Co-ownership – The “Copropriété” in France

 In Tax, Wills

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One common form of property ownership in France is the copropriété (co-ownership).  This could be the ownership of an apartment, or indeed a house, within a development.

The main concept of copropriété is that each owner owns the private areas of their property and shares a percentage of the common areas along with all the other co-owners.  Common areas can include hallways in a block of apartments, garden spaces, general parking areas and a swimming pool.

Similarities with a freehold purchase

The general provisions in the preliminary sale contract will look very similar to those in a contract for the sale of a freehold property.  There will however be additional clauses to cater for the co-ownership arrangement.

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The seller will still be obliged to produce to the buyer various diagnostic reports such as reports on the presence or absence of asbestos, lead or termites at the property and, reports on the electrical installation and also the drainage system.  Those reports will be in respect of the private area being bought. A buyer can expect to receive some reports on the same aspects in respect of the communal areas.

The stages in the buying process will also be very similar in that there will be a preliminary sale contract and then, usually around 2 to 3 months later, a sale deed to sign to complete the transaction.  However, there will be the additional involvement of the Syndic (Management Company see below) and a buyer can expect to receive a number of additional documents by way of information specific to the copropriété.

Rules of co-ownership

The seller will need to provide the buyer with a copy of the règlement de copropriété– rules of co-ownership.  This document will confirm how the development is divided up into lots (privately owned areas) and a fraction will be allocated to each of those lots with reference to the whole.  These fractions are used to calculate charges, such as the annual service charge.  The fractions are usually specified in 1,000ths or 10,000ths.

The rules are also the “dos and don’ts” of the development.  They will set out specific things that you cannot do (for example not being allowed to hang washing out on balconies!) and the things that you can do (e.g. if you are able to sub-let).  It is very important that a buyer studies this document with care to make sure that there is nothing untoward in it which would affect the intended use or occupation of the property. If the property isn’t going to be the buyer’s main residence, he will usually need to ensure a copy of the keys are held locally to enable access the property in the event of an emergency.

The rules will also define the usage of each element of a development, such as whether or not it’s restricted to residential use only or if commercial use is allowed.  It will also confirm rules that you would expect to see, such as not being able to act in such a way that would impact negatively on other co-owners.

Management of the development

Many developments are run formally by a management company known as a Syndic.  The Syndic will be appointed at an AGM and thereafter the appointment will be reviewed and either renewed or changed to another Syndic.  The Syndic is in charge of the general running of the development, holding accounts comprising payments made by the co-owners (such as the service charge), keeping annual accounts and dealing with contractors for any work required at the development.

Information about the copropriété

As well as providing the buyer with a copy of the co-ownership rules, a seller must also provide recent historical information, including:

  • Copies of the minutes of the last 3 years of AGMs;
  • Copies of the last 3 statements requesting payment of service charge (appel des fonds);
  • A financial statement produced by the Syndic providing information such as the sums due to the Syndic by the seller prior to completion, any sums due by the buyer (for example the next service charge, the level of funds held in any works funds and any liabilities owing by co-owners). This document is the pré-état daté.

It will be important to review the minutes of the most recent AGMs to get a feel for the costs due to be paid by each co-owner with regard to the running of the development, and also to see whether any extensive works have been voted on but pending at the time of completion of the sale.  This could be relevant to the buyer in respect of any future calls for funds to cover the works.  The contents of the AGM minutes should also give a feel for how the development is run generally.

Following signature of the preliminary sale contract (known as the compromis de vente or promesse de vente), the seller must inform the buyer if he receives notice of the next AGM and the buyer can choose to attend or appoint a proxy for voting.

While the emergency measures were in place in France due to Covid-19, it was not possible for copropriétés to hold their AGMs.  However, following a decree of June 2019 it has been possible for copropriétés to agree to hold AGMs via video or audio conference and to allow paper voting, so in the future it is quite possible that more AGMs will be held in this way.  A buyer may want to check whether copropriété has resolved to allow to hold AGMs in this way in the future.

A copy of the appel des fonds will confirm the service charge due for the property.  It is usually paid on a quarterly basis. It can be divided into two elements – general charges, such as administration costs, and general upkeep of the communal areas – and special charges, including maintenance of communal equipment such as lifts. The contribution of each owner to special charges will be bespoke to the lots owned. For example, an owner of a ground floor apartment may not contribute to the maintenance costs of the lift. The budget for the next year’s service charge will be voted at the AGM.

The pré-état daté produced for a buyer will also confirm the level of the service charge and give details of other funds held by the Syndic.  A fonds de travaux is a fund to anticipate and finance future works. The works are voted by majority at AGM. The fund is obligatory for developments with at least 10 lots, but not needed if the expert’s report on the development doesn’t foresee any works for the next ten years. The contribution to this fund is a minimum of 5% of the annual budget.

In the context of a sale, the buyer will be obliged to reimburse the seller the prorata amount of the service charge to cover the period from the date of completion to the end of that quarter.  However, the contribution of the seller held in the fonds de travaux is kept by the Syndic and the buyer takes the benefit of this.  For a client selling the property it will be important to consider at the stage of negotiations an express agreement with the buyer to reimburse the seller for this amount.  However, by law neither the buyer nor the Syndic are obliged to reimburse the seller.

At the time of completion, the Notaire will notify the Syndic of the change of ownership and will use a portion of the sale proceeds to reimburse the Syndic for any amounts due by the seller.  The Syndic will then register the buyer as the new owner who then becomes directly responsible for future costs regarding the property.

Measurement of the property

The seller is also obliged by law to provide a certificate to the buyer confirming the size of the property.   This is not necessarily the actual area because any area which has a height of less than 1.8m, together with specific areas including balconies and terraces, does not need to be reported.  A buyer has some recompense if it transpires that the area declared is in fact smaller by at least 5% provided an action is taken within one year of sale.

Summary

If a client is looking to buy a property in a copropriété structure there are additional elements that need to be considered carefully, not only to make sure that the purchase proceeds smoothly and as anticipated, but also to ensure that the buyer is fully aware of the exact financial and legal situation that they will place themselves in by becoming the new co-owner.

It also goes without saying that a review of the buyer’s Will in light of the purchase will be crucial to ensure that their objectives are met with regard to devolution of their foreign estate, and to also understand the inheritance tax position.

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