For most buyers of French leaseback properties the notion that the lease did not end at the end of the 9 year period stated in the lease was unwelcome news.
In fact, if an owner wants to end the lease at that time, they may have to pay an unspecified but potentially enormous amount in eviction compensation.
A French commercial lease goes on in perpetuity. Irish buyers of these properties were NOT told this by the sales agents, developers etc. The French Notaires who acted for the buyers also failed in grievous extent, to inform the buyer. The pre-sales contract and deeds for these leaseback properties contained details of the lease, the properties were to be in a ‘residence du tourisme’ and to be leased immediately, it was all part of the same sales ‘deal’. But often the notaires did not act competently for the buyers, failing to inform the buyer of any of the potentially ruinous implications of signing such a document.
L’indemnité d’Éviction or Eviction Compensation
After the first 9 years of the tourist residence rental , common law applies to commercial leases (bail commercial). The lessor (owner) has the right to terminate the commercial lease , but they must pay eviction compensation to the lessee.
The tenant also has a termination right, but they don’t have to pay any compensation to the owner.
If the tenant does not request the renewal of the lease, the lessor (owner) takes back the property.
Since 2009 (Act of 22 July 2009 No. 2009-888, s. 19), the marketing documents for these leaseback properties in these ‘résidence du tourismes’ should clarify to prospective buyers of property in a resort that they will have to pay compensation to the tenant if they refuse to automatic renewal of the commercial lease after 9 years.
The law limits the information the prospective buyer gets in general terms of its calculation. In practice, the purchaser may find the rules for calculating the compensation for eviction in legal expertise or Direct negotiation with the operating company of the tourist residence.
However, most of us signed the sale contract before July 2009 and this is of no help.
Articles L. 321-3 and L. 321-4 of the Tourism Code provide for the obligation to inform specifically in the marketing materials for tourist homes , buyers of the existence of eviction compensation in if commercial lease renewal refusals. (Also in the order of 23 December 2009 laying down the criteria for the marketing documents circulated to homebuyers located in tourist residences ) .
” However, the Government has begun to consider to enhance the information batches buyers in tourist residences, in addition to the information already made mandatory by the decree of 23 December 2009, cited above. It is, indeed, imperative that retail investors take stock of their financial commitment in tourist residences . ” Rep . min. , No. 10749 , OJ Senate 13.11.14 , p.2552 .
The French commercial lease is governed by Article L. 145-7-1 of the Commercial Code