The Big Four
How to buy property in Italy, France, Spain and the United Kingdom.
August 1, 2006
A vacation home in Europe is often more than a good investment—it is the fulfillment of a fantasy. While under-the-radar European cities are becoming more popular, American dreams of owning a Tuscan farmhouse or a villa in the south of France have not faded. For most, buying in the big four—Italy, France, Spain and the United Kingdom—is still the ultimate fantasy.; function voidFunc() { } voidFunc();) |
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Buying a vacation home in Europe is "classic caveat emptor," according to Robert Ivanhoe, chairman of Greenberg Traurig’s global real estate group. With concepts such as title insurance and mandatory seller disclosures practically unheard of, "it’s a murkier process than it is here," he cautions.
Since that process is frequently clouded by
romantic notions of
a certain lifestyle—at least for part of
the
year—Ivanhoe emphasizes the
importance of doing "quality
due diligence"
with the help of an objective
top-notch support
team. (Click image to enlarge)
The best place to start is by finding an English-speaking
lawyer in
the country in which you plan to buy. Most prominent U.S. law firms
have vast international networks. Have that lawyer recommend a
couple
of
brokers, not the other way around. Interview the
brokers on their
turf, not by
e-mail or phone.
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"You want someone you can trust and who understands what you’re
looking for," Ivanhoe continues. Then, when you are
certain you
are in good hands, let your
imagination soar.
ITALY
When David Burden, founder of the Timbers Resorts, expanded
his
luxury fractional-ownership residence club to Europe, he bought an
18th-century castle in Tuscany—undoubtedly the most evocative
European
destination for second-home daydreams.
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"Tuscany has the awe and the ‘ah’ factor,"
Burden says. "It’s
truly
everything everybody dreams about.
It’s one of the most special places on
this earth."Unfortunately, prices in Tuscany—and parts of neighboring
Umbria—have tripled and quadrupled over the past decade, as
the
region’s
signature stone farmhouses, abandoned in the wake
of an
extraordinary exodus
over the past century from Italy’s
rural areas,
were snapped up by other
Europeans and
Americans.; function voidFunc() { } voidFunc();)
Castello di Casole bathrooms
feature carrara marble from the same quarry that Michelango
obtained marble for
his sculptures. Photograph by Pat Sudmeier. (Click image
to enlarge)
Though no other region of Italy quite has Tuscany’s cachet,
other
areas are now on the radar. Thanks to George Clooney, who plunked down
millions for a villa on Lake Como, the favorite weekend
getaway of the
Milanese
is now known to the millions who read
People and Us Weekly.
With discount airlines like EasyJet and RyanAir flying into Brindisi, Pescara and Ancona on the Adriatic, investors are also discovering the Abruzzo, Le Marche and Puglia regions on the east coast.
A deposit of 10 to 30 percent of the sale price will secure your Italian dream home upon acceptance of a formal written offer. After your lawyer has verified ownership, past payment of property taxes and the validity of any building permits, both buyer and seller sign a binding preliminary contract, which spells out all the terms of the final sales contract. At this point, the buyer generally puts down another 20 percent. Ownership is transferred upon acceptance of the notarized sales contract; the sale is then registered and the balance is due.
Property taxes in Italy are paid to the local commune and the state; the amount depends on the size of the house and the commune. Capital gains tax decreases the longer you own a property; after five years, CGT is no longer applicable. A fiscal receipt is required for tax purposes on restoration work and will also be helpful should any dispute arise.
Other associated costs include notary fees (2 percent),
registration
fees (4 to 17 percent) and property purchase taxes (3 to 10
percent).
Brokers’ commissions (4 to 5 percent) are paid by
the seller.
FRANCE
If your vacation-home fantasy has been fueled by years of high
school French, Calvin Trillin essays and strolls through St.
Paul de Vence, you
are probably not going to
look further than the hexagon.
Burgundy, with its rolling, vine-covered hills, is less
expensive
than the Riviera or Provence; and Normandy, with its dramatic
coastline, has lots of charm, but spotty weather. The
Dordogne, harder
to get to
than most other areas in France,
was the latest rage among
English and German
buyers, many of
whom nabbed great old stone mill-
and farmhouses and turned them
into bed-and-breakfasts.
Two properties in Paris available through Christie’s
Great Estates. Top: An early-20th-century residence on the Place de l’Étoile,
with views of the Arc de Triomphe and the Eiffel Tower, is priced at $6.01
million. Bottom: Located in the Latin Quarter, this 13,000-square-foot mansion
includes a 7,000-square-foot garden. (Click images
to enlarge) ; function voidFunc() { } voidFunc();)
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Once you have found a property, be it in St. Remy or St. Malo,
and
agreed on a price with the seller, a notary—a government-appointed
official with the legal monopoly on all French real estate
transfers—will draw
up either a promesse de
vente or
a
compromis de vente
for both parties to sign. The former
gives the buyer
an option of buying the
property within a
period of time for an
agreed-upon price for a forfeitable
deposit of 10 percent. The latter
is a binding sales agreement
that contains the
conditions of the
sale.After the notary has checked for any encumbrances upon the
property,
parties sign the final contract, the deeds pass to the buyer and the
land registry is updated. The balance of the purchase price is
paid to
the
notary, who in turn pays the seller. Associated
costs include
notary fees (2 to
2.5 percent), property
purchase tax and registration
costs (4.5 percent). The
seller
generally pays the broker’s commission,
which is around 5
percent.
SPAIN
Lured by the guaranteed sunshine and the amount of bang they
could
get for their bucks, English and Scandinavian shoppers have been
snapping
up villas and condos on Costa del Sol for years.
Unfortunately,
haphaz-
ard development and poor construction have
turned sections
of the
coast, once the cavorting grounds of
Euro-royalty, into a
high-rise
hodgepodge.; function voidFunc() { } voidFunc();)
La Masía, a 12th-century estate located an
hour outside Barcelona, is outfitted with furniture and paintings from the
17th through the 19th centuries. (Click image to enlarge)
However, other parts of Spain—possibly the European country
presently boasting the most exciting innovations in
architecture, food
and
design—still offers interesting
investment opportunities. Valencia,
with its
dramatic City of
Arts and Sciences, designed by native son
Santiago Calatrava,
has recently become even more popular since the
announcement
that it will host
the 2007 America’s Cup. Midway down the
coast and equidistant from Madrid and
Barcelona, the coastal
city lies
opposite the trendy Balearic Islands of Ibiza
and
Mallorca. (Click image to enlarge)
Adventurers are discovering the Alpujarra region, between Granada and the southern coast, where quaint mountain villages enjoy a year-round micro-climate and lushness due to the constantly melting snow atop the surrounding Sierra Nevada.
Once you have found your finca in Andalusia or your cabin on the Guadalquivir, the first thing your lawyer will do is check the Spanish Land Registry for the exact lot size, any outstanding mortgages and the title holder, the only one with the right to sell the property.
Prior to your signing the binding sales agreement, which sets
forth
the terms of the purchase, and paying a 10 percent deposit, your lawyer
will check habitation permission, payment of past property taxes and
possible
existing rental contracts. If you withdraw from the
purchase
after signing, you
lose your deposit. If the seller
reneges, it is not
unusual for him to pay twice
the amount of
the deposit, depending on
the wording of the agreement. The sales
agreement is signed before a
notary in the form of a public
deed.; function voidFunc() { } voidFunc();)
A modern villa in Altea has views of the
Mediterranean. Both properties are available through Christie’s Great Estates
for $11.47 million and $4.43 million, respectively. (Click image to enlarge)
Additional costs to the buyer are approximately 10 percent of
the
purchase price, including property transfer tax (7 percent), stamp duty
(1
percent), and property registration and notary fees, which are
calculated
according to the price of the property. Broker
commissions,
paid by the seller,
are generally 4 to 6 percent.
When buying a new
home from a developer, the
buyer receives a
deed of declaration of new
construction, an occupancy permit
and a certificate stating the
property value.UNITED KINGDOM
Cottages in the Cotswolds, manor estates in Kent—vacation homes
in
the United Kingdom are more than just the settings for fairy tales and
Merchant Ivory films. The island nation 3,500 miles across the
Atlantic
is
becoming as accessible a second home destination
for Americans as it
is for the
Brits.
A five-bedroom home in London’s Chelsea district is
offered through Sotheby’s International Realty for $12.4 million. Photography by Tony Murray. (Click image to enlarge); function voidFunc() { } voidFunc();)
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Once you have found a local lawyer, have him steer you to real
estate agents in London, the Lake District, Devon, Cornwall,
Wales or
Scotland—all popular second home destinations with
foreigners.
After you have found your hideaway, your lawyer will present the seller with a formal offer, subject to surveys and contracts. Lawyers for both parties then draw up private contracts, leading to a binding sales agreement. When the agreement is signed, a deposit of 10 percent is placed in an escrow account with the seller’s lawyer; escrow is generally 15 to 30 days. Following the final sale, new ownership is recorded with the Land Registry.
Costs include stamp duty (between 1 percent and 4 percent depending on the price of the property), legal fees (roughly 1 percent) and registry fees (approximately £200, or $372). Real estate brokers’ commissions (generally 2 to 3 percent of the purchase price) are paid by the seller, though buyers are sometimes represented at their own expense. Capital gains tax is charged at income tax rates, generally 20 to 40 percent. (Click image to enlarge)