Contractual ‘hidden terms’ and Eviction Compensation

Is there a systemic failure by the French authorities to protect consumers by devising a tax incentive which was aimed at ordinary consumers, and designed to promote investment in infrastructure in the French tourist sector, but which required a commercial lease contract to be signed by the consumer, a ‘bail commercial‘ ?

One of the main issues with French leaseback properties is the requirement for this type of lease contract since it is a contract with ‘hidden terms’ most notably whereby the lease contract perpetuates even after the end of the contract unless significant ‘eviction compensation’ is paid by the owner to the tenant in order to evict the tenant. This contract ensures that tenant’s rights are protected over the owner’s rights. The owners were never informed of this eviction compensation requirement (indemnité d’éviction). The contracts do not state this and do not need to. The compensation is payable even if the contract says the opposite !

Many owners only became aware of this towards the end of the contract (or what they in their naivete thought was the end of the contract…).

This is a ‘hidden term’, and we believe that an owners rights as a consumer cannot receive any protection in a French court under EU Directive 93/13/EEC – Unfair Terms in Consumer Contracts, since French courts make such rulings under guidance of the French Commercial Code (Article L145-14), and not with regard to the rights of a consumer of an EU member state.

We believe therefore that consumers subject to these contracts (ie. French leaseback owners) cannot get a fair hearing in a French court.

If the European Commission bears the responsibility to ensure that member states do not breach EU consumer law, then what is their view ?

Is there a direct conflict in French law ?

Below is an example of a judgement from the ECJ (European Court of Justice) in a case taken (if understand correctly and all corrections will be applied immediately) by the European Commission against the member state, Kingdom of Spain, in relation to its failure to fulfil its obligations under Directive 93/13/EEC – Unfair terms in consumer contracts. This is an extract, but does it suggest that perhaps a similar case against France is possible, and necessary ?

We have put this to the European Commission and await a response on how they intend to enforce protection of consumers under EU law and in the context of Article 258 of the Treaty on the Functioning of the European Union (TFEU):

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“(ex Article 226 of the Treaty establishing the European Community – TEC)

If the Commission considers that a Member State has failed to fulfil an obligation under the Treaties, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations.

If the State concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the Court of Justice of the European Union. “

Case

Judgment of the Court (First Chamber) of 9 September 2004.
Commission of the European Communities v Kingdom of Spain.
Failure of a Member State to fulfil obligations – Directive 93/13/EEC – Unfair terms in consumer contracts – Rules of interpretation – Rules concerning conflict of laws.
Case C-70/03.

European Court Reports 2004 I-07999

ECLI identifier: ECLI:EU:C:2004:505

 Judgment of the Court (First Chamber) of 9 September 2004. 
Commission of the European Communities v Kingdom of Spain.
Failure of a Member State to fulfil obligations – Directive 93/13/EEC – Unfair terms in consumer contracts – Rules of interpretation – Rules concerning conflict of laws.

Findings of the Court

14

As the Advocate General pointed out in paragraph 7 of his Opinion, it is less the content of the obligation laid down in Article 5 of the directive on which the parties are at variance in regard to the first plea than the form and means by which that obligation is to be transposed into national law.

15

According to settled case-law, whilst legislative action on the part of each Member State is not necessarily required in order to implement a directive, it is none the less essential for the national law at issue effectively to guarantee that the directive will be applied in full, that the legal position under national law is sufficiently precise and clear and that individuals are made fully aware of their rights and, where appropriate, may rely on them before the national courts (see, inter alia, Case C-144/99 Commission v Netherlands [2001] ECR I-3541, paragraph 17, and Case C-478/99 Commission v Sweden [2002] ECR I-4147, paragraph 18).

You can find the full details at : https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62003CJ0070