Post-Brexit Changes That Property Owners in France Need to Know

Brexit - UK's departure from the European Union has stirred some concerns among British nationals with second homes in France and other countries under the union. Even when the UK has completed its separation from the European Union back on December 31, many are still left wondering what would happen next.

This uncertainty is often accompanied by the fear that they might have to sell their property, as post-Brexit changes could lead to their second homes being seized by the government. But these claims are nothing but fearmongering campaigns that have unfortunately plagued both sides of the debate back in 2017.

French property law honours the rights given by the United Nations Universal Declaration of Human Rights and the European Convention on Human Rights. Under the protection of these aforementioned entities, individual property rights are respected. Hence, no properties that are legally owned will be seized or have to be sold out.

You can rest easy that your second home will not be seized by the government or any other institution. However, there are still some important post-Brexit changes that you must absolutely be aware of.

Changes as of January 1, 2021

Loss of EU Citizenship

Starting January 1, UK nationals will effectively lose their EU citizenship. If they plan to travel or move to France, they can do so as third-country citizens just as the Americans, Canadians, and Australians do. Losing your EU citizenship will have many repercussions, especially when it comes to travelling and taxation. But perhaps the biggest change is the loss of the right to free movement.

Third-country travellers and property owners can stay for a maximum of 90 days only, every 180 days. EU citizens are free to extend their stay in other EU states however long that may be. But for UK nationals, the required duration of stay must be followed. Otherwise, they may be fined or even deported.

Property Owner's Rights

Contrary to the fearmongering information that was heavily pedalled during the campaign period, property owners can still enjoy the same rights as they did before. This includes keeping their property as their own. They do not have to sell or rent it out if they don't want to.

However, because of the eradication of their EU citizenship, they will have to follow the 90/180-day holiday rule. Overstaying beyond this mandated period has its consequences, as mentioned before. Once the transition period ends, more changes might be set in place so always make sure to stay updated.

Access to Healthcare Services

Before Brexit was completed, UK nationals who were staying in France did not have to worry about healthcare since the European Health Insurance Card (EHIC) entitled all Brits treatments in other EU states like France in case they fall ill or get injured. Brits who are working in France can work in peace knowing that any health problems or injury will be backed by EHIC.

The end of the transition period on December 31, 2020, ushered in some changes regarding healthcare for UK nationals living or working in France. For one, they will no longer be covered by the EHIC. However, the Brexit Withdrawal Agreement does indicate preservation of healthcare rights for full-time British residents in France. For third-country visitors or non-resident second-home owners, no deal on this matter has been announced this far.

If you are not a full-time resident in France and you wish to visit your second home, you will have to secure comprehensive travel and health insurance first. This is to ensure that your treatment payments will be covered if you ever get into any accidents while you are in the country. This is the same way that you would if you travel to other non-EU countries like America or Japan.

Additional Travel Requirements

In addition to the 90/180-day travel rule, all UK nationals will need to apply for a travel authorization if they wish to visit their property in France. This travel authorization, under the European Travel Information and Authorization System (ETIAS), was already launched on January 1, 2021. This rule is expected to be obligatory by the end of 2022 as the EU will start to implement stricter border control procedures.

Taxation

Even though second home owners can enjoy the fact that there will be no changes regarding the property owners' rights, they might find the changes in taxation rates and policies quite upsetting. For instance, EU citizens will only be taxed 19 per cent of the income from rent while non-EU citizens are going to be charged 6 per cent higher.

With all these changes, what options do UK nationals have if they have a second home in France? Can they still become permanent residents of the country? Do they have to sell? Can they still purchase properties in France in the future?

The answer to these questions depends heavily on your long-term needs and goals. But if you need short-term living solutions, you can also gain some insights in the next part of the discussion.

What options do Brits with properties in France have?

For UK nationals who wish to learn more about what they should do if they own a second property in France, French property laws and the withdrawal agreement allow the following options:

Register for Residency

The first option that second home owners could opt for is to register for residency in France. This is the only option that allows them to retain their EU citizenship under the Withdrawal Agreement. With the citizenship intact, they will gain full property owner's rights to their home or building.

As EU citizens, they will no longer be affected by the changes in rules that are applied to third-country citizens. UK nationals, however, will have to go through a series of process for the residency to be complete and effective. This is a good option for those who are planning to move permanently to France. It will give you the freedom to stay as long you like, as a resident of France and as a citizen of the EU. But if you cannot take such a big commitment at the moment, you can take the next option instead.

Declare the Property as a Holiday Home

If for personal or professional reasons, you cannot register as a resident of France, you can choose to declare your second home as a holiday destination. With this option, you are subjected to the 90/180 visiting rules. Those who want or need to stay longer than 90 days in France will have to secure long-stay visas.

Although many things are still unclear since the UK and the EU still has yet a lot of things to sign off on, one thing that is already confirmed is the loss of EU citizenship, rendering all non-residents as third-country citizens as discussed in the previous section. This means that the same visitation rules that apply to third-country citizens will also apply to them.

Rent Your Property Out

Another option you can take is to turn your home into a rental property. Our recommendation is to get the correct documents in order as soon as possible. This includes a residence permit, so you can continue to manage your property. You may also hire a property manager based in France if flying in yourself is not possible.

If your property is currently only catered towards British tourists, we suggest branching outside of that clientele. This is because, with the completion of the transition period to the restrictions due to the global pandemic, British tourists might decrease in the coming months. Get ahead of the times, and start advertising your property towards the locals or tourists from other countries.

Sell Your Property

If all the other choices do not work for you at the moment, then you can opt to sell your property out. The same process for selling your second home still applies. Be sure to talk to a realtor who is adept at the latest changes if there ever are any.

What impact will these changes have on the property market?

The best time to move would have been before Brexit's transition period has completed. Doing so would have led to less tax payments. Now that these rules have been set, it is significantly more difficult to close deals without having to shell out a larger amount on taxes.

The good news is, this does not seem to faze a lot of UK nationals who still want to purchase second homes in France. On the contrary, a Eurostat study even found that there is a huge increase in UK nationals emigrating to the EU even after Brexit. In 2020 alone, sales have seen a steady increase with UK buyers looking to spend 2-3 months in their second home as opposed to shorter periods. So, it is safe to say that Brexit will not soften the property market as much as expected.

With these numbers in mind, Brits who are planning to purchase a second home in France in the future can still do so with ease. Do keep in mind that the tax charges may be higher, though. Mainstream prices have seen moderate growth of up to 15% in the last 10 years - something you should account for if you are looking for new investment opportunities.

The buying process has not changed, but a lot can still change in regards to mortgage regulations in the next few months or years. For example, it is projected that British citizens who want to take out a mortgage in France might not be able to borrow as much as EU citizens. As of the moment, third-country residents can only borrow within the range of 60-65% while EU residents can take out mortgages of up to 80%.

If you wish to have a more accurate estimate, we highly suggest talking to experts in French property law to get the best deal in the market in the post-Brexit era.

Advantages of Working with a French Property Law Expert

Brexit may have posed some challenges to property owners who have second homes in France. With a lot of new tax and legal implications, you have to watch every step to make sure you are doing everything in accordance with these post-Brexit changes. Without consulting an expert on the matter, it can be hard to navigate through those processes.

Whether you are planning to move or rent out your second home, it is important that you seek professional independent tax advice before buying or selling. One of the advantages of getting good legal and tax advice is that you will be guided as to what to do next. This is much better compared to figuring things out on your own, which can slow down the process. Remember that time is essential in this matter. The sooner you make your move, the better.

Another advantage is that you don't have to juggle through a lot of paperwork and documentation. Your tax advisors can handle it for you, so you don't have to. Dealing with taxes is understandably intimidating, but your advisor will be there to walk you through every step of the way. You will make better and more informed decisions as a result.

Each client is different. Good legal and tax advisors will not just give you a template of services. Instead, they will curate their services according to your specific needs and requirements. This process includes analyzing the global situation of clients in a bid to provide a quality service that takes into consideration clients' needs in the short or long term.

Discover the Best Options with France Tax Law LLP

Property acquisition is a decision you can't just waltz into unprepared. Whether it involves your principle or secondary residence, you still need guidance before you commit. With the recent reform of contract law in February 2016 that came into force on 1st October 2016, the vision of property contracts (Promesses, compromis) has changed. In this regard, we can help you search for ideal real estate opportunities, explain contract obligation before you sign, and so on.

We will be with you from start to completion. For more information about post-Brexit changes, the French property law experts over at France Tax Law can help and guide you. Our team of lawyers can help you navigate through these unprecedented times.