If you are not tax resident in France but own a holiday home here, under the proposals to be debated in parliament you will start to pay a new extra tax on it from 2012, over and above your taxe foncière.

The tax will be 20% of the cadastral rental value, even though you keep the house for your own use and do not rent it out. This is the same notional rental value that is used to calculate your taxe foncière.

The government justifies the new tax by saying that holiday homeowners should contribute towards national services and infrastructure since they benefit from them when they are in France.

The tax does not just target foreign property owners, as French nationals who live abroad and retain property in France will also be liable. However there is a temporary exception for people who leave France and who have paid French taxes as residents of France for 3 years out of the previous 10. These individuals will have a 6-year exemption from this tax, and those who are overseas for professional reasons will not be affected.

The proposal will be voted on in July.
13th May 2011

MY ANSWER
The president, Mr. Sarkozy, vetoed this proposal and it was not included in the final bill. The main reason is that most non-residents owning French real estate are not the main targets - French nationals who have fled France and its taxation while keeping a property there for vacations. The majority are foreigners who love France but have not immigrated to France (yet?). There may have been many rationales for the proposal. Punishing French citizens who leave to avoid French taxation is one. Making more apartments available for normal rental is also a very strong motivation, as is putting downward pressure on the price of real estate in Paris and other expensive parts of France where foreigners like to buy and thus keep prices "above market level." Therefore, such attempts will continue, and it is quite possible that someday one will be approved. My point here is not whether these rationales make sense and their expected results are realistic; rather, I think much of the French population believes that French real estate is too expensive and that there are too many empty or poorly used apartments and houses, so they push the government to use its powers to fix the perceived problem. See the section below titled A DISTRESSING ASPECT OF PARISIAN REAL ESTATE: some well-intended solutions end up doing a lot more harm than good (and not just concerning real estate ownership).

PAYING FRENCH SPEEDING TICKETS ONLINE
In recent years the number of automatic radar units monitored by the French police has increased considerably and the number of fines has risen accordingly. The government's latest innovation is a website where speeders can pay tickets online: www.amendes.gouv.fr. The highest payment authorized is 1,500 euros.

There has been long and heated debate about the radar units. Many elected officials would like to get rid of them, or at least significantly limit their use. Even though traffic radar guns are not very large, drivers learn quickly to identify them so it is possible to avoid getting a ticket if the speeding is moderate. Some officials have even suggested installing signs several hundred yards before each radar unit informing drivers of its location, which I think would clearly defeat the very purpose of installing them. The units are very unpopular, for obvious reasons, but average speed on French roads has gone down and so has the number of fatal accidents.

By the way, savvy players in the private sector know enough to make sure they own the most common variations of their website's domain name so that others cannot steal their traffic, clientele and so on. In this case, a private company created a site called www.amendes-france.org and took in a fair amount of money before the site was closed. Consequently, some people had to pay their speeding tickets twice!

A TIP FOR FOREIGNERS WHEN SPEAKING WITH A FRENCH PERSON
A recent comment made by a foreigner who is a member of the American Church reminded me of something I learned about 25 years ago when I was working in the USA. This person asked me:
"How do I deal with a French person who is wrong when I am right?"

My answer was pure provocation, I fully admit:
" You apologize and say you are entirely at fault!"

I could have put it differently, but the underlying point is valid. Here is why:

When I was trained in the USA by the Travelers insurance company to sell life insurance and annuities, I was told to never, ever use the word "but" in a presentation to a prospect, or even a client. We were told that "but" is associated with "butt" and you find yourself kicked in the "butt" and out of the house. The solution was to always use the word "and" instead of "but," so that the presentation never had a negative tone.

As a foreigner there are so many ways a misunderstanding can occur that you are better off adopting this type of speech pattern, not because you want to sell financial products but because it should minimize the negative consequences and awkwardness of the many errors you will make speaking French and the cultural faux-pas you will make without realizing them.

A DISTRESSING ASPECT OF PARISIAN REAL ESTATE
Two very different pieces of news mentioned hereafter illustrate how much more difficult it has become for a foreigner to rent in France, and especially in Paris.

In July 2009 a law was supposed to dramatically change the relationship between tenants and landlords. Since it takes about three years to expel a non-paying tenant, the landlords were asking tenants to furnish more and more guaranties, making it close to impossible for someone with an average salary to rent in the center of major cities in France.

Instead of changing the law regarding protection of the tenant, which would have shrunk the delay considerably, the government addressed the scope and nature of the guaranties the landlord had the right to ask for. This approach backfired against potential tenants. Since landlords now have fewer ways to protect their right to receive rent, they have become even more cautious and refuse anyone they think might pose the slightest risk of defaulting on the rent. A foreigner is always seen as a higher risk since they rarely have local family members who can provide a personal guaranty and they do not always have the kind of salaried position that makes it possible to obtain LOCA-PASS® or a similar form of protection.

A little bit of history here: there used to be a social program funded by French employers called "le 1% lodgment," which helped employees with housing costs. The system became more and more dysfunctional and it was shut down at the time the law was passed in July 2009. In its place, new programs were created, of which LOCA-PASS® is the most popular. The corporations managing these funds merged, and there are now only five left to carrying out these new programs.

Landlords often used to seek a bank guaranty of between six months' and two years' worth of rent, but it is now illegal for corporations, and institutions in general, to ask for such a guaranty. Only private investors can ask for one.

An illustration of this crazy situation: one of my clients who rents in Paris while living in the USA wanted to downsize and found an apartment half the size in the same building for about half the rent. The client's request was refused because downsizing would mean signing a new lease, and the landlord is a multinational insurance company that cannot ask for a bank guaranty.

It has been known for decades that expats assigned in France have their lodging secured by the employer and the company signs the lease and pays the rent. It is the only practical solution.

To look at the other end of the spectrum, Ms. Pascale Dietrich-Ragon, age 30, a researcher at the Institut national d'études démographiques (INED), did her thesis on the population living in squats and unsafe buildings. The study sample was composed of 520 families, 80% of them foreigners, of whom 7% had recently become French. Only 29% were undocumented aliens, with 59% of those coming from Africa. French low-income housing projects are much better than the American ones, especially in Paris. Every year there are 40,000 new requests for only 8,000 new rentals accepted. So these people - who work as delivery boys, security personnel, cleaning ladies, construction workers, waiters, etc. - are stuck between the private sector they cannot access because of the lack of guaranty and government programs that are totally insufficient to meet demand.

The main conclusion Ms. Dietrich-Ragon reached was that the process of integration into French society was much slower for people in the precarious living conditions she was studying. Since mainstream society does not see where they live, they are like ghosts. This population feels totally rejected by French society and is helped by its own community, strengthening ties with their origins and weakening their ties with French society, i.e. their future. At least this is the model that everybody has in mind!

After having visited such lodgings on a few occasions, I have to say this analysis is absolutely accurate.

Jean Taquet

Q & A

RENEWING A CARTE DE SEJOUR VIE PRIVEE
WHEN THE RELATIONSHIP IS OVER

The first solution is quite risky, since if you cannot for some reason get through to the préfecture, which can happen on occasion, then you have defaulted on the appointment and you do not have the legal status to ask for another appointment. In order words you are multiplying your handicaps.

With the second solution, you attend the meeting with a complete file; it is just not the right file. For sure, the first reaction of the civil servant will be that you do not qualify for the renewal as booked. The message could be quite scary, if they go on and on describing all the adverse consequences you now face. Eventually you will have a window when you can speak, and you present the other file, the complete one. After a long wait - while the file is reviewed, then shown to the office manager, and they discuss and evaluate the situation - you are bound to get one of two answers. Either your file is reviewed right then and there and the decision is made on the spot, or you need another appointment, usually in a different office.

This way you are sure of getting either the right request reviewed or the right appointment for your request. You significantly raise your chances of success in getting the new status. This is why I prefer for people to choose this solution. True, it means facing an adverse and very stressful situation, in which you feel like someone walking knowingly into the lions' den! The first part of the meeting will be dreadful, at best. Indeed, the préfecture has a very rigid procedure and you are determined to jerk it so it can review something that was not expected. YES, it will be scary. You just need to be very well prepared, which is why having a perfect alternative file is so important, as it greatly facilitates the second part of the meeting. Being accompanied by a French person is almost a must, since you will not have that many opportunities to present the file, and it is essential for the civil servant to review it before the end of the meeting. These people are known to be brisk, to say the least, and they can cut a meeting short in no time.

Of course, I know nothing of your job, your credentials and so on. So the only advice I can give you is that the request needs to be 100% safe. You must not take the risk of getting a NO on the second file. If you have any doubts, choose the safest, simplest option.

To me this boils down to two choices in your case: employee status or self-employed. Employee status is preferable but it has what I consider a huge drawback: the office of Main d'Oeuvre Etrangère (Foreign Labor) decides whether to accept or refuse requests for the right to work in a salaried position. For anything less than a monthly gross salary exceeding 4,000 euros, the MOE has a veto right, which is now used pretty much systematically. New guidelines issued in late May 2011 by the Interior Ministry, called "La circulaire relative à l'immigration professionnelle," drastically increased the requirements, I feel this makes the procedure very scary.

Self-employed status also has some serious drawbacks, but for your case it has a huge advantage: URSSAF does not have a veto right and is quite liberal in accepting requests. That means the préfecture tends to review requests for this status very carefully; but this status in effect involves creating a business, and the civil servants do not have the expertise to evaluate such business projects like a CPA would do - specifically, the viability of the business plan. Indeed, the cover letter asking for this change of status includes a tiny business plan. The request then needs to have all the documents the préfecture expects to find; they must look reasonable, and the project must look coherent with what the applicant was doing before, especially if the applicant was a student. Basically, though, once all the proper documentation is there, the préfecture has very little real power to make an in-depth evaluation as the basis for denying the request for financial or business reasons.

Therefore, submitting this type of file to the préfecture is much simpler than submitting a request for salarié status, although becoming self-employed is often a two-step process, which can make it feel like it is dragging on forever.

In the first meeting, present your file with:

If all goes well at this first meeting, you will get a récépissé stating that you have the right to work as an independent. Then you go to the URSSAF branch nearest you to register. This triggers a chain of events over which you have very little control, ending with the issuance of health coverage, registration with the tax office and the equivalent of American Social Security to fund your French retirement.

At your second appointment at the préfecture, you will show that you comply with the legal requirement of having your registration up to date as the result of the procedure mentioned above. If you are successful, you will get a final récépissé and just have to wait for the cartes de séjour, which should be made available to you about two months later.

This procedure can seem quite daunting, considering its length - about six months total from starting to prepare the business plan to picking up the plastic card. But in fact only the first préfecture meeting is challenging; that is because there is no reliable list of documents to bring, since each case is very different. All in all, this procedure is quite safe as well as relatively easy to live with, since the applicant knows at all times what is going on, rather than waiting weeks or months for an answer from the MOE.

My final advice: overcome your fear and face the challenge head on. The harder you fight back against your situation - and this should enable you to indulge in blaming/cursing your ex-fiancé at the same time for what he has done to you, without many negative consequences - the better prepared you will be.

MOVING INTO AN APARTMENT BEFORE IT IS READY

No matter how obvious it seems that this is the only thing to do, in France (and especially in Paris) I would advise doing things differently, mainly for numerous practical reasons.

First, if the contractor thinks the lease has not started, he may feel he can handle any threats and angry statements from the owners about the work taking more time than originally agreed. He is used to such situations, even if they are not always entirely his fault. If the contractor is face-to-face with a tenant who wants to move in, however, this is a much more unusual situation and I believe he will rush to get the job done. It may not be done perfectly but at least the delay should not last very long.

Second, the relationship between landlords and tenants in France is traditionally, at best, one of cold, respectful distrust. Anything more than that should be considered a miracle or due to unusual circumstances. So if you can get the keys sooner rather than later, it is better for you. The landlord cannot renege on the deal. Legally, if you sign the lease before moving in, as is often the case, your rights are fully protected. Until the tenant has the keys, a really unscrupulous landlord could rent to someone else. So getting the keys right away ends up being extra protection. (Of course you would win the lawsuit in court, several months if not years later. This is not your objective.)

Third, although the description of the condition of the apartment (état des lieux), done during an initial walk-through of the apartment, cannot be done immediately for obvious reasons, nothing prevents the parties from agreeing to do it at a later date, after documenting what can be done right away, such as the reading of the meters, listing the keys given and the amount of money paid, and so on.

Ideally the initial état des lieux should be after the renovations are done and before you move in, but as the contractor might not give you or the landlord any notice of when he is done, this could be complicated to schedule. You are better off organizing it once you have moved in, even though the description will be only partly accurate since not everything will be visible. Still, if the apartment has been fully redone, even if the work has not been done perfectly, it should be in good to excellent condition, so the risk of your liability is quite small.

Last but not least, it can take weeks if not months to find a reasonable rental in Paris, so giving up quickly on this apartment is counterproductive. It will be virtually impossible to get another apartment in a week or so, unless you already have several of them lined up. I fully understand your mother's reaction of frustration and anger, but that reaction should be brought under control. You two have a lot to lose by expressing yourself in angry terms. Pick your fight: you have very little to gain with this one. Say something like "I want the apartment in two days or I will take another one," and chances are you will lose this rental.

One last detail, which I consider hugely important and which you and your mother may not realize. As noted earlier in this column, it takes over three years to expel a non-paying tenant, and French landlords have been trying for years to protect themselves from this risk. The situation has frozen much of the long-term rental market for unfurnished apartments, as landlords have more incentive to rent furnished and in some cases on a very short-term basis to avoid having the tenant overstay the duration of the lease.

Therefore, it is absolutely exceptional and not really comprehensible that you were able to get such a good deal and were not asked for a bank guaranty. It is such an exceptionally good thing for you that this alone should convince the two of you to do just about anything to secure this lease as quickly as possible.

You should consider yourselves exceedingly lucky to have secured this rental in such conditions. So whatever is needed to fix the situation as you go along, no matter how much inconvenience it may represent, will never balance the incredible benefit you have received.

Try not to forget that. Good luck.

DISCLAIMER
Please forward this message to all who would be interested in its contents. The information contained in this newsletter is intended as exclusively general information. Therefore, I strongly urge readers to seek professional guidance concerning the legal and tax matters mentioned. This newsletter is intended as a general guide and is not to be taken as professional advice.