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Purchase of a property in France by Hong Kong resident: key elements to be taken into consideration
8 9月 2020
When it comes to buying a property in France for a French national residing abroad, some difficulties in carrying out the process may arise. These may in particular be related to the (1) the financing of this project and (2) its signature by means of a power of attorney.
1. Legal opinion:
Getting a loan from a bank located in France can sometimes be more delicate if the borrower is not a French resident. Indeed, some banks can be quite cautious and reluctant as they will find it more difficult to check the borrower’s financial situation and background information.
It is noted that lending criteria can vary tremendously from one bank to another. Nevertheless, generally speaking, before lending money banks will carefully take into consideration the following elements with regards to the borrower:
• The level of income and indebtedness;
• The amount of the personal contribution;
• The professional situation;
• Place of residence; and
• The guarantee.
In addition to these elements, in the context of an application for a loan made in some foreign countries such as Hong Kong or Dubai, some banks will require from the borrower to provide a “Legal Opinion” signed by a qualified lawyer in the country of residence of the borrower.
This legal opinion confirming information regarding the situation of the borrower (personal status, capacity to enter into a loan agreement, no indebtment…) will be a condition precedent to making this loan to the borrower.
A template of Legal Opinion is generally provided by French banks.
One can expect that the local lawyer will only have to sign the template for minimal fee. However, the local lawyer drafting the legal opinion will be responsible for each statement contained in this document and it is therefore critical for him/her to check that they are all correct (knowing that most of the supporting documents will be in another language). His/her work will also consist in amending the template sent by banks and ensure it complies with the Hong Kong law requirements. Therefore, this kind of file is time consuming and one should expect a local lawyer to spend at least a few hours working on it.
In addition, even though the Legal Opinion is drafted and signed by a Hong Kong lawyer, it requires the assistance of lawyers qualified in French law for the verification and analysis of all the documents provided by the borrower as well as the explanation of the rules of French law.
Seeking the assistance of a firm which includes both local and French lawyers who are familiar with this type of document and transaction is essential. Endless back and forth exchanges with the banks and some potential misunderstandings on the content of the Legal Opinion may indeed delay the release of funds.
2. Power of attorney:
In France, a Notaire is a public official responsible for receiving all the “actes” and contracts to which the parties wish to confer the seal of authenticity, to assure their date, to hold them in trust and to deliver authentic copies of them. The Notaire has the monopoly in matters relating to purchases, sales, exchanges, co-ownerships, land plots, leases, mortgages etc.
Given the international pandemic, many buyers find it difficult to travel to France to sign in person the deed of sale at the Notaire’s office. Therefore, they usually sign over a power of attorney and send it to the Notaire in charge of the transaction.
a. Private form/public form
There are two types of powers of attorney for France: those in private form (“acte sous seing privé”) and those in public form (“acte authentique”).
The difference lies in the fact that a power of attorney in private form is established directly between the parties whereas a power of attorney in public form is received before a French Notaire.
The nature of the document needed generally depends on the transaction undertaken.
Authentic powers of attorney are those made for the regularization of solemn deeds as in the case of a donation. Also in the context of the purchase of a property off-plan, French law provides that the power of attorney must be in public form.
Regardless of the form of the power of attorney and even though a power of attorney in private form is more straightforward as it requires less formalism, the drafting will require the assistance of a local lawyer/Notaire to ensure the validity of the document.
Besides, the signature of a power of attorney in private form will have to be certified by the French consulate or a Notaire who can attest that it is indeed the person who signed the document.
b. The specific case of Off-plan purchase (“Vente en l’état futur d’achèvement”)
France is one of the most secure countries in the world when it comes to buying off-plan property (VEFA) as buyers’ interests and money are protected by a number of clauses along the way.
As stated above, a power of attorney in public form is required for this type of transaction which means the document may need to be authenticated and signed before a Notaire in order to be valid and enforceable under French law.
It used to be possible to sign such power of attorney before French consulate and diplomatic services officials as an alternative to a French Notaire. However, since 1 January 2019, French consulate or embassy do no longer provide such notarial services.
This major change complicates somewhat the process as it may turn out to be an impossible mission to find a French qualified Notaire allowed to practice overseas.
Based on our recent experiences, it appears that some Notaires in France may be reluctant in accepting a power of attorney in public form executed before a Hong Kong qualified public notary but the rule does not seem absolute. Some Notaires may accept a power of attorney executed in these conditions. In any event, individuals who are facing this situation have to make sure with their Notaire beforehand this solution is feasible before considering it.
Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.
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