This article represents the views of Séverine Audoubert, avocate with the Paris Bar, on the role of the Real Estate Lawyer in the French property market.
The property market is a highly regulated market where only relevant players are involved.
The players: the real estate agent, the notary, and since recently, the Real Estate Lawyer (“Avocat Mandataire en Transaction Immobilière”).
The developer (“Promoteur Immobilier”) acts only beforehand and in the context of new buildings, and does not take part in the entire transaction. He researches and buys the land, and his role is to finance the operation, to enter into agreements with companies to provide the administrative and financial technical monitoring of the operation, he monitors the work, and is responsible for the relationships with the local authorities.
The financial adviser (“Conseiller Patrimonial”, who has the knowledge of the financial situation of his client, and guides his acquisition strategy, be it in a family context or in order to invest in a property to rent out) and the Real Estate Negotiator (“Négociateur immobilier”, which negotiates the purchase and sale of property) are two players who can intervene in real estate transactions but not from start to completion.
We have chosen to define the roles of three professionals, whose role is governed by laws and different statutes. However with regards to the transaction they have common obligations to meet.
Until recently, the real estate market was the field of real estate agents primarily, notaries and sometimes property managers. But since 2009, the lawyer may also act in real estate transactions. This ancillary activity does not diminish the role of the notary, who remains the sole responsible to seal the deal.
These three professionals are mandated to carry out a real estate transaction that may involve selling, buying or renting any type of property: apartment, house, commercial, land etc. They will be responsible for the negotiation and drafting of agreements and contracts such as the sales agreement, the unilateral promise of sale, the lease. However, despite their similarities, these activities should be distinguished.
• The real estate agent: a traditional specialist of the market
His activity is strictly controlled by the Hoguet law of 1970. This law seeks to protect consumers by establishing a number of safeguards and controls on real estate professionals. It requires them to hold a professional card issued by the prefecture.
Unlike notaries and lawyers, the real estate agent conducts the activity as principal. He prospects customers, evaluates the property, publishes real estate ads, advises clients or prospective clients, and conducts viewings of the property.
He must ensure the smooth running of all operations and verify the reliability of the various documents required for the conclusion of the transaction.
Very often, he will also be a property manager, i.e. mandated by the owners to look after the management of the condominium and the maintenance of the property (rent collection, charges, leases, works …).
He usually has knowledge and experience in the field and he is multitasks oriented.
• The new player bringing legal security in the real estate transaction: the real estate Lawyer (“Avocat mandataire en Transaction Immobilière”)
Since the Hoguet law, lawyers have the opportunity to act as agents in real estate transactions, without fulfilling the requirements for real estate agents. Yet until 2009, lawyers, due to the commercial focus of this work, were not really involved in this activity.
On April 21, 2009, the Council of the Order of the Paris Bar adopted a new regulation, authorizing lawyers to act in real estate transactions within the limits set by law. The French National Council of the Bars decided to do the same on 5-6 February 2010.
This new activity is intended primarily for lawyers with expertise in real estate matters, such as their procedural aspects, foreclosure issues or the drafting of acts for sales or rentals of private or commercial property.
But the lawyer is not a real estate agent. He must respect the core principles of his profession and the rules of conflict of interest. The mandate must indicate the method of calculation of fees and the duration of the mandate. These fees can be fixed freely, but they often represent a percentage of the value of the property in question (between 3 and 6%).
If the transaction is not completed, the lawyer may receive fees only for the documents he might have drafted. As they can’t advertise, lawyers do not have the same visibility as real estate agents, they can only reasonably display information inside and outside their offices, but not in a window.
This is why it was important that a national association bringing together all the real estate lawyers was created. The AAMTI (Association des Avocats mandataires en Transactions Immobilières) was established in November 2009 to assist lawyers in this new activity, communicate to the public and to conduct trainings on the subject.
The Association’s website includes offers for all lawyers who are members of the Association. It is also important that lawyers create partnerships so that this new activity can grow. For more information, you may contact the association at email@example.com.
AAMTI will attend the French Property Exhibition at London Olympia from 18-20 September 2015. The lawyer is a professional who can both advise and advocate in litigation, and who is skilled in the drafting of contracts and in international law where appropriate.
Real estate transactions are particularly complex, due to the scope of the information requested and the number of mandatory documents required. A lawyer will ensure that the seller or the buyer’s file is complete so that the transaction is secure and offers the necessary guarantees. When this is not done properly, the consequences for the parties to the transaction could be disastrous and lead to court, bring down the selling price or even cancel the sale. It is indeed in the context of a dispute that the advantage of using a lawyer is the most obvious. Although using a notary is necessary (for writing the deed), the fact remains that only the lawyer can defend his client in court.
In addition, the lawyer is also involved in foreclosures, which are complex procedures that can lead to either an amicable sale or a sale by tender (auction). Although foreclosures are not real estate transactions per se, they are a way to acquire property for which the lawyer is essential (it is the sole authority able to bid).
In addition the lawyer can also provide advice and allow their client to be informed of the different tax exemption schemes, tax credits to optimize the transaction.
Finally, a lawyer with international real estate experience will be able to accompany and assist their client in multijurisdictional legal complexities.
• The Notary: the key player for the authentication of the act
Like the lawyer, the notary may act as an agent for example when his work is mainly directed towards real estate and when he provides a service of real estate negotiations.
This legal professional is competent to guarantee the legal security of the entire transaction. Note however that only 5% of real estate transactions on the French territory are made by notaries acting as agents because their economic model is not really adapted to the real estate transaction.
In any case, the sales contract must be in authentic form and the notary has the monopoly on this type of act, he is the only one who can give it this legal value.
In addition to the remuneration that may be provided by its agent activity, record fees must be paid and are fixed by decree at 5% of the sale price before tax up to 45.735 Euros and 2.5% thereafter. The notary collects a fee on the acquisition of the property. This fee varies depending on whether the property is old or new. For the purchase of a nold property, the fee is set between 6 and 7% of the sale price, and between 2 and 3% for a new one.
Despite these differences between them, the real estate transactions players have common obligations:
-Obligation to collect information and to control the information collected, which derives from his obligation to provide advise to his client (checking that the property is not subject to special regulations, that the seller has the ability to dispose and use the property, the financial situation of the purchaser, that the land is suitable for construction …)
- Helping his client in the various proceedings, such as organizing viewings and providing a legal and technical audit of the property.
In case of non compliance with these obligations, the professional incurs civil liability and the client may obtain compensation.
- Obligation to have a financial guarantee contract. Note that for lawyers, the guarantee amounts to € 35 millions.