LeaseLegalNews

DGCCRF Investigation – 3 residences taken further

Mairead McGuinness MEP, 1st Vice President of the European Parliament, has provided this update from the DGCCRF to owners. The same update has been provided by the CCPC (in Ireland) and CMA (in UK) to owners who submitted complaints to the DGCCRF on the mis-selling of French leaseback properties:

On the basis of the 188 complaints lodged by British and Irish nationals, sent by the CCPC and the CMA until May 2019, the DGCCRF has undertaken an investigation on various undertakings related to several tourist residences.

Given that the vast majority of contracts were concluded prior to 2009, it is doing its outmost to collect as much evidence as possible in order to present cases to the Public prosecutor.  At this stage, 3 holiday residences, which have generated the highest number of complaints (66), are subject to an in-depth investigation.

This investigation, which aims at identifying breaches of the legislation on the protection of consumers from undertakings, in order to sanction them, is expected to be closed at the end of the first half of 2020.  It is to be kept confidential in accordance with article 11 of the French criminal procedure code.  Therefore, no information regarding undertakings or tourist residences can be made public to ensure the regularity of the procedure.

The DGCCRF will keep the CCPC and CMA informed on the progress made on this matter.

The above statement from the DGCCRF comes over 2 years since the they received the first complaints from the CCPC and almost 3 years since Irish consumers first engaged with the European Commission. In their previous statement the DGCCRF stated that the investigation would conclude at the end of 2019. We are now looking at a further 6 months. So it is unfortunate that impacted consumers still await some conclusion. The French authorities have not indicated any change, nor the intention of any change, to materially improve the situation for owners.

In addition, they gave no indication on the status of the investigation of complaints relating to residences other than the 3 mentioned. More importantly, the statement does not mention that consumers/owners continue to be trapped in contracts which had ‘hidden’ terms, a breach of EU consumer law.

Ms McGuinness and the CCPC continue to support the protection of consumers and, at the request of owners, they have responded back to the Ms Beaumeunier of the DGCCRF to query the status of the complaint regarding ‘eviction compensation’.

Response to DGCCRF

The following has been posed back to the DGCCRF:

There were 2 main complaints from consumers regarding these purchases, the first being a potential fraud whereby the purchase price was inflated based on the ‘guaranteed’ rent which the French promoter/seller/developer knew was never realistic from for the duration of the contract (and was typically paid for 2-3 years often from the original gross sales proceeds, in a similar manner to a ponzi scheme).

But the second complaint, which many purchasers made, was in relation to the ‘hidden term’ in the lease contract requiring the purchaser to pay ‘eviction compensation’ to the operator at the end of the contract in order to take back their property. This issue is a common feature of most, if not all, of these purchases. It points to what appears to be a fundamental conflict in French national law.

To summarise, the purchaser signed a lease contract for 9 (or 11) years and was advised through the marketing campaign, and was given to understand by the seller, that the contract ended at that expiry date. The purchaser was given to understand that the contract might be renewed or not at that time, but control was with the purchaser i.e. the owner. However, under the French law (French Commercial Code (Article L145-14)) governing these contracts (‘bails commercial’ – commercial leases) which were given to consumers to sign as part of the tax incentive, this was not the case. It is still not the case. Purchasers who are past the end of the 9 years cannot take back the property without paying ‘eviction compensation’ (indémnite d’éviction) to the operator. And this is a considerable and prohibitive amount which effectively traps the consumer in the contract indefinitely. The contract did not state this, and is thus a ‘hidden term’. Our understanding is that this type of contract was a requirement of the French authorities under the tax incentive (Demessine and others). Furthermore, our understanding is that this is itself a clear and obvious breach of EU consumer protection directive ‘EU Directive 93/13/EEC – Unfair Terms in Consumer Contracts’.

The recent communication from the DGCCRF (2020/01/20) does not refer to this complaint, and refers only to ‘criminal procedure’.

Consumers from multiple EU member states,  not least of which French consumers, continue to be harmed by these practices.

As many will be aware, French law regarding marketing materials on the French leaseback properties changed in order to ensure that prospective purchasers of French leaseback property were informed that ‘eviction compensation’ could be demanded. But, this was all too late for those purchasers who now find themselves in difficulty. And too little to really inform anyone of the likelihood of the demand, the potentially significant cost and possible 2 year delay waiting for them down the line…

4 thoughts on “DGCCRF Investigation – 3 residences taken further

  1. As usual nothing is being done by the French authorities – no one is mentioning the elephant in the room – they set it up – turkeys do to vote for Christmas – I applaud everyone’s efforts but I fear any result is a long way off if indeed we ever get one. I do not know whether I am a realist or a pessimist hopefully not the latter

  2. It is great to see such efforts being made to move forward with this but it is taking far too long. I want to get out and sell up without having eviction penalty … it’s just so unfair!

    1. Totally agree Martina. The French state is responsible for this mess, but continues to resist taking any responsibility for it. It is not simply a 3 ‘rogue traders’, this has been systemic, for years…

      As those owners similarly affected in France have put it:
      “Il faudrait assigner l’Etat Français pour carence à assurer le suivi d’un système qu’il met en place sans prendre aucune mesure pour s’assurer de son bon fonctionnement.”

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