Financial Advice for Leaseback Owners

Financial

Médiateur

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

email: mediateur@fbf.fr.

FIN-NET

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.

http://ec.europa.eu/internal_market/fin-net/index_en.htm

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.

https://www.fspo.ie/

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EU Legal Advice for Owners Caught in French Leaseback

Lease

EU Flag

Europe Legal Advisor

Your Europe Legal Advice Service provides free advice on your rights within the European Union and can clarify European law that may apply to your case.

For owners who bought French leaseback properties under unfair terms and who were misled about the nature of the investment, this may be a route to help clarify rights regarding cross-border sales of these nightmare investments. Remember, these properties were targeted at Irish and English buyers who were private consumers, and were not fully informed on the nature of the investment they were making.

Consultation is available with your Legal Advisor by appointment, which can be arrange by phone at 01-634 1111, by email at eu-ie-info-request@ec.europa.eu or through the European Commission Representation in Ireland at European Union House, 18 Dawson Street, Dublin 2.

Queries can also be submitted via a web form or the free phone number 00800 678 91011. Advice is provided through your own language and within a week of your request.

Your Europe Advice website: http://ec.europa.eu/citizensrights/front_end/index_en.htm

Web form link: http://ec.europa.eu/citizensrights/front_end/css_solvit_en.cfm

Ms. Duffy is available for consultation sessions for a half day each month:
30th August – morning
16th September – morning
27th October – morning
21st November – morning
15th December – morning

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Le Tour goes to Les Jardins de St Benoit!

News

letour

The Tour de France has arrived at Les Jardins de St Benoit for a stopover on the Carcassonne stage.

There is great excitement on-site as the entourage rolls into town and they get out of the saddle.

 

 

 

 

Though one owner informs us that the operator of this leaseback Résidence du Tourisme, Docte Gestio, has not paid him any rent so far for 2016. Quelle surprise!

Perhaps they need to get their wheels in motion….

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French Senate Responds on Leaseback Difficulties

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The French Leaseback issue was raised in the French Senate,the second chamber of French parliament, in July 2014. See the response below (a google translate rough translation) from Ms Axelle Lemaire, Secretary of State to the Minister of Economy.

Aware of this situation, in particular through your mobilization, senator, the Government has started at the end of 2013 work to identify improvements to this device, in particular to secure individual investors.

A workshop organized in the office of the Minister of crafts, March 27 Trade and Tourism has identified a set of information which, in addition to those already made mandatory by the decree of 23 December 2009 laying down the criteria for marketing materials, are intended to improve the ability of individual investors to evaluate the offer made to it, including the sustainability of rental commitments on the part of managers.

The Government also wants to be re-examined the context of financing the leveraged investment, which should at least be part of a framework making it visible to the particular consequences of a default of rent, too often presented as guaranteed .

The Government did not forbidden to strengthen sanctions against promoters and managers who do not meet their disclosure obligations with respect to individuals.

Finally, in the framework of the law of 24 March 2014 for access to housing and a renovated urban planning, the Government submitted a private member’s amendment to ensure that property owners dedicated to local public services and thus facilitate the manager change.

The Government works closely with both the representative union managers that associations representing the owners, so that this device, which contributes to the French tourist economy, can also be secured.

Read the original French text on the Senate site – Difficultés rencontrées par les copropriétaires en résidence de tourisme

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Paul Devaux on Rent Reduction

Lease

There is a pattern of behaviour whereby operators of French leaseback properties pressure owners to sign a lease amendment taking a rent reduction. For me, it is too late. But for you, think about what this may mean.

Are you effectively halving the value of your property ? By cutting the yield in half you are instantly making it a less attractive investment. Also remember that this lease automatically rolls on at the end of the lease period and this could leave you in a poor bargaining position and the operator in a very happy one.

See what French lawyer Paul Duvaux has to say:

4 Decline the operator’s rent reduction offers

If the operator doesn’t manage to pay your rent, it may be a sign that you have been the victim of a frequent scam called ” fonds de concours”, related to real estate investments.

This usually happens in the following way: the property developer proposes a very attractive and secure investment package, with so-called guaranteed high rental returns. But the promised rent is actually being artificially increased due to a secret subsidy paid by the property developer to your operator. This contribution is intended to cover the deficit of the first months (or years). In this case, you cannot trust the operator and the best choice would be to pick another operator or to take up by yourself the management of the residence.

If your operator is subject to a “procédure de sauvegarde” or “redressement judiciaire”(bankruptcy proceedings), be wary of the “mandataire judiciaire” (official receiver). Quite often, the “mandataire judiciaire” makes the residence owners believe that they must accept their rent reduction offers. This is completely false. If the rent cannot be paid and even if the operator deals with bankruptcy, you still have the right to terminate the lease. So remember, if you aren’t paid, don’t hesitate to terminate the lease. Of course, such a decision must be taken according to each particular case, eventually after consulting a lawyer and provided that the position is accepted by the largest majority of the owners.

The lease amendment that I signed provided for a profit sharing element in conjunction with a 50% decrease in rent. That was the last that was ever heard of on ‘profit sharing’. The operator went into receivership anyway and the leases were taken over by Docte Gestio. No mention of ‘profit sharing’ there!  I wish I’d read Paul Duvaux on this also:

5. Refuse rents calculated according to the turnover or the results

Lately, it has become very current for the operators to pay rents based on results or on the turnover of the residence.

The clause is conceivable only if the operator is really honest and if a thorough examination of the accounts is intended in the lease contract.

The leases provided for an increase in ‘maintenance charges’ of almost 50% for the year 2013 and thereafter to be negotiated. I never heard any more about that either. They take the amount, do not negotiate and pay no common area Syndic charges!

Read more on Leaseback investments in French residences : welcome to the banana republic

 

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Organise Owners in Residence du Tourisme

Lease

There is an umbrella group in France to represent owners groups from French Leaseback owners called Fédération Nationale des Propriétaires de Résidences de Tourisme.

The group have been active in supporting owners organisations.

The Association of Tourist homeowners was created by FNAPRT to house owners that have no association in the tourist residence where they own property. We hope of course that this situation is only temporary and we will support them, if they can, to create an association.

Meanwhile, via APRT, they receive the same information and the same services as the owners being members of an association affiliated to the FNAPRT. The annual membership fee is set at € 50. Further information and membership with Christine Lorenzini ( christine.lorenzini@neuf.fr )

You can find them at www.fnaprt.com.

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Leaseback Rules on 70% Changed

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One of the restrictions with French Leaseback status on a site has been that the development must have at least 70% of the properties in a lease to retain the French government ‘leaseback status”. If my French serves me, it seems  that this has changed in Mar 2015 and has been reduced to 55%. However, there is a stipulation that  the residence must have operated for at least 9 years.

This is some good news as the French Ministry of Tourism seem to have recognised issues with the law relating to these ‘Résidences du tourisme’. The law is less restrictive now.

A derogation, sustainable lease obligation of at least 70% of local furnished home is set at 55% for:
-The tourist residences operated for over nine years, whose ranking has expired on the effective date of Decree No 2015-298 of 16 March 2015 amending the conditions for classification of tourist homes; -the unclassified establishments meeting the specifications laid down in section D. 321-1 , operated for over nine years.

And from the decree itself:

A titre dérogatoire, l’obligation durable de location d’au moins 70 % des locaux d’habitation meublés est fixée à 55 % pour :
-les résidences de tourisme exploitées depuis plus de neuf ans, dont le classement est arrivé à échéance à la date d’entrée en vigueur du décret n° 2015-298 du 16 mars 2015 modifiant les conditions de classement des résidences de tourisme ;
-les établissements non classés répondant aux caractéristiques fixées à l’article D. 321-1, exploités depuis plus de neuf ans.

Find the related French government details on Article D321-2 of the French Tourist Code on Legifrance.gouv.fr

also:

JORF n°0065 du 18 mars 2015 page 5032 texte n° 37

DECRET Décret n° 2015-298 du 16 mars 2015 modifiant les conditions de classement des résidences de tourisme

NOR: EINI1413630D

ELI: http://legifrance.gouv.fr/eli/decret/2015/3/16/EINI1413630D/jo/texte

ELI: http://legifrance.gouv.fr/eli/decret/2015/3/16/2015-298/jo/texte

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Talking up French Leaseback !

News

Really?

A recent article in the Indo on 5 Alternative Ways to Invest your Savings suggests that we could look at buying a French Leaseback. One contributor from a prestige investments company admits that French banks have been ruthless with indebted Irish investors,  but believes that

leaseback is an investment that can represent good value in the long term

Perhaps it can, but you don’t hear much about that. You do hear a great deal about how you can’t sell them at all for anything close to what you paid for them.

I would strongly encourage anyone thinking of investing in a French leaseback property to have a look at the 1,500 or so posts on Frenchleaseback.net forum to see the feedback of others and take a critical look at how that ‘good value’ might be realised – even in the long run.

The same contributor is pushing the same old marketing tics of 1) VAT savings and 2) ‘guaranteed’ rental returns.

It gives you the right to use the property for short-term tourist rentals over a period of nine, 11 or 18 years. You receive in return, major tax breaks from the French administration (19.6pc VAT) as well as a guaranteed rental income for the duration of the contract from the management company which varies between 3-4.5pc depending on the development.

VAT Tax Breaks

You could equally argue that there is no VAT saving whatsoever for the owner as the ‘saving’ is factored into the selling price the developer pitches the properties at. Many leaseback developments are designed to be sold as leasebacks. The the ‘leaseback’ status is awarded only if at least 70% of the properties in the Résidence du Tourisme are leased to an operator for short tourist stays. This promotion of the provision of tourist accommodation is the purpose of the government leaseback initiative.

Guaranteed Rental Returns

As we have seen, many operators have gone into receivership, or have pressured owners to sign lease amendments agreeing to half the rental returns originally ‘guaranteed’. Instances are numerous. The pain for Irish owners is on-going.

Even if you do receive the 4.5%, there will be costs to pay out of that. For example, for a €200k property at 3% you would get €6k. Out of this you might have to pay €1k for Taxe Fonciere, €2k for maintenance/syndic charges, €350 for a French accountant. That’s before you start to pay back a mortgage.

The media needs to be taken with a grain of salt, wherever someone is put forward as some kind of expert on a property investment you will often find someone with a financial stake in the flogging of said investment.

I’d like to suggest a 6th alternative  – take your hard-earned savings and buy some bricks and mortar and then throw them down the nearest bog hole..

(though of course I don’t mean that, as I’m environmentally responsible, and I like bogs!)

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Diarmaid Condon on French Leasebacks

News

Have you seen Diarmaid Condon’s blog ?

Sadly, I came to it too late, after I had already signed a second lease. That was the second mistake I made (the first was signing the first lease !).

Diarmaid has been writing on property for a number of years and  is up to speed on the problems with the sale of French Leaseback properties.

Have a read of his cogent article on the problems with French leaseback properties here .

He describes how many owners signed a second amendment to the original lease which meant a reduction in rent, all because they were afraid they would a) have no rent at all to pay the French mortgage and b) have the French government demand payment of 19% VAT on the purchase:

The management companies would then claim that they could not continue to provide the agreed returns (often as high as 5%) and owners would have to take a 30% to 50% reduction in rental income for the company to remain viable.

All too familiar. I was promised 5% in the original lease. I was pressurised into a 50% reduction after the operator, who was also the developer (quelle surprise), claimed the resort was facing bankruptcy. It went into  receivership anyway.

Does this resonate with you ?

 

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