LeaseLegal

French Court Cancels Lease – No Compensation!

The Court of Appeal in Montpellier finally cancelled a lease in a case taken by the owner and his wife at the end of the 9 year lease duration.

Many owners purchased their French leaseback property on the understanding that the lease was for 9 years (or in some cases 11 years) and after that they could decide what to do. They were never told about the eviction compensation that would be due, under French commercial lease law (Article L145-14).

Some sellers/operators went further and added a clause to the lease contract stating that no compensation would be payable, while knowing that such a statement was not enforceable under the law, and was potentially fraudulently misleading.

Such was the situation in the Montpellier case (Court of Appeal of Montpellier, January 10, 2017, 14/06714).

The final ruling was that the seller/operator :

  • waived the right to compensation in the lease, knowing that it was invalid
  • devised the lease contract in bad faith, knowing that the purchase was not a ‘real estate professional’
  • The operator of the leaseback property falsely reassured the buyer/lessor in the legitimate belief that his renunciation constituted a real commitment.

This behavior is considered to be a “wilful misrepresentation” (dol in French), meaning a fraud when writing the contract.

Read more at https://frenchrealestatelaw-traesch.fr/leaseback-indemnite-eviction/

In other cases, this false reassurance was verbal. In many cases, knowing that the purchaser did not speak French, or not business French, and would never know any different, the seller/operator told the purchaser that they could do what they wanted at the ‘end’ of the lease, knowing full well that this was not the case. This was a ‘hidden term’ that the purchaser did not know about and constituted a breach of EU consumer law.

And if the Court of Appeal at Montpellier have made such a ruling, then why are people who purchased these properties still stuck in leases that go on forever ??

It’s time for the DGCCRF to provide some guidance here. If it is ‘fraud’ then why is this not an issue of a criminal nature ? And why must each and every owner spend thousands of Euros on legal fees, and years in French courts (the case above took 3 years), in order to arrive at this conclusion ?

Réponse DGCCRF ??

4 thoughts on “French Court Cancels Lease – No Compensation!

  1. We are also caught up in a leaseback nightmare , where the management have still not paid for 2018 and according to other owners have changed all our locks & refused occupancy other than when the site is open

  2. We are also facing a compensation payment of €77000, or signing a new 9 year lease.
    Can this case above change the legal situation to allow quicker verdicts ?
    Also, – National Consumer Authority, who is that in the U.K. ?

    1. This case has a specific situation where the contract states that the tenant would waive the right to eviction compensation, when in fact this is not enforceable under French law and they knew it. Thus it was mis-leading.

      My view, is that these contracts were all mis-leading. But this judgement is in the context above.

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