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.
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 ?
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):
“(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. “
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.
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
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.
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  ECR I-3541, paragraph 17, and Case C-478/99 Commission v Sweden  ECR I-4147, paragraph 18).
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“.
The DGCCRF investigation into the complaints submitted by Irish and UK purchasers of French Leaseback properties continues.
Brian Hayes, MEP, contacted the DGCCRF to request an update on their investigation back in July 2018, and the Directrice Génerale of the DGCCRF Ms Beaume’unier, replied in Oct to say that they had received 250 complaints from the CCPC in Ireland and CMA in UK. They informed Mr Hayes that the complaints have been subject to a nation-wide investigation and that this investigation includes also complaints from French people. They didn’t receive any complaints from any other EU member state.
They gave no timescale for a conclusion.
One of the key complaints of purchasers was that the selling price was artificially inflated based on the promise of ‘guaranteed rents’. The allegation is that those parties behind the sale knew that these ‘guaranteed’ rents would never be paid for the full duration of the contract. In fact, there was no guarantee at all. We believe that in many cases a strategy of ‘fonds de concours’ was used to fund the payment of the ‘guaranteed rent’ for the first few years until all properties were sold, and that this funding came from the sale of the first properties themselves.
Such abuses have been well known in France and indeed the French authorities changed the law some years back to prevent such companies cancelling these commercial leases unilaterally after three years.
Tax Incentive – Leaseback
Owners also have issues with the lease ‘contract’ itself and believe that this contract is a breach of EU consumer.
The DGCCRF said :
The fact that the companies involved in this case acted within the context of a tax incentives scheme is totally immaterial to the assessment of the lawfulness of their behavior with respect to consumer protection rules, which is the issue at stake.
Owners believe that the fact that the companies acted within the context of a tax incentive scheme is NOT immaterial to the assessment of the lawfulness of their behaviour with respect to consumer protection rules. On the contrary, the tax incentive serves to trap the consumer. It traps the consumer in 2 important ways:
If there is no lease (if it is cancelled by the operator or the operator goes bankrupt) then the consumer must repay the TVA. This TVA is a percentage of the purchase price, which we believe was artificially inflated. Thus, the consumer is under pressure to agree to any lease, or any decreased rent offered, in order not to have to ‘repay’ this inflated TVA to the French state. The TVA remains the same while the property value has fallen, and property values dropped by 50% or more in many cases.
The lease is required by the tax incentive itself and this is a ‘commercial’ lease, or ‘bail commercial’. This contract is totally unsuitable for a consumer, since it has the ‘hidden’ term of being renewable forever by the lessee. This is in direct conflict with EU consumer directives outlawing such contracts with ‘hidden’ terms, or terms to the detriment of the consumer.
The tax incentive scheme is flawed by its very nature.
Criminal Legal Action
The DGCCRF also stated that such complaints may lead them to bring cases before the criminal courts in order for breaches of law to be duly sanctioned. They also stated that such a case had recently been taken, but did not provide any details.
In Dec 2018, the CCPC reached out to many Irish complainants (though not all) to obtain additional information.
The letter also said that they had shared a premliminary outcome with the CCPC and CMA and requested further information to see whether it was possible to take a criminal case. They wanted clarification on dates and indicated that the statute of limitations prior to offences committed before 2017 is 3 years (it has since been increased to 6 years).
Given that the CCPC first engaged with DGCCRF on the matter in Oct 2017, it is disappointing that it took the DGCCRF a year to finally respond to request more information on dates of contracts, and to flag potential statute barring!
Compensation for Owners
If owners want to get any compensation for any criminality identified by the DGCCRF, the owners would need to go to the civil courts. They highlighted that the civil courts have indeed condemned a number of real estate developers for fraudulently over stating the price of leaseback properties.
They didn’t provide details of any cases and did not indicate whether any owner had received any actual financial compensation.
In one Irish case where a group of owners have a legal case going on for ten years now and have spent hundreds of thousands collectively on legal fees. This situation was a clear case of wrong-doing on the part of a notaire. They’re still out of pocket…
Owners are seeking a meeting with the European Commission, DG Justice and Consumers in order to ensure that the rights of EU citizens as outlined by EU Consumer Law are upheld.
The Irish CCPCmet with their French counterparts, DGCCRF, in Paris before Easter and discussed the complaints that Irish consumers have made regarding the sale of certain French Leaseback properties.
The CCPC held a meeting with Brian Hayes MEP on 25th April 2018 and discussed the issues. Brian has been a staunch supporter of owners and has raised the issues on behalf of owners a number of times. No owners were present at that meeting.
152 complaints were passed from the CCPC to the French Fraud department, DGCCRF, before the end of 2017 and the investigation of these complaints form part of the workload of the DGCCRF for 2018. A further 17 complaints were delivered to the DGCCRF in Jan 2018. These complaints are now under a statutory process.
The message seems to be that the CCPC have performed their role in collating the consumer complaints and following the EU process for the investigation of such cross-border complaints.
In brief :
All complaints are closed now from a CCPC perspective (they won’t be sending any more complaints to France)
The DGCCRF felt that if owners had a collective action it would help – numerous owners are taking legal action so it’s not entirely clear how the DGCCRF think it will help…
There won’t be any compensation from this activity
It is possible that the DGCCRF may carry out enforcement – including criminal prosecution
Statute of limitations may apply to cases – though there was no clarity given as to what that limitation is..
Companies may no longer exist – in many cases the companies that sold the properties no longer exist, however the individuals do…
DGCCRF will not have any person as a ‘liaison’ and have indicated that only owners who have provided contact details will be contacted
DGCCRF have a regional structure whereby different regions would be investigating the cases pertaining to their region
There was no timeframe given for any conclusions from the DGCCRF
There was no clarity given as to the scope of the French investigation – whether the notaires, banks, operators were in scope, or the developers and sales agents.
There was no clarity given to any possibility of having lease contracts cancelled if it was concluded that they had breached EU law. (Though a child could tell you that either the law was breached and breach seriously, or the law was inadequate and seriously inadequate.)
In short, there was little to re-assure owners.
However, without pre-empting the outcome of the investigation, the DGCCRF can rest assured that Irish owners will not be going away any time soon …
European Commission – DG Justice and Consumers
The office of the Commissioner for Consumers continues to follow the situation closely. The Head of Unit, Marie-Paule Benassi has said the following :
..problems have been generated in the context of various French fiscal schemes aimed to promote investment in the housing rental market. To our knowledge several thousands of French citizens, as well as a considerable number of properties and intermediaries have been concerned by various types of problems related to these schemes. Some of the promoters and intermediaries are bankrupted, and in certain cases under criminal probes in France.
The Commission regularly presses DGCCRF authorities to come to conclusions about these cases. Such conclusions will then be transmitted to the UK and Irish counterpart authorities. The DGCCRF conclusions would serve to stop possible ongoing unfair commercial practices and to eventually launch public prosecution of the operators at fault. Further, these conclusions can be used in civil proceedings to obtain redress.
As you rightly pointed out, this complex matter unfortunately affects the livelihoods of thousands of investors.
In our communication to DGCCRF, which is part of the French Ministry of Economy responsible for fiscal incentives, we will stress the importance of taking measures to ensure that foreign investors are informed of the risks attached to such schemes.
CCPC Communications to Owners
The CCPC sent the following update to owners who had submitted complaints :
The CCPC has assisted the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF) by collating complaints received from consumers in Ireland and providing a preliminary assessment of the information provided. The preliminary assessments were sent to the DGCCRF in two phases; in October 2017 and January 2018.
On 29 March 2018, officers from the CCPC met with counterparts from the DGCCRF. The purpose of the meeting was to discuss the investigation that the DGCCRF has commenced in relation to potential consumer protection issues surrounding the Sale and Leaseback scheme that Irish purchasers entered into with French traders. The CCPC’s engagement with DGCCRF on this issue is through the Consumer Protection Co-operation Network; this is the network of authorities responsible for enforcing EU consumer protection laws in EU and EEA countries.
Following the CCPC’s meeting with DGCCRF, there are a number of key points to be brought to the attention of Irish purchasers:
DGCCRF can only consider those complaints that were submitted to CCPC in 2017. These complaints were assessed and tables have been provided by CCPC to DGCCRF in October 2017 and January 2018. These complaints have already been allocated to the various national and regional investigation teams as part of their 2018 work programmes.
Where complainants have not provided their contact details, DGCCRF will be unable to consider their complaint further.
DGCCRF has indicated that the length of time that has passed since the schemes were entered into brings particular challenges, such as the time limit for proceedings, but also tracing traders/corporate entities involved in the concerned schemes.
DGCCRF wishes to inform Irish consumers that for this specific issue, it has a criminal enforcement function which may be used to address breaches of French law by traders, where evidence is brought of such breaches. DGCCRF will not be in a position to seek compensation for any purchasers who might be found to have been subjected to such breaches.
At our meeting, the CCPC advised the DGCCRF that we will provide them with further assistance that they may request in the course of their investigation.
UK Owners and CMA
Regarding the situation with UK owners, Daniel Dalton MEP received a reply from the CMA on 22nd February which states that all relevant complaints have been passed to their French counterparts. However they do not give the exact number of complaints relayed. Furthermore, the CMA notes that there is not yet a timeframe for the investigation as various locations and their respective authorities are involved.
They state that CMA officials are in regular contact with DGCCRF about the French leaseback schemes and have been informed that work has commenced. They expect it will some months before the outcome is known.
Given the properties concerned are in a variety of locations this is a national investigation by the DGCCRF. They cannot give us a timeframe for the investigation..
Daniel Dalton’s office continues to follow the issue.
In the #FrenchLeaseback arena, Pierre et Vacances are huge players. They operate 280 Residence de Tourismes, with 50,000 properties, dealing with 23,000 owners!
Indeed, they have also moved into the Senior Residences investment area, since these have been given similar tax advantages to the Residence de Tourisme. These are the next investment ‘opportunity’ that could well bleed an investor dry. In fact it’s quite ironic, you could have your pension shrivelled and atrophied by investing in a ‘senior residence’, if the experience of purchasers of ‘residence de tourismes’ are any indication. However, such investments are not likely to appeal to Irish investors.
But are all of these owners happy with this big leader.
Owners complaints about P&V do not seem to be as bad as with other operators – they do pay the rent. No, the problems with P&V seem to be when it comes to renewal. After your 9 or 11 years initial lease, many owners have had to take a dramatic reduction in rent. Again, they have little choice but to accept the reduced offer, as they are trapped in the VAT (TVA) demand from the French authorities if their property is no longer in the tourist rental market.
According to an article by French journalist, Jorge Carasso, in Le Figaro (via Google Translate):
The end of the commercial lease, after the first nine or twelve years, is often an opportunity for the operator to negotiate lower rents. Witness the recent operations of the number 1 sector Pierre & Vacances. Nearly half of maturing leases have been revised downwards, with haircuts of 10 to 70%, mainly because of the rise in indices, according to Dominique Menigault, deputy general manager of Pierre & Vacances Conseil Immobilier, interviewed by Le Monde.
As proof, nearly 70% of expiring leases are not renewed under initial conditions, according to a survey by the National Union of Tourist Homes of 2015. The heavyweights in the sector are no exception to the rule. The Pierre et Vacances group, whose image is now significantly dented, has renewed downward half of the leases expiring in its residences, some up to 80%.
One of the main issues is that the properties are over-valued at the sales and marketing stage. It is hard to find owners who sell #FrenchLeaseback properties and regain what they paid for them. One P&V owner is currently selling her P&V apartment with at least a 20% loss, though this is significantly less than many other owners. And she considers herself lucky to get out at that.
We have seen in the Languedoc that properties purchased for €225k are being sold at court auction, after re-possession, for as little as €40k !
France TV2 Programme – Complément d’Enquéte
A special edition of the France TV2 tv programme “Complément d’enquête” in July 2017 exposed these issues with P&V. It describes how Gérard Brémond, the boss of Pierre & Vacances, made a fortune by offering the French to become owners of their holiday apartment to rent it later. This excerpt describes a familiar story to Irish leaseback owners:
Nine years later, at the end of the lease, bad news. The apartments are not filled, and the group offers a new contract: the “guaranteed minimum rent” increases from 5,500 euros to 2,740 euros. An income divided by two. Inconceivable for Ludivine, who wants to stop the rental and recover his housing. But it would lose its status as a tourist residence, and it should repay in the year the VAT it was exempted: 8,500 euros. “A kind of hostage situation,” she says.
But that’s not all. Pierre & Vacances sell its homes well above the market price. The two-bedroom that cost 90,000 euros is worth today … 30,000.
Another issue is the refurbishment costs. Many Irish owners who purchased these from P&V were never made aware of the potential demand for refurbishment costs at the end of the lease. For one owner this cost was almost €8k. For many this can nearly wipe out rental gains they have received over the years. This cost, and more particularly the scale of the cost, was never made clear to them at the buying stage.
For many Irish purchasers of these #FrenchLeaseback properties, they bought a property which, due to French law, resulted in them having no control over it whatsoever, and effectively giving it to someone else to use to run a business, while paying them a ‘nominal’ rent, but making the owner pay many of the other costs of that business…
And, due to protection of French law, the owner is trapped !
It begs the question why is this ‘French law’ which protects large operators, and impacts so severely on individual consumers (who are the voting citizens of the country), not changed ?
It doesn’t sound like a ‘sound’ democracy does it ?
Selon eux, la présentation qui leur a été faite du système français des résidences de loisirs gérées (french leaseback, pour les anglophones) a été trompeuse et ils s’estiment aujourd’hui prisonniers d’un système kafkaïen.
He goes on to highlight owners concerns that the complaints are being investigated by a body (the DGCCRF) which is a part of the French government department that devised the tax incentive schemes that have given rise to these consumer problems in the first place. This department itself is arguably the largest stakeholder in French leaseback!
Conflict of interest ?
Can consumers be confident that the DGCCRF will uphold their rights ?
Updated 23rd July 2018
The Sunday Times has a piece in the Irish edition by Pavel Barter focusing on the DGCCRF investigation and the inability of Irish owners to get rid of operators and get control back of their properties – properties that they paid highly for.
The couple featured in the article say their contract promised that the management company would not seek indemnity upon conclusion of their nine-year lease. When the lease ended, they changed the locks on their property. This month, Eurogroup started legal action to regain access. Richard Green from Eurogroup (Madame Vacances), who also defended the actions of his company on the BBC2 Victoria Derbyshire program last year, claimed that “Any notaire, adviser or buyer who allowed their client to buy stuff with nonsensical clauses didn’t do his job correctly..”
Yes.. it’s always someone else’s fault..
Pavel goes on to say that Virginie Beaumeunier, head of the General Directorate for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF), told Hayes she was conducting a nationwide investigation into Irish leaseback cases, which she hoped to conclude this year..
Jorge Carasso reports on the @DGCCRF (French Competition, Consumer Affairs and Repression of Fraud) investigation on the #FrenchLeaseback issues.
The purpose of the investigation is to establish whether these sales fall under unfair commercial practices within the meaning of the European texts. The aim of the plaintiffs is to obtain damages or at least to break these contracts..
Many owners were forced into a mortgage default with their French bank when the ‘guaranteed’ rent they were promised (and promised contractually) failed to materialise.
In France, such mortgage default is followed by an order for re-possession of the leaseback property. At this point, many owners are only to glad to have the property taken – the experience of many has been one of spiraling costs and debts, all accompanied by documents in French about things they were generally told at the marketing stage ‘would be all taken care of by the operator‘. However, the property may be sold off for a fraction and the owner will be left with an order for the rest of the mortgage owed.
Once a judgement is obtained in a French court, it may be followed by a European Enforcement Order (EEO) and documents will be served by the Irish courts service. The debt by this time has increased now consisting of the original amount owed, plus interest, fees, legal costs and more.
This has been the experience of one such Irish owner and his wife.
In order to to facilitate this there is a fund-raising effort being kicked off. It is using the GoFundMe model whereby anyone can contribute really easily. Fellow owner Noel Cocoman, who first got in touch with MEP Brian Hayes on the issue and was instrumental in getting the attention of the CCPC, is managing the fund-raising. All monies will be used for the legal case.
You can help on GoFundMeand you’ll find all the details there.
All contributions are welcome, no matter how small.
The French Direction générale de la concurrence, de la consommation et de la répression des fraudes (DGCCRF) have finalised evaluating all the data provided by its CPC counterparts and is launching a nation-wide inquiry on the acts covered in the complaints, which have also affected a large number of French consumers.
We have been informed by Brian Hayes MEP that European Commissioner for Consumers, Vera Jourová, is continuing to follow this issue very closely, in the context of f the Consumer Protection Cooperation (CPC) Regulation.
In response to the plight of hundreds of Irish owners, Brian Hayes has been instrumental in bringing this issue to the attention of the European Commission.
According to Ms Jourová:
The DGCCRF is currently performing checks in order to identify the involved traders which are still active on the market, as many asset management companies have gone into liquidation, before it can subsequently initiate the necessary enforcement actions which will follow against the concerned traders.
This is a major dossier that requires significant resources both at national and local level in order to conduct all the necessary investigations, and we are assured that the French authorities will take due account of the seriousness of the case.
We are awaiting confirmation on the exact number of complaints the DGCCRF has received, and on the scope of their investigation. As many owners are keenly aware, the parties involved in the contrivance of the #FrenchLeaseback properties scandal are not limited to developers and sales agents, but also include operators, notaires and French banks.
See more on the Commissioner Jourová’s call for investigation into #FrenchLeaseback mis-selling and on the CCPC’s role in bringing this to the attention of the DGCCRF under EU rules for cross-border consumer complaints and the Dec 2017 update from the CCPC.
In 2012 the French government agreed to rescue Crédit Immobilier de France (CIF), after conceding defeat in attempts to find a buyer for the struggling mortgage provider. According to an Irish Times report at that time, it had been up for sale for a number of months, but its fate appeared to be sealed when Moody’s cut its credit rating, saying it was in effect locked out of capital markets.
CIF has been in run-off since 2012 when the French government provided state guarantees on its debt to stave off a default due to a liquidity squeeze. The European Commission approved an orderly resolution plan in November 2013, and the group has been implementing it since then.
The portfolio’s quality deteriorated in the late 2000s when the bank expanded its portfolio via third-party business providers that applied weaker underwriting standards.
We believe that the largest part of the risk pertaining to these poorly originated loans is now identified and adequately provisioned for. We positively note that CIF’s portfolio shows early signs of stabilisation as shown by the relatively limited increase in the amount of outstanding problem loans between 2014 and 2015. The group has discontinued its lending activities since 2013, and given that defaults on residential loans tend to peak in the first two to three years from origination and drop as the vintages mature, we expect that the volume of new problem loan formation will subside.
Sounds like Anglo…
We have already written here on the apparent shameful behaviour of CIF and the court cases in relation to the Apollonia scandal and claims that consumers were deliberately indebted.
CIF, by its near-bankruptcy, will put in great difficulty, if not unemployed nearly 2,500 people. In addition, due to a deviation from its main activity which was – remember – to “facilitate the homeownership of low-income households”, this bank, like many other French brands (BNP – Crédit Agricole – Credit Mutuel – HSBCGEMB – Caisse d’Epargne), have made hundreds of victims.
CIF, a financial institution supposed to devote its activity to “social housing”, has chosen to develop excessively by financing leisure and business real estate, through products that are largely overvalued (from 2 to 4 times the value of the market), so potentially “toxic” and this for 10 years.
We have been contacted by a number of French leaseback owners with mortgages with CIF who are now in default. Some have claimed that the bank have been unresponsive when owners have tried to contact them. Some are facing re-possession. Nearly all are unable to navigate the quagmire.
But of course it’s not solely CIF that were lending in this fashion as the Apollonia defence have compiled a report.
Any owners who feel their French bank has not treated them fairly should submit a complaint via theFIN-NET, the cross-border out-of-court complaints network for financial services. Owners in the UK and other EU countries can find out more about their country’s process at the EU site here.
Many purchasers of French leaseback properties took out insurance with the French bank. In many cases this was
expensive – not competitive and much cheaper to get equivalent insurance quotes in Ireland
the documentation was completely in French – contrary to EU law governing such contracts with consumers
it proved impossible to cancel the contract and change to a cheaper provider unless the mortgage itself was cancelled, which if you are experiencing payment difficulties (as many owners are), is not much of an option
Yet another way that owners were caught in contracts they did not understand the implications of, were not told, and cannot get out of. In fact many owners are continuing to pay exhorbitant amounts in such insurance.
Unfair Consumer Contracts
Remember, if you have a a loan with a financial institution, you are a consumer of financial services. As a consumer of a financial service you have certain rights. Your rights as a consumer of financial services depend on the contract between you and the financial institution and your contract with the financial institution consists of stated terms and implied terms. Under the European Communities (Unfair Terms in Consumer Contracts) Regulations, 1995 and subsequent amendments in 2000 any term that is found to be unfair to the consumer cannot be enforced.
The European Court of Justice have made rulings in relation to unfair contract terms in mortgages. If a legal case is pending against someone, but that someone was mis-sold to and their rights violated under any or both of these EU Directives, then that court case cannot proceed until it is proved that their rights were not violated. The French court must stay their proceedings.