"Real Estate and Investments. Legal Regulation", the journal

Issue 1, 1999

Participants of the Real Estate Transactions. France Experience

Verbaer ., professor, deputy dean for international relations with Eastern Europe of "Paris-XII-Val de-Marn" University (France)

Its interesting to look after the experience of the advanced countries in formation of the civilized real estate market. In this publication we try to clear some legal aspects of the mutual relations of the people during the conclusion of the real estate bargains in France.

I. First Roles in the Real Estate Sale

Let's speak about the following components of the bargain: the parties of the contract, the intermediators and, at last, the persons having priority right on a purchase of the real estate.

1. Parties of the Contract

The consumer of the real estate is more often the physical person of French or Foreign nationality. It can be a legal person, and vendor can be a sale professional.

The physical persons are the alive people. You should have an Active capacity for possessing the right to purchase or to sell the real estate.

The private person usually thinks, that he has got a completely naturally active capacity to effect any actions in the everyday life. However there are some circumstances when this active capacity can be limited by the various reasons, referring to the right or to existing facts: infancy, trusteeship, curatorshop.

Check of active capacity, the same as check of the personality of the parties concluding the contract, should be made by the lawyer. Sometimes the foreigners owe to present the document concerning the customs of the country in the cases when the author of the sale act want to check that the legislation of the foreign country is applicable for the further validity of the bargain.

The legal persons are legal structures allowing to two or several persons to unit the capitals for making the profitable operation. The most widespread legal persons are civil partnerships or business concerns. They exist irrespective of their members and have name, legal address, activity and asset. Foreign firms, the same as and the French firms, possess the complete legal active capacity on the French territory. There is one condition-the verified lawfulness of their creation accordint to the state foreign registries, which are equivalent to the French registries R.C.S.

The asset merchant is physical or legal person, who trades or purchases the asset for himself. The asset merchant purchases the asset for further reselling. This activity is not regulated by the trade.

The construction contractor is the professional in the field of construction, creating new buildings intended to housing or professional use. The activity of the contractor isnt regulated. However the legal relations have to be up to the strict standards for protecting a consumer.

2. Intermediators

In this close well speak about the categories of intermediators: the real estate agent, the notary, the lawyer, the expert land surveyor.

The real estate agent is the professional of commercial operations and real property management.

He takes part in negotiations about conditions of the bargain and sometimes makes a preliminary contract, which confirms the consent of the parties for the bargain price. All those kinds of activity are called "liberal profession". The real estate agent should have professional card, and also insurance of his professional responsibility, and grant a bank warranty or warranty of cash department of mutual aid. He acts only as the representative of the vendor or buyer.

The notary is a representative of the state, he forms the agreements controls their storage and ensuring of their safety.

Being a state representative he is appointed to the notarial office. There are about five thousand notarial offices in France. Individual, or joint they are in the parent state, on foreign-made territories.

At the same the notary is te representative of the liberal profession, that means he has right to give legal advices and to grant legal services. Notarial consultation, regarded as legal advice by state authorities, can be granted to any person, irrespective of social derivation and incomes That is why for many years the notary is the important acting person in all real estate operations.

The notary is obliged to follow a strict discipline and to respect the appropriate rules because of the importance of the role and necessity to provide to the clients the best protection, and also because of his state representative status. The notary has to have the university diploma, and also to pass professional examination. The notaries are consolidated in professional organizations at each level of french administrative organization and obey to the procurator of Republic. As to the granting funds warranty, which is used by the notary for ensuring of commercial obligations, it is garanteed by the cash department. Besides the professional responsibility of the notary can be involved in process of constitution of the various acts. It is insured.

Notary is undoubtedly the most important category of professional lawyers in France, from the very beginning, he grants consultation services, and renders the assistance in conclusion of the agreement. Besides his status of the state representative garantees the loyalty to the state, and to the contract parties. He is obliged to give to legal consultations to the clients and should also explain to the parties the consequences of their further actions and not to participate in operations which purpose is the fraud of the state, and also to behave himself as the impartial judge.

This responsibility impartiality is often not very well understood by the foreigners, who wish to make various commercial operations in France, in particular, by representatives of Engilsh or Scandinavian countries, because in those countries the business relations develop, without delay, with the conflict of interests, each participant demands concrete peaces of advice, and he wont make any operation without them.

The notary, if he really wishes it, can also negotiate as well as the real estate agent. In this case he also owes to respect disaffection obligations that is the supplementary garantee for his client. However a negotiation practice is more advanced in villages than in cities. The notary can take part in the bargains as councillor and agreements author.

Such actions represent the deposit safety and efficiency. We say safety because the preliminary contract imposes the obligations. The notary pays attention to the legal problems, which will help him to avoid troubles. In France the participation of the notary is necessary for having the real estate definitive certificate, which owes to follow the preliminary contract. This legislation obligation is introduced for making the participation of the professional lawyer a garantee of efficiency of the agreement. A notary choice is free. More often a real estate vendor or real estate agent can make a recommendation of the notary to the vendor. However if the buyer has already a notary or he wishes, that his notary takes part in this bargain, he has this right. If the vendor wishes the bargain to be concluded with participation of his own notary both notaries will take part in the bargain without additional price for the buyer, because notaries divide among themselves a compensation according to the tariff.

The lawyer is the professional of free profession. He renders the assistance to the citizens in all legal acts, and to present their interests in court.

The warranty of funds, which they receive and pay for their clients, is provided by the centralized organization, which pays, as for example, the independent cash departments of the pecuniary final pays of the lawyers (CARPA). The lawyer is not appointed by the state (except for the lawyers of Court of cassation), and he can have free practice. However he also obeys to the Procurator of Republic.

The lawyer is the full lawyer and renders a legal assistance and also has the right to make any juridical acts. The private person can resort to his help and to his consultations.

However, the French tradition is that lawyers are more engaged by representing their clients in courts, but a lawyer can also have specialization in real estate right so private persons can address to him.

If the real estate buyer wishes to effect commercial operation with asset, which is sold by tenders according to the decree of the first instance, he should resort to the help of the lawyer, that is obligatory at this jurisdiction.

The expert land surveyor can practise the establishing of the contact between the buyer and the vendor or to manage the real estate. So, he should have the admittance of corporation of the expert land surveyor and to lodge funds in special cash department, which is created specially for this purpose by the supreme Body of corporation and which is guaranteed by the collective insurance.

3. Subjects Having the Priority Purchase Right

There are two categories of the subjects, having the first option - state one and private one.

The state category means state, and also some official bodies, local bodies or their authorized, and also commercial firms, who owe to control Public interest acts (SAFER).

Private one means private persons. The law reserves them instruments of work (for example, agricultural land lots) or housing (tenant residential building).

II. Supporting Parts of the Real Estate Sale

1. Banks

Today the offer of the capitals is exclusive function of bank networks.

According to the structure, banks naturally practise a long-term credit, which is characteristic for the purchase of the real estate.

Almost all banks working in France, practise it according to conditions, peculiar to their status.

The variety of kinds of the credit can disorient the candidate for a purchase. All mentioned above intermediators can render him an assistance in a choice of the offers, which in will be appropriated to his situation and to the characteristics of asset, which he wants to buy.

In France, legal statuses of consumers protection obey the definitive accomplishment of the purchases to receiving of the credit when the buyer takes it. However those provisions protect only a non-professional. It expresses the aspiration to avoid that in a case of refuse to grant a credit, an imprudent buyer would not be constrained, in spite of anything, to commit this bargain or to pay at least a large sum for reimbursement of failure. The legal rules say that the definitive executing of a purchase is subordinated to suspending condition of receiving of a necessary financing. If the credit is not given to the potential buyer, he can refuse the bargain without sanctions.

It is a rather strong protection for the consumer, and the legislation has added strict formal conditions of studiing the file of credit search.

2. Land Public Services

Here we shall study cadastre, then storage of the hypothecations.

2.1. Cadastre

From the very beginning of derivation of the society the ground is a basis source of personal riches. For having financial means for own needs, new settlements create system of the tax from production of natural resources, it was a basis of the land tax.

Its soon necessary to know volume and nature of asset to effect its rating for fair distributing of the contribution.

2.2. Mission of the Cadastre

2.2.1. Fiscal Mission

The cadastre provides set of a real estate rating of built up and vacant plots.

The value of each vacant plot is not defined in each concrete case, and depends on the tariff for hectare established in each commune according to the kind of culture or property and to a class.

The value of every plot is used for definition (determination) of a basis Agricultural profit and at Necessities for definition (determination) social The collectings from the agricultural users.

As for built up plots a rating is made by premises, not by plots, and a rent value is often a basis for various direct local taxes.

Besides a rating of the land plots, a service which controls the management of the cadastre, are competent for definition of a basis of the collecting for exportation of household dust, and also local tax and professional tax, because they make a rating of rent value of residential, commercial and industrial premises.

2.2.2. Mission of Collection of the Land Tax

Mission of collection of the land tax consists in two operations. First is The identification and physical definition of the asset. Second are the holders and their rights.

In a case of identification of the land plots the updated cadastre has an influence because each land lot has the code, allowing to distinguish it without any equivocacies.

As for identification of the holders, the existing rules never charged precisely and definitely to establish the present asset holder. It means the holder, who is the payer of the land tax.

However the reform of 1955 has hardened a mission of cadastre connected with the land tax, having introduced a system of land publicity founded on conformity of the cadastre and real estate card file. Even if this system doesnt affirm or guarantee the property right, cadastre can be an element of the information for courts for the decision of their matters of argument.

2.2.3 Technical Mission

The cadastre can play very well its fiscal and land role only if there is a plan being a direct basis of any identification and physical description of the landownership. Executing and maintaining of this plan is the first technical mission of this service.

Taking into consideration the practical value of the plan of the land lots, in 1948 French state has entrusted National geographical institute sith mission, which consist mainly in three things:

Coordination, check and centralization all removals of the hypothecations, which have a defined value. It is be realized by state services or authorities with financial participation of the state, departments and communes.

2.2.4. Cadastre missions

It is also necessary to pay special attention to other functions of the cadastre documentation, which doesnt have fundamental character of the previous missions but is also important. We mean functions, on the one hand fiscal function (financing of some kinds of social insurances of agricultural users, and also professional or social privileges for the agricultural users), with other hand an economic one (re-planning in countryside, wood cadastre card file).

In general a considerable part of local authorities and state organizations need in a databank, where they should find elements, which can focus their actions, as for the cadastre, a source of fiscal, land and economic information, its an excellent mean for description and placing of the data and represents the main basis of databank.

2.3. Storage of the Hypothecations

The same as the cadastre, it is the administration controlled by the department of the finance Ministry. She (it) discharges double mission: with One parties - civil, on the other hand -fiscal.

The storage of the hypothecations provides a publicity of the real real estate takings. This mission meets the information requirements of the parties, concluding the contracts, and the third persons, and also the necessity to ensure safety of legal real estate operations. Thus a transfer of real rights can be protested by the third person only since the moment of publication of the agreement.

Since 1970 a system of combined formalities allows to simplify the obligations of the users: the keeper of the hypothecations discharges formalities of land publicity and, in most cases, he establishes, cancel taxes and duties.

We shall consider consistently organization and characteristics, which have common principles of the right applied in this category.

2.3.1. Organization of a Storage of the Hypothecations

354 offices of the hypothecations make part of organization of territorial services of senior taxes Management. Since 1970 a range of activity of each of those offices does not coincide any more with a district of trade Court location.

The location of the hypothecations has its own limits, which do not depend on the judicial circuits. The keepers of the hypothecations are government officials. They make entering into the registry the documentation, which is represented according to the article 2200 of the Civil code, which in particular establishes "the Keepers of the hypothecations should have the registry, in which they introduce daily and in all the presented documents: acts,adjudgements, sheet and the documentation, which will be presented for executing of land publicity formalities".

Besides, the keepers of the hypothecations owe to staticize a card file and give information to any person searching it (civil role). Actually, According to the law they are obliged to give to all the persons, requiring it, copies and endurances from published documents or card files in Concerning a property status of any physical or legal person. The inquiring parties arent obliged to present reasons of demand of the documents.

The informations are issued according to the defined rules.

They are issued within the limits of 50 years up to the date of requirement. Issue of an information is made in a written form and follows strict formalities.

And, at last, keepers of the hypothecations have double responsibility: state book keeping responsibility and civil role responsibility. They bear personal responsibility for any damage, which they can cause to the visitors by means of their own financial resources.

The deputy of the keeper should control the service and monitor the work.

The employees of branch of a hypothecations storage have various functions, as for example, analysis of the documents and definition of the takings, or accounting of final pays.

2.3.2. Characteristic of the System

A land publicity (in Russia - registration)has the very important instrument, which is simultaneously personal - real estate card file. This card file includes three categories of the data cards.

1. Every time the right of estate is mentioned in a juridical act, it should be published. All the following documents are to be also publishe: the documents establishing changes of elements of holders identification, protocols, which are issued by cadastre services to establish changes of elements of identification or of material base of the real estate.

The publication allows to have a possibility for protestation by the third person of acts, which make integral part of transfer part of the real estate right.

2. All real estate garantees, which make part of the estate right, besides overhead justice charges, should be registrated. It includes the special privileges, valid, judicial or conditional hypothecations.

The same as and for the publication,land publicity formalities Arent a part of takings, however, hypothecations and privileges can be protested by the third person only after the registration in a departement of a storage of the hypothecations. Those garantees give to the holder the preferable right of following.

3. And, at last, they are published by the way of marks: with judicial demands about appropriation, all basic acts of a procedure, which follow this judicial demand: with registration, all the changes, which do not aggravate the situation of the debtors (the stable aggravation should be marked in the registry).

3. Expert Land Surveyor

The expert land surveyor is the representative of the liberal professions. His work is topography. He participates in all operations for identification of the land real estate:

Surface, limitations, levels. The expert land surveyor can work only if he has the state diploma. This profession is regulated, and the expert land surveyors are incorporated in regional corporations, and also obey to strict discipline.

They are very important acting persons in any operation concerning the arrangement of the territories and public constructions, they make all topographical measurements. They also participate in all operations of separation of the land asset.

So we see that cadastre plans are necessary to remain efficient, and also owe to be constantly staticized. Any real estate operation, which entails section of the landownership, causes simultaneously a change of cadastre plan. The service of the cadastre is not engaged in material party of work concerning the establishement of this branch. Those are the duties of the expert land surveyor, that is obligatory for making out the documentation of measurement of the landownership, which will describe graphically new perimeter of the land lots or land lot and which will define the appropriate surface.

And, at last, according to his technical competency the expert land surveyor is engaged in the matters of argument between the private persons: Limitation of the landownership, of the land lots, neighbourhood etc.

The arrangement between the parties adjusts the distribution of the incomes and royalties of the expert land surveyor.

Thus, in this article we made a study of the basic participants of the real estate bargains.

The French experience can be interesting to Russian readers because of affinity of bases of civil procedure law of France and Russia. Also understanding of the legal rules and legal practice of each other is necessary for an International investment cooperation.