Government Action - Backing Required

Yes and no. I have been to Les Houches but could only speak to a rather unhelpful receptionist. From what I gather some people in fact did not renew, the whole process was very messy and the residence dont even know who renewed and who didnt. I was unable to ascertain if/how much those not renewing had to pay in compensation.

I also found out that there was a meeting in Les Ginabelle, Chamonix on the subject of lease renewals. This took place 2 or 3 weeks ago, I am still trying to find out what happened.
pboyles40429.6412037037

Hi Mutley

Great to see someone is trying to start some balls rolling. Let me know if I can help. I own a leaseback apartment in the Alps through MGM. I saw an excellent quote on leaseback forum which describes perfectly MGM's attitude "The biggest abuse of leaseback is parties profit from the sales and construction.The profits are neatly banked.Then they set up a management company ,with no capital ,built like a house of cards." My apartment is managed by CGH (subsidiary of MGM) - CGH have taken to changing the high, medium and low season calendars in such a way that owners can't use their apartments in the weeks they believed they could when they bought the property (making the purchase of the property uneconomic), the services change for the worse constantly and I feel that we are treated like irritants rather than owners.MGM haven't finished the landscaping around the apartments and don't seem to care how much owners complain. MGM's website has always said that after the end of the lease you can do what you want with the property. I set out here a quote from their current websire

"Q. What happens at the end of the 11-year lease?

A. As the freehold owner you can choose to sell, use or let your property whenever you wish. Alternatively you can renew the lease. With the latter option, the terms of the lease will be discussed (duration, weeks of use, rental income, service charges...)."

and yet there have been suggestions on leaseback forum that the manangement companies can sue you if you don't renew the lease with them.

It is all very vague and there seems to be a lot of confusion as to what the law actually is on all sides.

will you be able to comment at some point soon?

Dear all,

Here is an article on latest legislative developements:

French leasebacks in trouble: What's changing in 2010. http://www.solicitor.fr/French_leasebacks_in_trouble.pdf.

Regards,

Fabien Cordiez

Avocat à la Cour, Solicitor

I own a leaseback in Les Carroz which was built my MGM and now managed by P&V. I do not recieve any income for the apartment so cannot comment on whether or not they pay on time. What I do know is that the apartments were mis-sold on a number of points. Firstly the matter of what happens when the lease 'expires', secondly the right to use the apartment at any time out of season and of course the confusion about how much/what has to be paid back at the end of the lease.

I have spoken to various MGM offices about these issues and the most sense I can get on the matter is that nowadays they explain all these issues to new buyers.

As regards what happens at the end of the 11 years the impression I get is that if you do not renew you will pay them 2 years of what they would have made from your apartment plus whatever TVA is outstanding. Additionally they would refuse access to communal areas and swimming pool etc without making a charge.

All in all very discouraging.

To Axed,

Regarding your Q and A in your last post that is 100% spot on, that is exactly how it was explained to me 8 years ago.

Has anyone out there actually got to the end of their lease yet with MGM and have experience of what happens if one doesn't renew with them?

No but apparently MGM La Ginabelle in Chamonix will end this year or next. Any Ginabelle owners on here?

I have just managed to find out that the leases expired on the MGM residence in Les Houches last year. The residence is called Les Hauts de Chavants. From what I can gather there were numerous problems with P&V trying to get all sorts of fees out of people who did not want to renew. Also from what I can gather many people, I think around half did not renew, I dont know if/what they had to pay P&V to get out of renewing the lease.

I will be attempting to find some of the owners tomorrow as I'm in the area at present. At least we have somewhere to start. I was also told that many owners in La Ginabelle are also asking what will happen with the lease but nobody seems to know. I will post more information when I get it.

I think it would be extremely useful to have some prior knowledge as to what in reality happens at the end of the lease as opposed to what MGM sold to us. It would be great if you can find out something

Yes I am off to Les Houches tomorrow to knock on some doors, will also ask around the local rental agents to see if they can put me in touch with someone.

pboyles

Did you ever get anywhere in finding some owners who did not renew and what happened please?

Le Splendid in Allevard le Bains is another property where no rent has been received from the management Compnay since July. The Management Company is Reshid Hotel and is in profit?

Hello

I am a french owner in a residence for older people (les Prevotes , Bretigny sur Orge). I have troubles with the manager, who is also the promoter. This promoter sold several residences managed by Transmontagne, he is building other tourism residence in France and Switzerland (Valais). I know that many owners in mountain residences are british, that’s why I visit this forum, in spite of my disastrous English.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

I don’t see anything coming from French government, so I try to collect stories from other victims in order to show dangers of leaseback to people who wants to invest. You can join me here: http://investirlocationmeublee.over-blog.com/ , you will find many links and informations (it's a young blog, other posts will come soon, messages I get give me ideas for new posts). Sorry but it’s only in french. I understand English but I speak very bad. You can send me your detailed stories to add to French ones. In France we have associations such as FEDARS. We'll be stronger if we are as many as possible.

I feel ashamed of being a French citizen when I see that French government let promoters and management companies rob people. I feel that for our government, building in France is the only important thing for improving french economy. Investors don't really exist.

Good luck

Felix,

Do not apologise, your English is very good. Keep us posted on developments... merci beaucoup!

JuanAzur,

Sorry, I told about British, and I forgot Irish.

Mutley,

You say that naming and shaming sales company and management company is the best way to deal with them (do I understand correctly?). I agree with that. But on french forum and sites this is not really permitted, this is called denigration. Poor companies, they may stop their business by our fault!

Thanks,

So you can see that the problem is not only with residences hotelieres. French people can rub their taxes (not only VAT) with government aids if they buy apartments with leaseback scheme. At the end of the year, theses aids will decrease, maybe property developpers will look for investors oversea to send their last apartments. Cheaper, of course, but very difficult to rent because of concurrency. Sale is the only important thing, not management.

You can read Paul Duvaux

http://avocats.fr/space/paul.duvaux/content/leaseback-invest ments-in-french-residences---welcome-to-the-banana-republic_ 1C724902-9FE6-4B71-88C9-352D97065268/web-print

Here you will find a list of residences with difficulties

http://54270joel.free.fr/apart/rechproprio.php

The last one in the list was built by G...O group, my "tormentor". Many other residences are following...

Hi all, you need to form an owner's association if you haven't already done so. You can then share the costs of legal recovery action and collectively you will have more weight when you negotiate a new lease. I speak both French and English and have been through 12 months of hell with my leaseback in Strasbourg. I'm happy to help in any way I can.

Could you tell us in general terms how things worked out? I am working on the following assumptions.

1. The company can renew the lease if they want.

2. Should you refuse you will be liable to pay compensation amounting to about 2 years rent

3. They may also try to charge you for refurbishment costs

4. If you agree to the lease renewal they are under no obligation to give you better lease terms.

In your experience is that pretty much how it works?

The new lease contains a promise by the lessor to renew the lease based on the following conditions:<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

· At lease expiry, the lessee must hand back the premises in good condition. If the furniture is worn out the lessee must replace it. To renew the lease, the rent must be reviewed annually on the basis of the IPC consumer price index.

· The Bureau of the Owner’s Association is nominated as the unique and representative body authorised to scrutinise the condition of the premises, the quality of management as well as trade accounts showing occupancy rates month by month.

· The lease does not include compensation in case of non-renewal. So I guess it’s a bit of a grey area what the lessee is entitled to, if anything.

In reality the decision to renew the lease depends really on the potential of the residence. Obviously, if half the owners refuse to renew the lease on a residence that was custom designed for hotel services (kitchen, restaurant, reception etc…) it will have an impact on the value of the investment as the residence may no longer be able to function at its highest and best use.

Discord between owners must be avoided in order to protect your investment. Easily said, not always easily done...

I posted this in a different thread already but its relevant to this discussion as well. From recent correspondence I have received it is clear that P&V will seek to have the owners pay for refurbishment at the end of the current lease period. They will seek 30% up front with the rest payable on completion.

As always the wording is vague as regards lease renewal, however the fact they are seeking to put the meeting off to 2013, the same year the leases expire, tells me they may be attempting to avoid the statutory 1 year notice of non renewal that owners are obliged to give.

If anyone has a more optimistic view of this I 'd be glad to hear it. They do mention that this process has already begun at the following residences.

Arcs 1800 Alpage de Chantel
Meribel Fermes du Meribel

As I understand it Blotch, the management company have the right to claim compensation from you if you do not renew the lease with them for a further nine years.

On the other hand, they can break just about every clause in the contract with impunity, including failing to pay you your rent, destroying the property and then walking out on the contract, leaving you to pay huge lawyer bills and bills for restoring the property....such as Park & Suites have done at our place.

Such is the world of leaseback.

Cuddles,

I have been contacted by a French owner of a property at Claire Rive in Prayssacm which is managed by Odalys. He is the chairman of an association of co-owners formed to defend themselves against the injustices imposed by Odalys. He would very much like to get in touch with the French owner in your Residence who has taken Odalys to court over the rent review - I believe they have had similar problems at their site.

Could you please contact me privately on PmlHw@aol.com and I will give you his email address.

By the way, if anyone else is having problems with Odalys please let me know and I will pass on the information.

Regards

Sheridan

There are issues with non paymnet of rental by the Maisons De Biarritz group. Owners have formed a defense organisation called ADI biarritz which has its own website, and a committee has been elected

La Saboia, La Tania - management company Resid Hotel. As in other reports on this forum when we phoned we were told that they did not know when the would pay the rent and we are still waiting for the promised written explanation.

Has any one contacted a good French lawyer....Joint Action etc

Eurogroup are not honouring the contract we signed with them 3 years ago on the rent increase for our apartment on the Domaine de Figuiere, St. Maxime. They are proposing that instead of the full double-digit increase due they pay us 3%. Whilst this problem is less bad than some mentioned on this forum, the 'goldmine' that this development is for them means we will have to fight (using expensive solicitors) to either get the full increase or kick them out of our apartment.

Chris

Mutley

I admire your efforts. It is unfortunate that when one makes an investment in good faith that it can turn sour and take over your life for a long period of time, at the expense of your personal and family life. I feel that all French stakeholders are responsible for this. I think your petition and concerns should be sent to Notaires.fr Notaires are supposed to be looking after everyone's interests. Yet they are still engaging in the overseeing of sales of leasebacks (perhaps even those who are currently defaulting on rent payment) knowing full well that most of these are going sour. These so-called impartial individuals must now enforce our rights. Keep up the Good work.

Mutley,

Apart from the specific developments having problems, the wider issue of the sale of leasebacks needs to be addressed.

1) How many owners were aware when they signed the lease that they would have to pay compensation to the holiday operator at the end of the 9-year term stipulated in the contract? This is a serious omission which makes the contract unfair and one-sided. See the Unfair Contracts Directive which states:

"A commercial practice shall be regarded as misleading if, in its factual context, taking account of all its features and circumstances and the limitations of the communication medium, it omits material information that the average consumer needs, according to the context, to take an informed transactional decision and thereby causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise."

I'm sure a good international lawyer would have a field day with this issue.

2) Promoters claimed that at the end of the lease you could do what you like with the property, sell it, live in it etc. They also emphasised the likely increase in the value of the property (especially on the Côte d'Azur). However, as I found out too late, the value of the property has nothing to do with local price increases - it is tied to the yield. Despite the fact that properties in the area in which I bought have gone up about 30% since we bought, the holiday operator offered to market it for well below the purchase price.

3) Claims were made that the only costs would be land tax after 2 years. No mention of the frequent communal charges bills. In fact, on its website, Odalys Real Estate still claims that there are 'no condominium charges'!!

Mis-selling of Leasebacks

I agree 100% with Sheridan regarding the mis-selling of leasebacks and it is no coincidence that we had the same agent(Assetz).Options after 9years to sell,live or rent it yourself,oustanding capital growth prospects,no ongoing charges,all charges paid for by operator.I accept that most of these are verbal exchanges and could extremley hard to prove!

Also pushed was the 10 year warranty on the building!At the Domaine de Figuiere in st.maxime,after 2 years the pool had to be repaired at our cost,about 1300 euros so far!

Eurogroup are also refusing to pay the uncapped insee which was due in january!They are threating to pull out at there next 3 year exit if we don't accept there ultimatum.

What is irrefutable is the penalty to exit the lease after 9 years.

Also the 3,6,9 withdrawal clause that we now know is in place!

That what i call mis-selling!

Regards

John

Hi Mutley

Many Residhotel and Rhodes Tourism schemes have received no rent since Dec08. Please see my post under owners leaseback stories for 4 more posts giving Residhotel residence locations. My leaseback with Residhotel has failed to pay rent on 8/1/09 in Residence Du Lac, Divonne Les Bains.

I attach an email I received today from a french solicitor :

It emerges that ResidHotel and their sister company Rhodes Tourisme are both suffering financial hardship. As a result, many property owners did not receive their quarterly rent in December 2008/January 2009.

I am advising leaseback owners that are in the above situation to have a "commandement de payer" to be served upon Residhotel. This is done through a local bailiff. Residhotel then have one month to settle the outstanding rent, failing which owners will be able to notify Residhotel that the lease is cancelled. If the leaseback company refuses to hand over the keys, you will need to issue a Court Application for this. My charges for instructing a bailiff, paying his fees on your behalf, ensuring that the 'commandement de payer' is accurate, legally effective and properly served, are €350 including VAT. Bailiffs costs are additional and usually in the region of €130-€180. These are recoverable from the leaseback company, but my own fees are not.

Please note that owners who issue a 'commandement de payer' do have a choice not to subsequently break the lease. If they do, the taxman would usually give them one year to find another leaseback company, before claiming the VAT rebate back, on a pro-rata basis.

I hope this answers your query. Needless to say, I will be happy to arrange for a 'commandement to be served your behalf. I would need a detailed breakdown of the sums outstanding and, if possible, a copy of your lease agreement.

Best regards,

Dear Mutley

Odalys have been very slow in paying rent but may not have got to the sstage of non payment yet. However they have introduced SGIT gestion as the management company on a variety of their sites and I dunderstand that they actually own SGIT which might be illegal? SGIT then send owners massive bills for repairs and maintenance which seems like a scamming way of getting the rent back with the other hand. Is this worth also including in your list of bad practice??

Regards

Hi Richard: you have to contact "Bercy" about the VAT, which would be repayable if the management company went bankrupt

In the mean time check http://www.cbanque.com/forum/forum30.html to find out other owners, some associations in France already exists.

http://54270joel.free.fr/instruction_fiscale.pdf

BULLETIN OFFICIEL DES IMPÔTS -- DIRECTION GÉNÉRALE DES FINANCES PUBLIQUES

5 B-17-08 -- N° 73 du 11 JUILLET 2008

For Quietude owners: http://quietude.over-blog.com/

It is translated in English.

Other website: http://groups.google.fr/group/Invest-RT

Sign the petition: http://www.petitiononline.com/131007/

Don't stay alone... contact your MPs and the UK gov, send letters to the French Ambassies/Consulates as well.

The French Government is starting to realise that leaseback owners
are often left unprotected against leaseback companies' insolvency.

The 22 July 2009 Act (Act number 2009-888, published on 24 July 2009) introduces a number of changes that are aimed at protecting investors.

Under the new regulations, any sale agreement relating to leaseback
property must mention the management's company full details. In
addition, the right for leaseback companies to claim compensation in
case of non-renewal of the lease by owners will always be clearly
mentioned in the purchase paperwork, to ensure that investors are fully
aware about these issues before they sign (See my previous posts on
that topic). Lease agreements will also state how such compensation is
to be calculated. This used to be purely a matter of case-law:
Investors were often totally unaware about the fact they may have to
compensate the leaseback company if they decided not to renew the lease
after the initial rental period. Compensation for non-renewal will now
therefore also become a contractual matter, which ensures better
visibility for leaseback owners from the outset.

The law of 22 July 2009 also makes it impossible for leaseback
companies to cancel their lease every 3 years, as is normally the case
in relation to all French business leases. This applies to all leases
signed after the date the new law takes effect.

Finally, leaseback companies will be under a statutory obligation to
disclose every year to leaseback owners financial information e.g;
occupancy ratio, variation in expenses/income, major events etc.

The above is obviously a step in the right direction. Much more could be done to protect investors however, especially those established
overseas. Amongst various possible improvements to the system,
developers should for example be held jointly liable, over the full duration of
the lease, for the leaseback company's possible failure.

Fabien Cordiez

www.solicitor.fr

Fabien,

How does this new law regarding compensation (for non-renewal of lease) apply to leases that are already underway. This compensation wasn't mentioned in my lease which started in 2006, so where does this law leave me (and nearly everyone else who frequents this forum)?

Regards,

Clive

Clive

It doesn't have to be explicitly stated as it is over-arching French law that applies to every Bail Commmercial. This is one of the may reasons so many people are so irate on this forum. In principle the leaseback system is not such a bad idea if only the French would treat owners properly and implement the principle that a lease is binding on both parties. The post by Fabien yesterday says it all.... in his opinion it is unlikely that the Management Companywill pay the rent due unless compelled to do so via a commandement de payer.....i.e. it costs you money to get what is legally owed to you. The French government should be hanging their heads in shame. If it weren't for the likes of Mutley putting his neck on the block we would be treated even more dispicably.

Yes, I understand that previously the compensation wasn't mentioned explicitly in the lease as it is a part of French commercial law, which we are all supposed to know either through general knowledge or clairvoyance. However, I want to know whether the new law is going to be applied retrospectively - that is, if the compensation wasn't mentioned in a lease that pre-dates 22 July 2009, can we assume that no compensation will be due in the case of non-renewal of the lease by the property owner. Somehow, I doubt it - if it doesn't, then the new law is of no use whatsoever to existing leaseback owners. CliveUK40067.4009837963

Clive

Do you have a web address specifying this law change?

No, I don't have a web address - I only have the information provided by Fabien Cordiez above.

Here is a URL link to the 22 July 2009 Act: Loi du 22 juillet 2009

Fabien
www.solicitor.fr

Juan Azur,

Hi there - You can read the full text here http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTE XT000020893055&dateTexte=&categorieLien=id#JORFSCTA0 00020893066

See "Chapitre II"

Regards

Sheridan

My Property in Notre Dame de Bellecombe was originally under the control of Resid and then the administrator sold the lease to Quietude who 2 months later go into administration and then 3 months later liquidation.

In the UK if a lease is sold on then it would fall back on the original leaseholder (in this case Resid) who would become liable for debts if the new company (Quietude) fails - it appears not so in France! I would question the morals/performance of so called professionals who sell on leases without what appears to be due diligence on their part as to whether they are actually dealing with a solvent company.

I am now owed the equivalent of 6 months money from Quietude or their administrator which I have been told I can kiss goodbye. I have been told to make arrangements to collect the keys (and I suppose I had better start saving to pay back the French Government the VAT!). All of this by my French Lawyer as I have had no correspondence at all from Quietude or their administrator. Again in the UK an administrator has a duty to inform all creditors of his appointment but it appears not so in France.

What chance do we have as investors if the so called professionals seem to have no code of practise or it seems ethics?

I will defiantly be lobbying my MEP for more protection for overseas investors