French Property and Bankruptcy Proceedings (In the UK?)

Date: 13/08/2010

By Vincent Morand, Ashton Graham Solicitors

Since 1st January 1956, it is an obligation for French notaires to record at the French land registry any deeds relating to immoveable property in France. The French land registry is divided into branches known as Conservation des Hypothèques, each département having several Conservations. When a transaction relating to immoveable property takes place, the notaire requests from the Conservation confirmation of how the property is registered. The reply, for which the French administration is responsible, confirms the cadastral references of the property, the owner’s details, the price of purchase and any charges, such as mortgages or easements.

The French land registry is a very well organised, and therefore safe, system. However it relates to the property and not directly its owner. For that reason the notaire may have to obtain further information especially when the seller is running a business – commerçant – or when he is one of the shareholders of a corporate company. Indeed it is necessary to check that the individual seller or his business are not under administration – redressement judiciaire – or have not been made bankrupt – liquidation judiciaire. Another application is therefore usually submitted to the greffe du tribunal de commerce to confirm the situation. If unfortunately the seller is in one of the situations above, the notaire has to deal with the French equivalent of a trustee in bankruptcy – mandataire judiciaire – to ensure that creditors are protected.

When a notaire has to deal with a seller who is not resident in France, the position may be less secured. He will only be able to make the first enquiry at the Conservation. If this client is running a business from abroad, in the UK for example, or is one of the shareholders of a UK based corporate company, the notaire might not be in a position to obtain information from the UK. That can be a problem if the seller is in administration or been made bankrupt. Naturally from a legal perspective the seller should keep the notaire informed of his current position, but one will appreciate that he might be tempted not to tell the truth. The worst case scenario being a sale taking place in France and the entire price being paid to the seller following completion, without the knowledge of a trustee in bankruptcy or the seller’s creditors.

One option available to a trustee in bankruptcy is to register the English judgment at the French land registry as a charge against the French property. The process is not straightforward but it should be worthwhile. If there is a charge against the property, the notaire is informed by the certificate issued by the local Conservation. Even if he is not familiar with the English position in such matters, he will have actual knowledge of the charge and must not allow completion to take place until he has confirmation that the charge can be cleared. This process could end up with a price being paid to the trustee in bankruptcy in the UK, or at least part it if there are other charges registered, such as relation to a French mortgage granted at the time of the initial purchase.

A solicitor specialising in French law can help to liaise with the French lawyers involved in the process.

For further information regarding this or any other legal issue regarding French property sales, purchase, Wills or inheritance tax please go to www.ashtongraham.co.uk/france or email france@ashtongraham.co.uk

This article is for general information only and should not be relied upon in any particular circumstances.