Linking with other leaseback owners

23 posts / 0 new
Dernière contribution
Linking with other leaseback owners

This may be be of interest to this Forum's readers: http://54270joel.free.fr/rechproprio.php
This is a (French) website where owners that are worried about their rental income not being paid can get in touch with other owners.

It is nothing like this forum of course, yet it can be helpful to those who want to build up links with French leaseback owners and the various comittees that re being set up to defend investors' interests against the leaseback companies.
 

I am referring to loss of rental income, i.e. those rents the leaseback company would receive from sub-letting the property, not the rent re-paid to leaseback owners.

Fabien,

This is potentially disasterous for anyone who bought a leaseback planning to sell at the end of the first lease. Given the very high rents that Eurogroup (our management company) charge for sub-letting our apartment in the South of France, I would imagine they could easily achieve €15K per annum. If this was the case could we therefore be charged €45K for the priviledge of having our property back?

Chris

Dear Chris,

In case of non-renewal of the lease, the management company could get a French Judge to award them a fairly high level of damages.

Please note however that compensation is not due on the re-sale of leasebacks. When you sell, the lease agreement is automatically carried over to the next leaseback owner, thus no damages are due to the leaseback company.

Liability only arises where owners give the Lessee (the leaseback company) advance notice that the lease will not be renewed for a similar period of time.

These lease agreements are automatically renewable, unless Tenant or Landlord gives notice (usually 12 months in advance, through service of a special notice by a bailiff). Very few French leaseback owners are aware that if they decide not to renew after the initial 9 or 11 years rental period, the leaseback company could seek compensation from them. Such right is a statutory one and called 'Indemnité pour non-renouvellement du bail commercial'. I understand that some leaseback companies do not actually demand any payment in case of non-renewal of the lease, but this is at their discretion and no waiver, which the leaseback company could give in advance for example, would actually stand against statutes.

I hope this is informative.

Best regards,

Fabien
http://www.solicitor.fr

Dear Fabien,

I understand that selling a leaseback with the lease intact will not invoke penalties but I would assume a freehold property is much more valuable than one with a lease attached. Equally, these properties were marketed as ones which would be suitable for owners to use as personal holiday homes after the initial lease. Now it turns out that a second mortgage may be required just to pay off the management company!

What would be your advice to anyone approaching the 12 month period before the lease ended who did not wish to renew?

Regards,

Chris

I would advise anyone approaching the 12 months period prior to renewal to formally ask the leaseback company whether a penalty will, or not, be applied in case of non-renewal. If the answer is yes, there should hopefully be some room for negotiation. In the event the leaseback company states that no damages will be due, this should be confirmed in writing, on the company's letterhead.


http://www.solicitor.fr

I was told when buying our property that one the 11 year

lease was up we did not have to release the property if we

did not want to. Between the Management companies not

paying the rent due and now to be told you may have to

release the property, I feel that these sites selling these

properties are selling them with false advertisement.

This is surely illegal.

If you were told when buying your French leaseback property that once the 11 year lease was up you could decide not to renew the lease if you did not want to, then you were clearly mislead.

If the above is correct, the marketers and professionals that advised you that these leases could easily be cancelled could, at French law, be held professionally liable.

Did you seek legal advice from an 'avocat' (French lawyer) at the time of purchasing the property, or some 'French Property Specialists'?
http://www.solicitor.fr

That's helpful, thanks. I find this forum and the one to which you refer is much more accurate than the RH 'over-blog' website!

After hours spent browsing this website and the various French 'blogs' that exist, I came to the conclusion that, given the issues at stake and the fact my French is poor, professional help is necessary.

I have instructed the bilingual French solicitor recommended by this Forum to defend my interests. I guess this was a wise move, as I have been paid the last quarter of 2008 and I my claim in the Receivership proceedings is now recorded.

Here is a link to the French solicitor's website: http://www.solicitor.fr

Mary

Mary,

Thanks for your kind words. I appreciate that people have a choice of lawyers and most leaseback owners prefer not to arrange legal representation in the first place. I am contributing to this forum on a personal, impartial basis, so would prefer my details not to be mentioned please.

Best regards

Fabien

The leaseback I own is also in trouble. I am seriously considering making a

'classic' apartment. Besides having to pay the vat back prorata, what other

costs are involved?

If you break the lease and make your apartment revert into a classic property, then in addition to repaying VAT on a pro-rata basis, you risk having to pay the leaseback company compensation.

At French Commercial law (the Decree of 30 September 1953), where a lease agreement comes up for renewal, tenants are legally entitled to get their lease renewed for the same period of time as the one stated in the lease. This rule applies without any limit thus French business leases can go on like this virtually forever.

Landlords can decide not to renew a lease. However, in such a case, the Decree states that Tenant is entitled to claim damages for non-renewal. So, compensation is due to tenants whose landlord gives notice that the lease will not be renewed. Such notice must usually be issued 6 or 12 months prior to the lease's end date. The Notice ('Congé') is to be served upon the tenant i.e. your leaseback company through a bailiff (Huissier).

You cannot therefore break a business lease at any time. French law merely allows landlords to serve tenants notice that there will be no renewal.

Several possibilities exist to avoid the above restrictions, including:

- Where a tenant (leaseback company) is in default of paying rents, landlords can have a 'commandement de payer' served and if no payment is forthcoming within a given period, usually one month, landlords can apply to the Court for a confirmation that the lease is cancelled. If that happens, then obviously no compensation is due to the leaseback company, quite to the contrary in fact! Issuing a 'commandement' has not effect however if the tenant is placed in Receivership before the Court confirms that the lease is broken;

- Where a tenant already is in Receivership, one can ask the Court-appointed Receiver to state whether or not the lease will be kept. This stems from Article L621.28 of the Commerce Code. Pursuant to that article, landlords can send a formal request to the company's
Receiver, by registered mail (not a 'commandemen't - no bailiff's fees), seeking a
confirmation as to whether or not their lease will be continued. If the Receiver fails
to reply within one month, or replies favourably, your lease gets immediately cancelled without the need for such cancellation to be
approved/confirmed by a Judge. Unlike serving a non-renewal notice, cancellation of the lease by the tenant's Receiver does not expose you to having to pay compensation to the leaseback company.


I hope this is informative.

Fabien

Thank you for ur speedy reply. The contact on my leaseback is being

terminated in July this year. I have been given 6 months notice.

Considering the problems etc I have had , I feel the changing to 'classic'

must be considered rather than look for another reliable leaseback

company in this current climate. I know I have one year to find another

company if I want to go that route. Whats cost other than vat refund is

incurred do you think?

You managed to stop the lease from renewing and the leaseback company does not claim any damages. Well done! I hope this creates a precedent for other leaseback owners.

Apart from the VAT pro-rata payment, there should be no further costs other than those the leaseback company used to pick up under the lease e.g. building maintenance, taxe d'habitation, insurance, condoimium charges, cleaning etc. Do also check whether the leaseback's commons called 'parties communes' are owned by all co-owers or if the leaseback company, or a third part owns them, as this could lead to you and/or your future tenants being unable to use the resort's services & facilities e.g. pool, restaurant etc!


Fabien

I would nt say 'well done' and leaseback company invoked the break in

lease. I would have been happy to renew for a further 3 years.

The 'parties communes', how do I go about checking who owns them. I do

know the pool is maintained by company who look after common areas

which is separate to leaseback management company.

I did not realise that it is the leaseback company that broke the lease, not you.

Your lease agreement, and possibly the Title Deeds, should include information on who owns what and whether the leaseback company has exclusive use of the common areas.

Our attention was never drawn to any of these issues when we bough our French leaseback.

A couple of years ago,
French leaseback properties were being massively sold to Irish and UK
purchasers.
Sadly, very few people appear to have been professionally advised by qualified French advocates or Notaries about relevant French law & tax
considerations.

Now that matters have turned from bad to worse, those same UK-based lawyers that advertise themselves as 'French law specialists' are nowhere to be seen.

I own an apartment in Le Kube, which is an aparthotel. Tenant is "Les Hotels de Paris". It is related to Murano Resort Paris, plus possibly some others. I have always had problems but at least the rent was always paid - until now. Last payment due January 2009. I have an agent in Paris to collect rent but this is not working. Agent went so far as to send out a bailiff, but to no avail.


Only way is to organise fellow-owners. Are you interested?

Hi Fran,

I already act for another owner on behalf of whom I have recently had a 'commandement de payer' served on Murano Resort Paris. I can also do the same for you if you wish. If Hotel Murano fails to settle your rent within a defined period (up to 3 months), you could apply to the Court to cancel the lease.


Cordiez,

I'm sure many leaseback owners would be interested to know what the compensation is likely to be is there is non-renewal at the end of the first lease. My solicitor who advised on the purchase stated that there were no penalties mentioned in the agreement although I know now that just because they weren't mentioned doesn't mean they won't be applied!

If I gave 12 months notice before at the end of the lease what might might the penalties be?

Thanks and regards,

Chris

Hi Chris,

The leaseback company's right to claim compensation at the end of the lease, in case of non-renewal of the same at the Landlord's initiative, stems from statutes - the Decree of 30 September 1953. As you rightly say, just because penalties are not mentioned does not mean they don't apply! In fact, even if the lease were to state that no penalities or damages are due, the leaseback company could insist and obtain damages, because of the compensation right's statutory nature.

If you gave 12 months notice (this must be done through a bailiff) at the end of the lease, the leaseback company could obtain up to 2-3 years, and possibly even more, worth of rents, in compensation. Neither the Decree or your lease states how much compensation will amount to. It is a matter of case-law and French Judges usually award tenants several years worth of rents as damages.


I cannot really comment the fact that some lawyers that are not qualified or registered as solicitors in France seem to ignore the issue. What I can confirm is that leaseback marketers rarely draw purchasers' attention on compensation for non-renewal of the lease.

I hope this helps.


Is that 2-3 years of the rent that is paid to the owners, or the rent that the management company would receive from letting the property. Surely the compensation should relate to loss of income from not having the property to let, which really should be the difference between what they receive from lettings and what they then have to pay to the owners???