders’ requirements are more complex for professional borrowers than for private individuals, depending heavily on:

• the type of activity;
• the size of the business;
• the amount borrowed; and
• the nature of the project.

Professional lenders will seek to assess:

• the company’s ability to generate sufficient income to repay the loan;
• the soundness of its project; and
• the quality of its management.

Different types of collateral may be required by lenders. These include:

• surety bonds;
• conventional mortgages;
• lender’s liens (a legal guarantee that gives the bank a priority claim on the financed asset in the event of resale);
• pledges (the borrower pledges intangible personal property such as a life insurance policy, company shares or securities as collateral for the loan); and
• borrower’s insurance (designed to cover the borrower in the event of death, disability or incapacity).

• Calculate the borrower’s borrowing capacity (income, expenses and debt ratio).
• Choose the type of financing (eg, conventional mortgage, zero-interest loan) and compare loan offers.
• Put together the financing package and submit it to the bank.

The bank will then examine the file and give a preliminary response (agreement in principle).

On receipt of the loan offer, the buyer (if non-professional) has an incompressible 10-day cooling-off period, which begins to run the day after it receives the loan offer. On the 11th day, the buyer can sign the offer and return it within the offer validity period (generally 30 calendar days, as explicitly stated in the loan offer).

The signing of the deed of sale at the notary’s office releases the funds.

If a mortgage broker is involved, a commission may be payable. The next fee to be paid is interest, the amount of which depends on:

• the amount borrowed; and
• the term of the loan.

In the event of non-payment of the mortgage, the security arrangements are implemented differently depending on the type of cover taken out.

In the case of a mortgage, if the debtor defaults, the bank can initiate foreclosure proceedings to recover the funds by selling the secured property. A formal notice must be served and the property may be sold at auction.

In the case of a guarantor, if the debtor fails to repay the loan, the guarantor may be obliged to pay instead of the borrower. The guarantor can then sue the borrower for repayment.

The lender’s privilege entitles the lender to priority reimbursement from the sale price in the event of resale of the property, ahead of other creditors (with the exception of super-privileged creditors such as the French Treasury). It also gives the lender the right to seize the property, even if it has been resold to a third party.

The borrower’s insurance will reimburse the loan in the event of the borrower’s:

• death;
• disability; or
• proven incapacity.

Generally speaking, securities enable lenders to recover sums due by:

• seizing the property; or
• claiming payment from the guarantor or insurance company.

In France, the most common investors are:

• private individuals, notably for the rental or purchase of their principal residence;
• institutional investors such as:
• • investment funds;
  • insurance companies; and
  • pension funds;
• property developers; and
• foreign investors.

Overall, the French real estate market is open to investors of all nationalities and statuses. However, certain restrictions and regulations may apply, such as:

• those relating to the type of property (eg, social housing or listed historic buildings);
• local planning restrictions; and
• specific tax incentives (eg, Pinel, Denormandie).

The following investment vehicles are generally used in France:

• The most common is the civil real estate company (SCI), which is a legal structure enabling several people to jointly own a property in the form of a company. It is often used to manage personal or rental property assets.
• The civil real estate investment company (SCPI) is an investment company that enables private individuals to invest in a diversified real estate portfolio, without having to manage the properties themselves. SCPIs collect funds from investors and use this money to buy and manage real estate assets (eg, offices, retail, housing).
• Real estate investment trusts (OPCIs) and listed real estate investment companies (SIICs) are vehicles dedicated to indirect investment in real estate (similar to SCPIs). Unlike SCPIs, OPCIs are made up of both real estate and financial assets, while SIICs are listed on the stock exchange.
• The civil construction-sale company (SCCV) is a company whose purpose is to buy, build and then resell one or more properties, with the aim of realising a capital gain on the transaction.
• A trust (fiducie) is an instrument whereby a person (the settlor) transfers ownership of a property to a third party (the trustee), who manages it for the benefit of one or more persons (the beneficiaries).

SCIs are established by:

• drafting and signing the articles of association; and
• registering them with the Trade and Companies Register.

The manager or managers are appointed by the partners, and their powers are defined in the articles of association. The managing partner is accountable for their actions to the partners and third parties. They may be held liable in the event of mismanagement. An ordinary general meeting must be held at least once a year to approve the annual financial statements.

SCPIs and OPCIs are created by management companies approved by the French Financial Markets Authority. They:

• manage the properties;
• rent them out; and
• distribute the income to investors.

Investors subscribe to SCPI or OCPI units through an approved management company. There are no specific formalities for investors. The tax treatment of OPCIs is more complex than for SCPIs, due to the presence of financial assets.

SIICs are listed on the stock exchange. Investors subscribe to SIIC shares on the stock market, just like any other share. In reality, an SIIC is a ‘classic’ listed property company, albeit with a special status. Unlike SCPIs and OPCIs, the seller need not wait for a monthly or weekly seller/buyer reconciliation, or for the over-the-counter market, to sell their shares. SIICs benefit from a special tax regime: fiscal transparency. Concretely terms, income and capital gains are taxed at the level of shareholders, not at the level of the property company itself.

The SCCV is a specific legal form in France, designed for the construction of buildings with a view to their sale. An SCCV must have at least two associates, who may be individuals or legal entities. The manager or managers are appointed by the associates and their powers are defined in the articles of association. The SCCV differs from the traditional SCI in that it has a single corporate purpose. In principle, it benefits from a preferential tax regime in that it is excluded from the scope of corporate income tax. The partners are taxed in proportion to their rights under their own tax regime.

A trust is a legal mechanism for transferring assets or rights to a third party (the trustee), who manages them for a specific purpose for the benefit of one or more beneficiaries. The trust is formalised by a written contract that specifies a number of elements, including:

• the identity of the parties;
• a description of the assets;
• the duration of the trust;
• the purpose of the trust;
• the powers of the trustee;
• the accounting procedures;
• the remuneration of the trustee; and
• the conditions for the return of the assets at the end of the trust.

The trust is a powerful and flexible legal tool. However, its complexity requires:

• a clear understanding of how it works; and
• the support of competent professionals.

In France, land use is restricted and is subject to regulations designed to ensure harmonious land management and sustainable urban development. For any modification or use of the land, it is therefore necessary to obtain prior planning permission. Depending on the characteristics of the project, this may involve, for example:

• a building permit;
• a demolition permit; or
• a development permit.

These authorisations ensure that projects comply with land use regulations.

These rules primarily stem from the Town Planning Code, which:

• establishes national planning regulations setting out rules applicable throughout the country; and
• organises territorial planning, from the regional to local level, by defining the various documents to be adopted by public bodies.

The main document to be taken into consideration when submitting an application for planning permission is the local urban development plan, which defines land use rules at the municipal level. It:

• establishes zoning for the municipal territory (zones for building, farming, nature or protection); and
• determines the rules applicable to the project (eg, building height rules, distance rules between the building and the road or vis-à-vis other plots of land, floor space rules).

Land use is also regulated by more specific legislation aimed at:

• regulating certain activities (eg, facilities classified for environmental protection); or
• protecting certain areas (eg, nature parks, classified sites, Natura 2000 areas, coastal or mountain areas).

Permit applications must be submitted through a CERFA form, available online. The form must be accompanied by a file comprising: a certain number of mandatory documents, the list of which is set out in the Town Planning Code, including:

• documents common to all projects (eg, site plan, mass plan of the building, descriptive note, plan of façades); and
• additional documents depending on the nature of the project and/or its characteristics.

The time limit for processing a request for authorisation starts to run from receipt of a complete file at the town hall. This period is:

• two months for a single-family home; and
• three months for other projects.

It may be extended in certain cases – for example, where:

• the project is located within the perimeter of a protected historic monument or nature reserve; or
• the project concerns an establishment open to the public.

In principle, silence on the part of the authorities at the end of the review period is tantamount to a tacit building permit. However, as there are many exceptions to this principle, it is essential to identify the rule applicable to the project in advance, in order to safeguard the interests of the project owner, particularly with regard to calculating the time limit for appealing against a refusal.

Planning permission is free of charge, but there may be a number of fees associated with the project, such as the development tax. There may also be additional charges, such as architect’s fees (mandatory for projects exceeding a floor area of 150 square metres).

Third parties (eg, neighbours, associations) may challenge a building permit order within two months of the first day of regular and continuous posting of the permit on the property.

Two potential remedies exist:

• Informal appeal: Recourse in the form of an application addressed directly to the administrative authority that issued the permit, in which the third party requests that the order be withdrawn. It must be lodged within the abovementioned two-month period. In principle, this appeal interrupts the time limit for legal action against the building permit. The authorities have two months in which to respond, with silence constituting refusal.
• Contentious appeal: Appeal to the administrative court lodged either:
• • directly within the abovementioned two-month period; or
  • within two months of notification of the express decision or the date of the tacit decision rejecting the informal appeal.
• Third parties must demonstrate their interest in taking action. The third party may also lodge a suspension petition with the court, with the aim of obtaining suspension of the building permit order. If the conditions are met, the permit will be suspended.

Lastly, regardless of the existence of a third-party appeal, a building permit may be withdrawn by the issuing authority if it is tainted by illegality. Withdrawal can only take place within three months of notification of the ruling.

The consequences of failure to obtain a building permit or to comply with planning permission are many and varied. Essentially, the project owner is exposed to penal and administrative sanctions:

• Criminal penalties: Failure to obtain planning permission is a criminal offence. Penalties can include:
• • a fine ranging from €1,200 to €300,000, depending on the seriousness of the offence and the surface area involved; and
  • in some cases, up to six months’ imprisonment for repeat offenders or in the most serious cases.
• Administrative penalties: If, following an inspection, it is established that a building has been constructed without or in breach of a building permit, the competent authorities may give formal notice to the project owner, within a period to be determined by them and which may not exceed six months, to submit a permit application with a view to regularising the situation. In any event, if the authorities find that an infringement has been committed, they are obliged to draw up an official report. In certain cases, the authorities may order the work to be halted.

In addition, third parties such as neighbours or the municipality can take legal action before the competent court to demand that:

• the work be halted;
• damages be paid; or
• in certain cases, the irregular construction be demolished.

Finally, in addition to the penalties identified above, non-compliance with building permits can have direct consequences on:

• the insurability of the property (lack of cover in the event of a claim); or
• the resale of the property.

Yes, expropriation (compulsory purchase/acquisition) is possible in France, but it is strictly regulated by law to ensure a balance between the public interest and the protection of property owners’ rights. Generally governed by the Code of Expropriation for Public Utility, this procedure allows a public authority to compel a private individual to transfer ownership of real estate, subject to certain conditions.

The legality of expropriation is based on two main legal principles:

• Expropriation must be in the public interest; and
• Fair and prior compensation must be paid to the expropriated party; in principle, this covers the value of the property and any damages.

There are several categories of expropriation in France, depending on the objective pursued. These include, but are not limited to:

• expropriation in the public interest (the most common form of expropriation used to carry out projects of general interest, such as the creation of infrastructure or urban development);
• expropriation for environmental protection (eg, to protect natural areas or sensitive zones at risk of flooding or erosion); and
• expropriation for public health reasons (to combat substandard housing)

Unlike expropriation, which aims to serve the general interest by respecting property rights and offering fair compensation, land confiscation is an exceptional measure that can be implemented in specific cases strictly defined by law.

Land confiscation is more like a penal sanction, applied in special circumstances to punish illegal or irregular behaviour. Under Article 131-21 of the Penal Code, land confiscation is possible when it constitutes an additional penalty imposed by a criminal court. Confiscation must be ordered by a court and may only concern:

• assets directly related to the offence; or
• assets acquired with the proceeds of the offence.

Depending on their likely impact on the environment, certain real estate projects must be preceded by procedures designed to inform and consult the public, in order to gather their opinions and contributions. The practical processes for the implementation of these procedures are set out in the Environment Code, which addresses issues such as:

• the documents that must be made available to the public;
• the duration of the public inquiry; and
• the frequency of information meetings.

In addition, certain projects must be preceded by an environmental impact assessment designed to:

• quantify the project’s impact on the environment; and
• where necessary, provide for compensation measures.

Some projects still need to be declared to or authorised by the environmental authorities, depending on their scale.

Certain properties are subject to regulations governing facilities classified for environmental protection (Installation Classée pour la Protection de l’Environnement – ICPE), such as:

• factories that produce, use or store hazardous materials; and
• certain buildings containing:
• hydrocarbon tanks;
• air conditioning units; or
• devices for discharging fluids into the environment.

The use and occupation of these buildings are governed by the rules applicable to the ICPE heading under which the building falls. For example, if a building contains an air-conditioning system, it is likely to be subject to the rules applicable to ICPE Heading 4802, “Manufacture, use or storage of fluorinated greenhouse gases”. These rules may be of different kinds and may concern matters such as:

• the storage of products;
• the securing of equipment; and
• the overhaul of equipment.

Liability for environmental damage is strictly regulated, notably by the Environmental Code. It is based on the ‘polluter pays’ principle.

Several players may be involved, as follows:

• In the case of soil contaminated by an ICPE, the party responsible is, in principle, the last operator of the facility.
• In other cases of soil pollution, the person responsible is first and foremost the waste producer that contributed to the pollution, and then the waste holder. In the construction industry, the builder/developer may also be liable for environmental damage, particularly in the event of pollution caused by construction site waste.
• The owner of the contaminated land may be held liable if it was negligent or not unrelated to the pollution.

In some cases, public authorities may be involved, particularly if:

• public infrastructure is the source of pollution; or
• they have failed to take the necessary measures to prevent environmental damage.

Liability can be incurred under several regimes, as follows:

• Administrative liability: The prefect can require those responsible to carry out the necessary restoration and decontamination work. In principle, those responsible for the pollution are responsible for financing the work.
• Civil liability: Third parties affected by pollution can seek compensation for damage before the civil courts.
• Criminal liability: Criminal penalties may be imposed for soil pollution offences.

Sellers must provide certain real estate diagnostics that inform buyers about the environmental condition of the property. Among these:

• the energy performance diagnosis assesses energy consumption and greenhouse gas emissions; and
• the risk and pollution report provides information on the presence of natural, technological or mining risks affecting the property.

For older buildings, asbestos and lead diagnostics are also required.

The buyer must ensure that the property complies with environmental regulations, particularly in terms of energy performance, as required by the Environmental Regulation 2020 (RE2020) applicable to recent constructions.

For land, it is essential to check for contamination. Obligations to clean up pollution may apply prior to any construction project if the property is:

• subject regulations governing installations classified for environmental protection (ICPE);
• located in a soil information sector; or
• listed as a polluted site.

This information must be provided by the seller, but a preliminary audit is often advisable to avoid any unpleasant surprises.

In addition, if the property is subject to ICPE regulations, it may be necessary to take certain steps with the environmental authorities to record the change of operator.

France has adopted a system of incentives (subsidies or tax breaks) to promote energy-efficient building renovation. These subsidies are mainly granted by the Agence Nationale de l’Habitat, a national government body. The French regions and overseas collectivities are also competent to distribute energy renovation grants

The most important current aid scheme is the MaPrimeRénov scheme, which is open to a large number of households. Households have the option of being assisted by a state-approved operator in compiling their applications for assistance.

In addition to incentive mechanisms, a number of rules apply to the construction of new buildings or work on older buildings. The RE2020, in force since January 2022, imposes more stringent requirements in terms of:

• energy performance;
• thermal insulation; and
• carbon footprint reduction.

It:

• encourages the use of bio-sourced materials, such as wood; and
• favours renewable energies in new buildings.

These efforts are also in line with Law 2023-175 of 10 March 2023, which requires the installation of solar panels or renewable energy production devices on the roofs of:

• new public buildings; and
• those undergoing renovation.

Finally, certain labels play a key role in promoting green buildings. The Haute Qualité Environnementale (HQE) label, for example, certifies buildings that meet sustainability, energy efficiency and quality of life criteria.

• HQE certification assesses the overall sustainability performance of buildings, covering various aspects, such as:
• • energy;
  • water;
  • materials;
  • comfort; and
  • occupant health.
• The aim is to limit the environmental impacts throughout the building’s lifecycle. The label applies to both new buildings and renovations.
• The Bâtiment Bas Carbone label is also an important reference in France, focusing on reducing the carbon footprint of buildings. It promotes construction projects that use bio-sourced materials, such as wood, and techniques that reduce emissions throughout the building lifecycle, from construction to operation.
• NF Habitat certification is often used for residential buildings. It guarantees high standards of:
• • construction quality;
  • comfort;
  • safety; and
  • energy efficiency.
• This label also includes a specific environmental version, NF Habitat HQE, which is part of a more advanced sustainability approach.

Buildings located in eco-neighbourhoods or sustainable development zones can also obtain specific certifications. For example, the ÉcoQuartier label assesses development projects according to criteria such as social mix, resource management and territorial cohesion, to ensure environmentally friendly urban development.

The current French real estate market is in transition after a period of post-COVID-19 euphoria.

Since 2023, there has been a marked slowdown in transactions and prices have stabilised or even fallen in some regions.

The French real estate market is facing a significant drop in construction, as well as growing demand for rental properties and the popularity of co-living spaces. Outlying areas, meanwhile, are experiencing an increase in commercial vacancy.

2024 marked an all-time low for transactions in France, with fewer than 800,000 authenticated deeds.

Access to credit remains a key factor in market development.

Given the latest rate cuts announced by the European Central Bank, 2025 looks set to be the year when the crisis ends and the market returns to more normal levels. Forecasts predict a significant recovery, with transaction volumes up by 15%, topping the 900,000 sales mark.

From a legislative point of view, at present (January 2025), the latest major real estate reform is Law 2024-1039 of 19 November 2024 (known as the Le Meur Law), which aims to provide a stricter framework for short-term furnished rentals, often referred to as ‘tourist rentals or even ‘Airbnbs’.

Its main aim is to rebalance the rental market by limiting the perverse effects of the proliferation of such rentals on access to permanent housing, particularly in tourist areas and large cities.

Given the current political instability in France, we do not foresee any major legislative reforms in the French real estate sector in the coming months.

A successful real estate transaction is based on:

• transparency;
• prior information;
• communication;
• reasonable negotiation; and
• respect for commitments.

It is important to anticipate potential stumbling blocks and to enlist the support of competent professionals to avoid difficulties and conclude the sale under the best possible conditions.