BUYER'S LIABILITY FOR AGENT'S COMMISSIONS AND MONEY "SOUS LA TABLE"

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Article 4 of a series of specialist articles written by David Anderson of Sykes Anderson, Solicitors, London.

BUYER'S LIABILITY FOR AGENT'S COMMISSIONS AND MONEY "SOUS LA TABLE"

Conversation between David Anderson and a UK purchaser of a French property:

Please note that the content of this article is of a general nature only and you should not act or refrain from acting in reliance on it. You should always obtain independent professional advice on the facts of your particular case. No liability is accepted in connection with this article.

Q: I heard about a property in France on the local grapevine, which I am buying. I went direct to the owner and we agreed a price. The property is on with a local estate agent at a price of €40,000 higher. If I go ahead could I be liable for the agent's commission ?

A: Firstly you need to establish the type of contract the seller has signed with the agent. If the seller has signed an exclusive contract "mandat d'exclusivité" with the agent he must still pay the commission regardless of whether the introduction is via or not via the agent. This also affects your liability as buyer and can make you liable for the commission.

If however the seller signed the contract with the agent on a non-exclusive basis "le mandat sans exclusivité" the seller does not have to pay the commission unless the buyer has had earlier contact with the agent. Accordingly the seller pays nothing if you have dealt direct with the seller without the agent's involvement. This means the agent cannot claim from you as the buyer because it is not covered by the contract.

Q. But how can I be liable to the agent if the agent's contract is with the seller and I haven't signed anything with him ?

A: The French Civil Code allows claims in these circumstances if you have knowingly helped the seller to breach his contract with the agent. This is classed as a faute délictuelle in France, roughly similar to an English tort. Evidence would have to be produced by the agent and would include matters such as that the reduction in price was equal to the commission, your knowledge that an agent was involved and any statement you made prior to completion if you were contacted by the agent.

Q: The seller wants me to tell the notary I am buying €30,000 furniture (which I am not) and to put this in the contract. He also wants €20,000 in cash under the table.

A: In the contract there is a statement that the full price has been disclosed. You acknowledge this by signing the document. The penalty for a false declaration is additional tax on the amount (4,89 %) with a penalty of between 20 to 40 % and interest on top of the total amount at 0,75 % per month. A better approach for the furniture is to prepare a full inventory as many items, which in England are viewed as fixtures, and fittings are viewed in France as chattels. It may well be that this inventory could realistically come to € 30,000 which solves the problem.

Q: What about the €20,000 ?

A: More problematic. The crucial point in France is that the notary guarantees good title on the basis that all monies pass through his account, which will not be the case here. In the very unlikely event of a problem with the title, for example if the seller has difficulty redeeming the mortgage on the property from the sale price, you could find yourself with a serious problem.

Q: Have you ever seen anyone getting caught by doing this ?

A: Every notary in France has had cases involving clients who have been caught out by the tax authorities. The same applies to buyers who have tried to avoid paying the agent's commission. Our view is that you should not get involved in this. In your case an agent who loses out on €40,000 commission will be very unhappy and may in addition to suing you contact the notary and local French tax office to get back at you. This is not a good way to start off!

Q: Any other points ?

A: The base cost of the property will be reduced for CGT purposes. Probably not a problem if main residence kept for 15 years.

Q: What about paying cash for building works ?

A: In a sale you will not be able to deduct the costs for French Capital Gain tax purposes. Since the new French CGT regime came in on 1st January 2004 we have noticed a tougher regime and only receipts with a French VAT number on them are generally deductible.

Click here to visit the latest legal news page on Sykes Anderson's website

David Anderson can be contacted at:

Sykes Anderson Solicitors
31 Bury Street London EC3A 5JJ

Tel: +44-207-702-1914
or fax +44-207-481-2840.
Or by email at: solicitors@sykesanderson.com

©www.whereonearthgroup.com. No part of this article may be reproduced without the express and written permission of the owner(s), The Where On Earth Group, and the author, David Anderson.

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