Using Collateral to Secure LoansUse of collateral to secure loans
As part of the rebound in the France mortgage bond markets for high value properties in top locations, focusing on the strong liquidity of a given home and the attractiveness of sponsoring, the biggest challenges for the borrower remain how to cut the cost of collateralising loans for acquisitions in France, especially those from abroad.
There are two principal kinds of mortgages on immovable property under France law: Creditor pawn (privilège du prêteur de deniers ) - a statutory pledge (privilège légal) which provides collateral to a creditor who provides means of funding the purchase of immovable property, to the detriment of any other form of funding (such as the funding of investment projects, safeguards, supplies, etc.).
There are different regulatory implications of these two collateral classes on property portfolios. Mortgages are effective between the contracting partners and are executable against the beneficiary's successors from the date of the certificate. It is not necessary to register the mortgages in the property register for them to be effective.
The entry is, however, mandatory in order to make the security right over real property assertable against third persons from the time of entry in the cadastre. On the other side, the pledge of a creditor comes into force on the date of the contract of sale, provided that it is entered in the property register within two month after the date of the contract of sale.
There are various types of taxation and charges involved in providing a mortgages, which in reality are paid by the borrowers. Real estate registration fee (taxe de publiclyité foncière): currently 0. 715%, this is applicable to the nominal amount of the credit guaranteed by the mortgages plus a proportion of this nominal amount that represents extra debts (generally between 5 and 20% of the nominal amount of the loan); mortgages registration fee (contribution de securité immobilière): currently 0.
05%, this applies to the amount of the hypothecated credit plus a proportion of this capital which represents extra liabilities; notary charges (émolument du Notaire): currently 0.45%, based on the nominal amount of the hypothecated credit only plus value added tax at a present 20% interest rat.
In France, without paying property tax - levied on property - the French tax on property can be protected by the registration of a pledge of a creditor, provided that: the credit is included in the purchase document for the property and the credit is used to pay the purchase cost and deposited in the notary's name.
Procuring a claim for a credit in France becomes a greater challenging task if this credit also funds the purchase of property in other jurisdictions. If it is to take advantage of the cost savings described above, the overall facilities must be incorporated into France and must be issued by a qualified public accountant in the legal system of France in the legal instrument of a public account in the language of France, without prejudice to any negative effects this may have in a particular court.
The majority of jurisdiction in mainland Europe and the United Kingdom, however, allows such systems and permits the granting and registration of topical mortgage as collateral for a credit subject to France legislation. However, the procedure for the signature of the document may become unwieldy (depending on the number of participating jurisdictions) as each debtor must make sure that a properly authorised representative is available to personally and personally authenticate and enforce the document in the attendance of the solicitor.
Correspondingly, in the case of particularly complex and geographically large operations, the equilibrium between cost containment and the need for greater agility may make it more appropriate to enroll a mortgag rather than a pledge from a creditor. Transferring an outstanding mortgages or liens through the recourse mechanisms also allows the party to evade property taxes.
There are also certain restrictions on the proceedings with regard to the mortgage certificate, which must be a document notarised in France and in France. Furthermore, the assignment of the benefits of virtue of existing mortgage loans or of the lender's pledge is contingent upon satisfying verification by the creditors and their advisors of the security provided over the property portfolio.