What to think about concerning French property, estate administration and Wills during the international coronavirus (COVID-19) lockdown
France is of course also in the unprecedented situation of being severely impacted by coronavirus (COVID-19). At the time of writing, the special measures restricting movement are in place until 11 May 2020, extended from 15 April 2020.
The French Government has passed over two dozen legal Orders to cater for the current circumstances, including for transactional work and dates for filing in respect of tax affairs.
Many British owners of property in France will be concerned about how the current special measures might affect them. Here are a few of the most common scenarios that many of our French property clients currently find themselves in.
Q 1. I recently signed a contract for the sale of my French property. Will completion be on time (set for the end of June 2020)?
Order No. 2020-306 of 25 March 2020 relates to the extension of various time periods during the current emergency measures.
If your buyer received the copy of the preliminary sale contract to trigger their ten-day cooling off period on or after 12 March then the buyer’s cooling off period (délai de retractation) is currently suspended. It will restart one month after the lifting of the security measures. These are currently due to expire on 11 May and so this would mean that the cooling-off period would end on or around 21 June 2020.
Provided there is still time for all of the conditions in the contract to be fulfilled, then it is possible that the completion of your sale could take place within the original time limit of end June 2020. However, note that during this current period the local authorities are also restricted in the work that they can do and so it may be that the general conditions precedent in the contract (such as checking the title to the property) will also be delayed. You will want to speak with your Notaire about the consequences of missing the completion longstop date, and whether an extension could be agreed with the buyer.
More than ever it is important that you don’t organise any travel to France, if you intend to be present at the completion meeting, until you have had notification from the Notaire that a completion date can be set. Notaires are currently allowed to accept electronic signatures on some documents where physical presence in the office to sign is not possible due to the current restrictions on movement.
Q 2. I signed a contract for the purchase of a French property in February. My cooling-off period has expired. I am waiting to get my mortgage offer. Is completion likely to be delayed?
The same Order (No. 2020-306) also provides that the cooling-off period in respect of a mortgage is suspended. You may already be aware that part of the process of making a French mortgage application is that when you receive the mortgage offer you must wait ten clear days before you submit your acceptance of the offer. If you receive your mortgage offer during this current period of confinement, the start of the cooling-off period to accept your mortgage offer will be suspended until 1 month after the security measures are lifted.
As mentioned above, it is also possible that there is a delay in fulfilling other conditions in the contract. You shouldn’t rely on completion being able to take place by the longstop date specified in the contract, especially if it is soon. You may need to be prepared for a later completion date, and discuss with your Notaire whether an extension on the longstop date should be agreed with the seller.
Q 3. I don’t have a will for my French property. What will happen to it on my death?
It’s recommended that you review your will provisions when your circumstances change significantly. This current period of emergency security measures is likely to be classed as a significant change in circumstances for many, particularly if you have been affected by Covid-19 and are concerned about your health.
How your French property will be distributed on your death will depend upon:
- the terms of your current will (if you have one);
- whether French or English succession laws apply to the property; and
- if you don’t have a Will who you are survived by who will benefit under the rules of intestacy.
If you have an English will but not a French will it’s quite possible that the distribution of the French property will be governed by the English will, but it will depend upon whether the English will is worldwide in its geographical scope and whether French law overrides the English will provisions.
French succession law favours children by granting them fixed inheritance rights. However, it’s now possible – under the EU Succession Regulation – for a British national to declare for the succession laws of one of the territories of Great Britain to apply, thus removing the fixed inheritance entitlement of children over a French property. However, in order to do this you need to have completed a Will and specifically state in it that you wish for the succession law of your country of nationality to apply.
The devolution of the French property will also depend on whether you are a sole owner, or a co-owner. If you are a co-owner and you bought the property with a tontine agreement, then your property share will automatically pass to the surviving co-owner.
It’s highly recommended that you make a will if you don’t have one, or if you do have a will (English or French) that you review it, particularly if you haven’t reviewed your will provisions in the last five years.
You should always take advice on the application of French inheritance tax when considering your Will and how your French property will be distributed on your death. Some succession options could in fact be detrimental for inheritance tax.
Q 4. I received rental income from my French property last year. When do I need to report the income and pay the tax?
The tax year in France is the calendar year. If you receive income from property situated in France, you have an obligation not only to declare that income to HMRC (if you are a UK resident) but also to the tax authorities in France. Double tax relief is available to avoid double charging to income tax in both countries.
Tax returns in France generally need to be filed by mid-May in the following year and so for income received in 2019 the tax returns would be due by mid-May 2020. However, the French tax authorities have now confirmed that the deadline for those taxpayers filing a paper declaration, the deadline is 12 June 2020. For those filing online, the exact deadline date depends upon the location of the local tax office, but is now between 4 June and 11 June.
No postponement of deadlines for payment of French income tax and social charges has been announced. Therefore, those already registered for French income tax in France will carry on paying their monthly tax instalments with payments made on 15th day of each month.
The income tax statements 2020 on income 2019 will be issued towards the end of July 2020/ beginning of August 2020 with a deadline for payment of any balance of income tax/social contributions likely to be on or around 15 September 2020. Nevertheless, it is not impossible that the issuing of the tax statements might also be postponed at a later date if the tax authorities are not able to process all tax returns within the usual deadlines.
There is also no automatic postponement of deadlines for payment of taxes due in March 2020 by French companies, businesses and self-employed. However, if the current situation puts your French business in financial hardship, it is possible to request a postponement of payment of business-related taxes (corporation tax, local rates, Employer’s and employee’s NICs) or a temporary reduction of any tax instalment payments due.
Q 5. I am a beneficiary of an estate in France. I’m trying to finalise the estate administration with a Notaire. Can I expect delays at the moment?
A Notaire must deal with the administration of an estate in most circumstances, and certainly when there is a French property in the estate.
The Notaire must identify the beneficiaries of the estate and complete various deeds to confirm the identity of those beneficiaries and the assets in the estate. The Notaire must also file an inheritance tax declaration on behalf of the beneficiaries.
Most of the deeds drafted by the Notaire must be signed in the physical presence of the Notaire. Generally speaking, many beneficiaries are unable to travel to France to do so, and this is not feasible for anyone at the moment. The beneficiaries would therefore be relying on a Power of Attorney document prepared by the Notaire and signed by them to authorise a third party (often an employee at the Notaire’s office) to sign the deeds on their behalf. The signature on the French Power of Attorney document needs to be witnessed, usually by a Notary Public but sometimes by a Solicitor. Powers of Attorney won’t be helpful if the Notaire doesn’t have the employees physically present in the office to act as attorneys. As mentioned above, Notaires are now allowed to accept electronic signatures on certain documents, assuming that they have the necessary secure systems in place to allow this to be possible.
If the Notaire acting is still able to work at the moment then the administration of the estate could still proceed. It will however depend upon how easy it is to obtain the necessary estate information from third parties (confirmation of the balance in bank accounts from a bank, obtaining a valuation of the property etc).
The postal service in France is currently reduced, generally to three postal deliveries a week. This may contribute to a delay in the process where it’s not sufficient for documents to simply be scanned and sent by email.
In conclusion, many Notaires in France are continuing to work albeit with reduced staff levels and less presence in the office. Many public offices such as the town halls, planning departments and the land registry are also working at reduced levels of staff, and some are closed. It’s inevitable that delays will be seen in France but it is expected that it will return to “business as usual” once the security measures are lifted.
Contact Sarah Bogard to find out how we can help you.