Indo on French Leaseback


A recent article in Indo The French Dream that became a Nightmare – goes some way to highlighting the problems with French leasebacks and I commend the journalist Sinead Ryan for taking this on.

But it doesn’t go far enough.

Perhaps those selling French leaseback/investment properties should be subject to financial regulation.

From the Central Bank:

the Central Bank of Ireland has no role in regulating the property sector or property investments

After all, these entities are advising and selling leaseback investments which can put the purchasers family home in Ireland at risk if the mortgage cannot be paid.

Rather serious, n’est pa?

What other entity selling investments is not regulated ?

The journalist also quotes the same ‘leaseback expert’, Annette Mink of FP Investments, in a separate news article.

It would be interesting, and I suggest more in the interests of it’s readers, if the balancing ‘positive’ view was taken from an independent source and not someone not involved in the sale of these leased properties.

Pierre et Vacances Leasebacks

As for Pierre et Vacances being the problem free player in all this:

We’ve had no problems with the likes of Pierre and Vacances

There appears to be some evidence to the contrary over on One poster claims that Pierre et Vacances are demanding eviction compensation of 3 years gross rental income in eviction compensation (Indemnité d’éviction d’un bail commercial)!

This poster was under the impression the property was his at the end of the lease period. As many others did.

A quick perusal of the Pierre et Vacances website yields no mention of eviction compensation. Though, in fairness, they do tell you that you will be paying for refurbishment.

At the end of the lease, the Group will offer you a new contract, to continue the management of your property. When the lease is renewed, renovation work is carried out to maintain the value of your asset so you will be assured that it will meet the needs and expectations of the tourist clientele. Your financial responsibility for such works is capped, in existing leases, at 6% of the purchase value of the property yearly indexed on the Building Cost Index, limited to 2%.

Do the numbers stack up ?

Bear in mind that it’s 6% of ‘purchase price’, not the value of the property now. Combine that with yearly indexation increases and you could be looking at a whopping bill!

Eviction Compensation

See the French government site for more on eviction compensation.

Read more on eviction compensation.

Would the journalist care to comment ??

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Must We Pay Eviction Compensation ?


For most buyers of French leaseback properties the notion that the lease did not end at the end of the 9 year period stated in the lease was unwelcome news.

In fact, if an owner wants to end the lease at that time, they may have to pay an unspecified but potentially enormous amount in eviction compensation.

Disastrous news.

A French commercial lease goes on in perpetuity. Irish buyers of these properties were NOT told this by the sales agents, developers etc. The French Notaires who acted for the buyers also failed in grievous extent, to inform the buyer. The pre-sales contract and deeds for these leaseback properties contained details of the lease, the properties were to be in a ‘residence du tourisme’ and to be leased immediately, it was all part of the same sales ‘deal’. But often the notaires did not act competently for the buyers, failing to inform the buyer of any of the potentially ruinous implications of signing such a document.

L’indemnité d’Éviction or Eviction Compensation

After the first 9 years of the tourist residence rental , common law applies to commercial leases (bail commercial). The lessor (owner) has the right to terminate the commercial lease , but they must pay eviction compensation to the lessee.

The tenant also has a termination right, but they don’t have to pay any compensation to the owner.

If the tenant does not request the renewal of the lease, the lessor (owner) takes back the property.

Since 2009 (Act of 22 July 2009 No. 2009-888, s. 19), the marketing documents for these leaseback properties in these ‘résidence du tourismes’  should clarify to prospective buyers of property in a resort that they will have to pay compensation to the tenant if they refuse to automatic renewal of the commercial lease after 9 years.

The law limits the information the prospective buyer gets in general terms of its calculation. In practice, the purchaser may find the rules for calculating the compensation for eviction in legal expertise or Direct negotiation with the operating company of the tourist residence.

However, most of us signed the sale contract before July 2009 and this is of no help.

Articles L. 321-3 and L. 321-4 of the Tourism Code provide for the obligation to inform specifically in the marketing materials for tourist homes , buyers of the existence of eviction compensation in if commercial lease renewal refusals. (Also in the order of 23 December 2009 laying down the criteria for the marketing documents circulated to homebuyers located in tourist residences ) .

” However, the Government has begun to consider to enhance the information batches buyers in tourist residences, in addition to the information already made mandatory by the decree of 23 December 2009, cited above. It is, indeed, imperative that retail investors take stock of their financial commitment in tourist residences . ” Rep . min. , No. 10749 , OJ Senate 13.11.14 , p.2552 .

The French commercial lease is governed by Article L. 145-7-1 of the Commercial Code

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French Property Price Index


One of the selling points that promoters of French leaseback properties push is the opportunity for a capital gain on selling.

Now, many of you will be in the position that no-one actually wants to buy your property due to the consistently poor and unreliable management records of operators, coupled with the diluted rent if you signed a lease amendment with a decrease in the ‘guaranteed’ rent.

So, let’s see how property has been fairing in France in general and compare this with property in one such French leaseback in Languedoc. In this resort, a property purchased in 2009 for €250k now appears to be ‘fire’ selling for around €80k, about 32% of it’s original price!

CGEDD French Property Price

From Conseil Géneral de l’Environment et du Dévelopment Durable

You can see that this leaseback price does not reflect the overall price path of French property where price seems to be levelling out around the same point as 2009,. At all, at all!

No-one can claim that the loss in value in the French leaseback example above is related to ‘le crise economic‘ or property crash etc.

However, it is worth noting that any capital loss on a French property can be offset against any Irish capital gain you might have. You can offset against future Irish gains but not retrospectively (contact your accountant).

Before buying any similar property, look for evidence on re-sales and on price of re-sale vs original purchase price. You may find no such evidence will be forthcoming…

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EU Parliament – RESPONSE to MEP on French leaseback legal issues


I put the French leaseback issues to MEP Brian Crowley to take to the European Parliament for some answers. Here is the response he received from Olivier Guersant :

I am writing to you regarding your letter of 12 May 2016 addressed to Commissioner Jourova, which has been transferred to my services for a response. In your letter, you draw the Commission’s attention to recent changes made to French legislation regulating the leaseback scheme applicable to the purchase of properties in France. You mentioned that these modifications caused inconveniences to your constituents who have bought properties in France, and were therefore benefiting from this scheme.

I understand that the leaseback scheme allows the buyer of a property to benefit from a refund of VAT of 20%, under the condition that ownership of the property is maintained for a minimum of 20 years. The duration of the commercial contract with the management company in charge of renting out the property was initially set by law to 9 years, with the possibility to terminate it without incurring penalties after this deadline.

It appears that a new law will result in retroactive changes to some of the terms of the existing contracts. Specifically, this new legislation will act to nullify the possibility to terminate the contract with the management company after 9 years. The new law stipulates that the commercial contract is now set for life, and that an early termination of this contract would make the owners of the property liable for a penalty of an amount which would exceed the initial benefit granted upon the purchase of the property by the refund of the VAT. First of all, I would like to recall that, under the Treaties on which the European Union is based (1), the European Commission has no general powers to intervene with the Member States. It can only do so if an issue of EU law is involved.

From the information presented in your letter it could not be concluded that the amendments of French law regulating the aforementioned purchase scheme would infringe upon EU law. If your constituents consider that the new amendments resulted in damages, they should seek remedies before the national courts as any reparation of the damages can only be awarded by national courts which have the power, where appropriate, to order national authorities to compensate individuals for losses that they have suffered.

However, in case that there are elements which would substantiate a breach of EU law, I would like to invite your constituents to submit them directly to my services in the Directorate General for Financial Stability, Financial Services and Capital Markets Union – Mr. Stefaan De Rynek, ( Head of unit of free movement of capital and application of EU law.

1 Treaty on European Union and Treaty on the functioning of the European Union

It seems that the use of the term ‘inconveniences‘ either demonstrates poor English or a complete lack of grasp of the issue. I am sure that Irish people who bought French leaseback properties under mis-leading  advertising etc and now have their family homes in Ireland under threat from French banks wish that all they felt was ‘inconvenienced‘!!

He also does not answer the issues that I put to MEP Brian Crowley. He talks about ‘ legislation will act to nullify the possibility to terminate the contract with the management company after 9 years‘, it is not clear what legislation he is talking about here. The French commercial contract never ended after 9 years. One of the issues is that we were told it did when we were sold the properties!

Onwards to Stefaan De Rynek.

Olivier Guersant is the Director General of  the Directorate-General for Financial Stability, Financial Services and Capital Markets Union.

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European Commission (Ireland) – RESPONSE to leaseback problem


The European Commission has a legal representative in Ireland. I put the French leaseback problem to her and this is the response:

Unfortunately, property matters such as leasebacks are not regulated by EU law.  The sale of these leasebacks appears to be a matter of French contract and conveyancing law and beyond the competence of EU law. In fact, since this is a commercial lease, none of the consumer protection legislation can apply.  Therefore, this is a matter of French law and must be pursued through the French legal system.  The issues raised are outside the scope of EU law.  Only if you can successfully demonstrate that non-French citizens are being discriminated against by the French authorities by comparison with French citizens in breach of Article 18 TFEU, could the matter become one in which EU law could possibly intervene.

I further queried the law noting that there is an EU Directive in relation to timeshare properties (a scandal some years back with similar sharp practice and mis-selling to consumers) and how we can pressure for the creation of a similar directive. This is the response:

Thank you for your email, which was sent to Siobhan Duffy. Her advice is as indicated below.

Ms. Duffy advises that you contact your local Member of the European Parliament, as MEPs can put pressure on the Commission to introduce legislation.

I have attached a linked to Your Europe Advice where you may get a more detailed response. However, your enquiry may be rejected as such matters are beyond the scope of the remit of the EU.

You may need to employ the services of a lawyer in France.

All roads appear to be pointing back to taking a French legal action – torturously slow, expensive and, frankly, I have little confidence in the French judiciary (on past experience)…

The Your Europe Advice points us back to the ECC –  see the European Consumer Centre response.

Take your own query to the Your Europe Legal Advice service.


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Europe Direct – RESPONSE to leaseback problems


I contacted the Europe Direct contact centre on issues relating to consumer protection  for leaseback owners to no  avail.

The response was brief and useless..

The Europe Direct Contact Centre only provides information about the EU’s policies and activities. The situation you describe relates to national law. Therefore you would have to contact national authorities or local entities in order to continue with your enquiry.

Helpful eh??

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Commercial Lease – ‘Bail Commercial’


The French Notaires website provides some information on the nature of a commercial lease as used in the purchase of French leaseback investment properties.

The use of a commercial lease provides for particularly advantageous conditions for a tenant.

Regarding the owner’s ability to recover their property it states:

The commercial property does not deprive the owner of the right to recover their property at the end of the lease term or at the end of a three-year period, in certain circumstances, such as: construction, reconstruction, personal occupation if the premises include residential accommodation, demolition, or any serious, legitimate reason.

Also, if the tenant fails to fulfil their rental obligations (by not paying the rent, for example), the landlord may recover possession of the premises quickly, if the lease was prepared by a notaire. Note that unless the landlord is in possession of a notarised lease agreement they will have to obtain a court judgment against the tenant in order to require the payment of the rent and to terminate the lease rapidly.

At the end of nine years, the tenant has the right to have their lease renewed for the same term, at a rent that may not exceed an upper limit. If the landlord does not wish to renew the lease, they are required to pay the tenant compensation for non-renewal of the tenancy. The tenant is entitled to be fully compensated for the loss. The compensation may correspond to the market value of the business.

Alternatives to a Commercial Lease:

The French Commercial Code authorises parties to enter into agreements that do not have the status of a commercial lease. This applies particularly to tenancies-at-will which may not last for more than two years (not to be confused with precarious occupation agreement which are commonly known as tenancies-at-will). If, on the expiry of this term, the tenant is left in possession of the premises (or if the lease is renewed, or if a new lease is concluded for the same premises), a nine-year commercial lease automatically comes into existence.

Conversely, if the landlord wants the tenant to quit the premises, the tenant must comply and will not receive any compensation for non-renewal of the tenancy.




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French Tourism Code


The investment properties that were marketed at and sold to Irish buyers as leaseback properties with refund of TVA and a guaranteed rent under a commercial lease, are governed by the French Tourism Code.

This can be found on the French government site

There have been updates to this code since many of us purchased and signed these commercial leases.

Most buyers were led to believe that the lease ended after the initial lease period (generally 9 years). We now know that this is not the case, that in fact the lease automatically rolls forward under the same conditions, regardless of what is actually written in the lease itself. The issue of compensation due to the operator if the lease is not ‘renewed’ is potentially a massive financial black hole for owners. In fact most buyers were not informed that their property was actually in a Résidence du Tourisme at all.

It seems that the code now provides for some protection in this area:

Marketing documents distributed to home buyers located in tourist residences mentioned in Article L. 321-1 of the Code should explicitly mention the existence of the right of eviction compensation fee provided for in Article L . 145-14 of the commercial code in case of lease renewal refusals and the general conditions for its calculation.

However, where does that leave owners who signed leases before this??


 The lessor may refuse to renew the lease. However, the lessor shall, except as provided in Articles L. 145-17 and following , the evicted tenant pay a compensation fee equal ousting the harm caused by the failure to renew.

This compensation includes the market value of goodwill, determined according to industry practice, possibly plus the normal cost of moving and relocation, as well as transaction costs and fees for the same value funds, except in if the owner proves that the damage is less.


Also, the operators should provide information to owners on the operating revenues of the residence:

The operator of a classified tourist residence must maintain separate operating accounts for each residence. He is required to communicate to owners who request it.

Once a year, it is obliged to give all owners a review of the past year, adding the filling rate obtained, the significant events of the year and the amount and changes in key positions expenditure and revenue of the residence.

I doubt many have requested, or received this information. I have requested it, but perhaps that email went into a different black hole..

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Consumer Protection for French Leaseback Owners – RESPONSE


European Consumer Centre

The European Consumer Centre Ireland (ECC Ireland) was established as part of a European wide network to encourage consumer confidence within the EU. ECC Ireland advises citizens on their consumer rights while shopping in another European state. It aims to facilitate easy access to redress and if necessary, the EEC Network also offers a dispute resolution service. In such a case, EEC Ireland can mediate with a trader through the sister centre of the country of purchase. Please see the EEC Ireland website for contact details.

Clearly the Irish consumer has been let down by the sales process used by French leaseback promoters and developers, leaving many Irish consumers locked in to leases with conditions they were not given any knowledge on.

Indeed, the EU Charter of Fundamental Rights and the European treaties since the Single European Act state that they guarantee a high level of consumer protection in the EU. It is also a general objective defined in Article 12 of the Treaty on the Functioning of the EU.

This European legislation guarantees consumers:

  • fair treatment;
  • products which meet acceptable standards;
  • a right of redress if something goes wrong.

EU legislation in other areas also has to take consumer protection into account.

Generally, consumer protection is ensured by a diverse set of policies, such as food and product safety or data protection.

Consumer and marketing legislation is aimed at protecting the economic interests of consumers. It mainly covers unfair commercial practices and consumer contract law, such as misleading advertising and unfair contract terms.

The reference to:

misleading advertising and unfair contract terms

is most applicable to many French leaseback investment property purchasers who were not informed of the nature of the commercial lease (bail commercial) that they were signing. Most thought it was a rental agreement contract. Most were not informed that the 9 year lease did not end after 9 years, contrary to what the lease states. Most were not informed that if the buyer did not renew it that compensation could be demanded.

Most were not informed that they would in fact be trapped in a consumer nightmare..

Contact the European Consumer Centre (Ireland) at:

European Consumer Centre Ireland
MACRO Building
1 Green Street
Dublin 7

Phone: 01- 8797620


European Directive on Timeshare

European Directive 94/47/EC was introduced in the mid-nineties to legislate on timeshare agreements. Over the years, a number of timeshare-like products appeared in the market to circumvent it. In order to close off the ability of certain traders to weaken consumer protection, the EU introduced new legislation – Directive 2008/122/EC on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contract. This replaced the previous Directive and was transposed into Irish law by S.I. No. 73 of 2011.

DIRECTIVE 2008/122/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts.

Annex 1, Part 3, Section 5 states the requirements on information relating to the termination of the contract. This is specifically missing in the sale of leasebacks.

It seems something similar to this EU Directive is required for French leaseback property..


The response from the European Consumer Centre of Ireland (ECC Ireland) is as follows:

ECC Ireland offers free information and advice to the public on their rights as consumers in the European Union, assisting them with cross-border complaints (where consumer and trader are based in a different EU/EEA state). ECC Ireland is part of a network of 30 centres across Europe working together to resolve cross-border consumer complaints in an amicable manner. Please note that our services are strictly out-of-court and we do not have any powers of enforcement.

With regard to your query, please note that ECC-Net do not generally deal with real estate issues, given the lack of EU-wide legislation in relation to immovable property and the expertise needed to examine complex transactions of this kind under the relevant law at national level. We are not aware of any alternative dispute resolution (ADR) entity entertaining this type of issue. In these cases we therefore recommend engaging the services of a qualified practitioner with the required expertise. Where the transaction involves certain financial products, there are instances where Fin-Net may also assist. Fin-Net is a network of out-of-court complaint schemes in the European Economic Area which handles disputes between consumers and financial service providers, i.e. banks, insurance companies, investment firms and others.

We consulted the European Consumer Centre in France and, other than the above, they have indicated that they are not aware of any specific legislative changes lately, other than minor amendments to the main law (Loi 84-595), e.g. ordonnances 2010-638, 2012-576 and 2013-544. Pursuant to the Finance Acts, however, a number of schemes providing for tax benefits and incentives have been introduced or suppressed in recent years (e.g. dispositifs Demessine, Scellier, Duflot, Pinel).

As regards the information provided, please appreciate that leaseback contracts (contrats de location – accession) establish a number of legal relations and legal consequences which require close examination by an expert eye in order to provide specialised legal advice. Please also appreciate that consumer law only covers transactions between a trader and a consumer, where the latter acts for purposes which are outside his trade, business or profession.

If leaseholders are reluctant to seek professional legal advice and/or take further action through the courts, all we could suggest in this instance is that they consider the possibility of setting up or joining a stakeholders group, such as the Fédération Nationale des Propriétaires de Résidences de Tourisme,



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Financial Advice for Leaseback Owners



If you have issues with your French bank and are not getting a satisfactory response you can try the mediator, who is a kind of ‘in-bank’ ombudsman.

If your bank has one, it should give you the name and contact details. Though in my experience they don’t like sharing the contact details!

If that doesn’t work, try the Federation Bancaire France

Fédération Française des Bancaires, 18 rue La Fayette, BP 151, 75422 Paris, Cedex 09



FIN-NET was launched in 2001 and provides a network for settling cross-border financial disputes within the EEC out of Court ie. disputes between consumers and financial service providers such as banks, insurance companies etc.

If you have an issue with your French bank in relation to a mortgage on a French leaseback property this may be helpful in establishing your rights. In all of the people affected by this issue, the French banks have not been helpful and the language is a major barrier.

While banks such as Credit Agricole du Languedoc and BNP advertise mortgages for French leaseback properties in English, which are deliberately targeted at Irish and English consumers, they have remarkably little to say (especially in English!) when issues arise further down the line.

Credit Agricole for example had prominent link on these English language websites to property websites promoting and selling these ‘investment’ properties and offered mortgages on the back of the illusory ‘guaranteed’ rents.


Financial Ombudsman

Irish citizens should contact the Financial Services Ombudsman if a financial dispute arises with an institution in another EEC country.

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