The petition on Change.org to secure justice for beleaguered purchasers of French leaseback properties has been submitted to the French and Irish authorities. We are awaiting a meeting with the European Commission and hope to present it in the next month to Ms Marie-Paule Benassi, Acting head of Directorate E: Consumers at DG Justice and Consumers, and her colleagues. Ms Benassi is head of Consumer Enforcement and Redress.
French Embassy in Dublin
Three Irish owners attended a meeting with the French Ambassador to Ireland, M Stephane Crouzat, in Dublin at the beginning of Dec 2018. The meeting was also attended by the embassy’s économique conseiller, M Pierre Mongrué. At this meeting, we formally handed over a hard-copy, and soft-copy, of the petition for justice with over 5k signatories, to be passed to the French authorities (DGCCRF – Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes).
The embassy had been in communication with the French DGCCRF, and M Mongrué referred to the possibility of a statute of limitations on the issue which might preclude the DGCCRF taking a criminal enforcement case on the original mis-selling.
There was a robust discussion and owners concerns were clearly raised. A subsequent meeting was held at the embassy the following week. Owners requested that the French authorities address the complaints that they had received, as is their responsibility under EU law.
The ambassador was also presented with a printed case study of one resort prepared by owners in Le Petit Lac in Cannes. This particular study illustrated the issues experienced by many owners of these properties.
No response has been received as yet from the DGCCRF.
Irish Central Bank
The petition has also been formally handed over to the Irish Minister for Finance, Mr Paschal Donohoe, in his capacity for responsibility for the Central Bank and financial regulation of relevant entities in this jurisdiction.
The petition stated that entities selling properties such as French leasebacks should be subject to financial regulation. These sales involved promises of ‘guaranteed rental returns’, and consumers made decisions to purchase based on those promises. As we all know to our unfortunate detriment, these were false promises and there was no guarantee.
Some of those selling were making up to 20% commission, or more, on these properties. It is quite possible that many of these sales ‘agents’ did not realise that the ‘guarantee’ was essentially worthless, or that the purchase would result in a lease contract that ran in perpetuity, entrapping the purchaser. But shouldn’t they have known what they were selling ?
It was after all, a large purchase and a complex product.
A number of overseas property companies operated during the noughties, and while most no longer exist today, one of these, Douglas Newman Good, does still operate. They sold leaseback properties after an advertising campaign which included a full-page ad in a prominent Irish Sunday newspaper promising ‘guaranteed’ rents.
Therefore, owners are requesting financial regulation of anyone selling a property in this jurisdiction where there is the promise of a ‘guaranteed return’, one in which the purchaser is making his purchase decision based on these returns to finance the purchase.
Note that many of these properties were sold as ‘leasebacks’, they were not sold as a regular holiday ‘properties’, and then became a leaseback. The requirement to have a lease was present from the start and was stated in the deeds. It was all part of the same purchase transaction. The lease itself was a separate contract, but the requirement for it was part of the purchase.
No response has been received from the Dept of Finance as of yet.
CMA and DGCCRF Investigation
The CMA (Competition and Monopolies Authority in UK) have reached out to some owners requesting additional information on their French leaseback purchase, at the request of the DGCCRF. The CCPC in Ireland contacted some owners last Nov and Dec with similar requests. The CMA are looking for:
- Any information relevant to the identification of the properties and companies at issue.
- Any documents relevant to the assessment of a possible deceptive marketing practice ie. correspondence between the purchaser and the involved companies and any marketing material sent to the purchaser prior to the conclusion of your contract. For example, any promotional material the owner received promising “guaranteed rent” etc and any additional relevant documentation.
- A copy of the Contract of Sale, Contract of Commercial Lease and of any other contractual documents relevant to the case, signed by the parties.
- Any correspondence between the parties concerning the financial performance of the contracts, in particular that relates to the rental of the property.
The CMA conveyed a message from the DGCCRF, reiterating what the CCPC has also told owners, namely that the DGCCRF is unable to seek compensation on a consumer’s behalf. Consequently, if an owner wishes to pursue his/her complaint, they might want to see independent legal advice.
However, owners have experienced in French courts that the ending of the lease contract, for example, is not possible at the end of the contract term, since the courts judge under guidance of French commercial law, and not EU consumer law (as transposed to French law).
Independent French legal advice has suggested that the French courts do not consider owners to be ‘consumers’. Though I’m not sure what they do ‘think’ we are…
The FNAPRT (National Federation of Owners’ Associations in Touristic and Managed Residences) held their AGM in Jan 2019 in Paris and discussed their intention to continue to lobby the French public authorities in 2 key areas:
- A new document concerning the pre-contractual information (risks …). This is a document which would be legally required to be communicated prior to signature of the authentic sales act. The FNAPRT have already engaged with the DGE (Directorate General for Enterprise in France) and the Ministry for Justice.
- A lease, or mandate, that would be more suitable and acceptable to co-owners in Managed Residences.
The Irish and UK owners, many of which are members of the FNAPRT through their residences, continue to support them and
It appears to be quite challenging for the DGE. But as they say, “where there’s a will there’s a way“.
Maybe they need more encouragement…