We want to expose the real story behind the sale of these properties and galvanise owner support to get investigative media attention. We would like owners affected to sign the petition for recognition by the French government and act to show fairness.
The problem with the sale of the properties is illustrated by the following typical story:
- 2007: French Leaseback properties are marketed heavily as a lifestyle and investment instrument in Ireland and UK by Sunday newspapers and estate agencies.
- If the property is leased, the sales documentation promises ‘guaranteed’ rent of 5% with a maintenance charge, ability to reclaim the 19% VAT paid on purchase price, no maintenance and a hassle-free investment.
- Mortgages are available from French banks with repayment structured from ‘guaranteed’ rent. The mortgages are arranged by the developer spread across different French banks and there is no requirement for the buyer to ever go to a French bank. There is never any mention, from any of the parties involved, that failure to make repayments threatens your family home in Ireland. Remember, the repayments are dependent on the ‘guaranteed‘ rent.
- Buyer signs a ‘compromis de vente’ and buys off-plan. The developer arranges the sale with a French Notaire. There is no requirement to meet with the French notaire. There is no advice from the notaire. The notaire acts for both the buyer and seller. The role of a notaire is different to a solicitor in Ireland. Read more about the role of a Notaire in buying property.
- The developer pays the first 2 years of Taxe Fonciere. This is similar to a council tax which all owners must pay. It is at a reduced rate for the first 2 years of a new build. For example, €230 on a small 2-bed unit in rural France. The owner doesn’t question this, it’s not a significant amount.
- Buyer makes staged payments and sale proceeds when the development is complete. The buyer signs a ‘Bail Commercial‘ – commercial lease. The lease is signed with the developers company or a company related to the developer.
- The developer arranges a French accountancy firm to handle the French Income tax returns (you are receiving rental income in France and need to make declarations).
- Rent appears as stated in the lease for a few years.
- The developer continues to sell the remaining properties in the resort.
- The developer never mentions the Syndic de Co-proprietaires. This is the legal structure which must exist in a development of this nature to govern the common areas.
- All is as expected for the owner.
- Owner receives a demand for Taxe Fonciere. This is expected. However, it is 4 times the amount of that of the first 2 years. For example, it’s now €940. The French is a little impenetrable and no-one know exactly what’s included in this. Owners are disgruntled.
- The guaranteed rent fails to materialise. Owners begin trying to communicate with one another to see what’s happening. This is difficult as contact details will not be supplied by the developer.
- 2011: The rent continues to be unpaid.
- Some owners go into arrears on their French mortgages.
- The operator (a company of the developer or related to the developer), claims he cannot pay the rent as the rentals are not providing the income. The owners must agree to an amended lease which will reduce the ‘guaranteed’ rent by half and increase the ‘maintenance’ charge component by half. It is made known to owners that if they have no lease they will have to pay back the VAT on purchase price to the French government. For example, on a property purchased for €200k this could be €34k. Note that this is after the ‘crash’ in Ireland when many have much reduced ability to pay a mortgage let alone a demand for this kind of money from the French revenue.
- The resort goes into receivership. The leases are taken over by companies specialising in distressed companies.
- The owners become aware that a Syndic de Co-proprietaires must be formed. By law, all owners are a member. By law, all owners must pay the fees. As it’s all in French, the owners meet and realise that a specialist company is needed to run this. It’s somewhat similar to a management company of an apartment block in Ireland. But not the same.
- This is the opposite of ‘hassle-free‘.
- Owners continue to struggle financially.
- The new operator does not pay this charge on behalf of the house it holds the lease for. The owner pays. For example, this could be €1,800 per year.
- The new operator pays the reduced rent late. There appears to be no penalty in France for paying up to 1 month late. The operator avails of this for his cash flow.
- 2013: Owners who have not been able to keep up mortgage repayments due to reduced rental income and increased costs face repossession.
- Many owners take legal advice and much is spent on French lawyers.
- Some properties are re-possessed and sold. The owners are pursued for the remainder of the mortgage. Their family home in Ireland is under threat.
- Some operators do not pay rent and owners need to go engage the services of a ‘huissier’, similar to a bailiff, to get their rent.
- Some operators do not pay the Syndic charge. Owners need to pursue this through the courts. A lease which states a maintenance cost and obligations which is clear to the buyer is not clear to the French court.
- The French court process is slow. And of course it is costly.
- 2016: Owners continue to struggle with costs, French documentation. There is still little clarity on their rights.
- The media in Ireland and the UK who carried advertising and features on selling these properties do not answer emails. There is no reporting of the issues. The Sunday papers continue to carry property articles about developments from the same developer.
- The owners see the end of the lease approaching. They realise that the lease automatically rolls over if they do not explicitly cancel it in a certain way.
- They realise they will never make any viable return from a French operator. They realise they will have continuous problems.
- They realise that if they do not renew the lease they may have to pay compensation to the operator. This could be up to 2 years the operators revenue on the property.
- They realise that they may have to pay re-furbishment costs on the property.
- Some owners take legal cases against the French notaire, bank and developer for mis-selling. This will be a long process through the French courts. They succeed in preventing re-possession of the property by the French bank. The cases are on-going.
Our goal here is to have owners and families and friends involved sign the petition for official recognition of the fundamental issue with the sale of these properties and facilitate the cancelling of these leases without compensation to operators and without payment of VAT to French government.