MEP LETTER

Hi, see below of draft letter that can be sent to mep's. Please DO NOT SEND yet as trying to get as many people to send at sametime for maximum benefit. We need hundreds at least for meps to take any notice.

Will advise when to send out and who to - 2 mep's dealing with relevant issues, your own local mep and your local mp

please email me on dianabryce@hotmail.co.uk if you wish to be included in the mail out

YOUR ADDRESS
Telephone number

Date of sending the letter (eg. 23rd April 2012)

Address of MEP (to be advised)

Dear Mr or Mrs …….

I have purchased a leaseback property in France and am one of the hundreds of UK citizens who have purchased leasebacks in France over the past 5 years. Collectively we have been left with millions of pounds of debt causing untold financial disaster to each of us in the UK with no way of escaping this burden for 18 years or more.

Leasebacks have been sold in France for the past 50 years. You purchase a freehold property on a touristic development, which you then subsequently ‘lease back’ to a management company who pays a guaranteed rental, usually between 4 and 6%. The French government encourage the scheme by rebating the 19.6 TVA tax due on new properties, thus offering potential purchasers a new property at only 80% of the cost. The banks are happy to provide, in effect a 100% mortgage (although in real terms only 80% LTV). Thus the purchaser can buy the property without physically investing any money. The government creates continued growth for their employment, tourism and associated business revenue, without having to provide any money themselves. The mortgage costs are covered by the guaranteed rental, and after 18 years, purchasers can sell the property to another investor, without having to pay back the 19.6 TVA tax (if sold before 18 years, the amount of TVA tax repayable is proportional to the number of years owned)

People invested in leasebacks as a way of planning ahead to boost their pensions. They are sold as an armchair investment, which is part of the appeal, as most investors are working full time. In every case I have been associated with, they have been professionals, who have been sold properties in France through reputable English agents, have completed their own research into the purchase, have been guided through the French purchasing system by a bilingual agent and purchased using a ‘notaire’ (French solicitor) who acts on your behalf to advise of any risks prior to purchase.

This was working very well until about 5 years ago when the onset of the global recession, meant that this investment became a complete and utter monstrosity for investors, with seemingly no legal rights or recourse at all.

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Multiple development and management companies have both gone into receivership, leaving developments unfinished and unmanaged with no rentals possible. Investors suddenly find themselves with a huge mortgage, mostly between £100K and £500K, with no way of paying. As well as this there are Syndic charges each quarter (companies that by law in France have to be commissioned to look after the development to keep standards high), utility charges, taxes foncieres (community tax) and accountants fees.

There is no warning, no development or management company is obliged to advise owners of their financial problems. Thus a situation arises, whereby owners realise there is a problem with the development, due to non payment of rental. Desperate to overcome their horrific financial situation, they try to contact anyone else that may have bought a property on their leaseback development. This usually takes about 3 months to pull a group together, as often purchasers are non UK residents, work overseas, as well as French, Irish, Dutch being affected. Those that have the time, will start to spearhead an action, start to formulate the group, decide on a solicitor (usually French, as advised by UK solicitors), then collate every owners information, property, mortgage, papers signed, etc. This can take up to another 3 months. Then the solicitor can begin, he will start by taking the management company to court, thereby realising the owners of their lease with them, so that a new company can be engaged, and rentals started again.

Funds yet again, must of course be found to pay the solicitor to take the companies to court, negotiate with the courts to achieve the best deal offered by new companies keen to take over the management contract. Unfortunately, these new agreements are at hugely reduced rental guarantee. This takes about 12 months to achieve, so far 18 months have now passed.

No back rentals are forthcoming as the management company does not have any money. Many owners are left with properties far from completed, because the development company went bankrupt before finishing the build. The threat of mortgage draw down lapsing due to the time scale offered. Also the mortgage companies will not negotiate to reduce mortgage payments, even though they know there is a case in court. By this time owners are extremely distressed and some start to loose their UK assets, or have to consider bankruptcy.

Once the new company has been awarded the management of a leaseback, new leases must be signed. However, as the guaranteed rental offered may now be as little as 0.85% per annum, many owners are still left with a huge deficit financially, which they simply cannot afford. Also those with properties not finished do not know whether they can get them finished, whether they can find funds to complete them or how long this will take, but realistically the minimum will be 4-6 months.

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Some 2 years later, hundreds of owners are still facing long term financial ruin, unsure at what stage they will have to default on their mortgage, resulting in the banks selling their property, way below it’s value, leaving owners to find more money to pay off the mortgage shortfall.

Purchase of a leaseback, although freehold, has to adhere to certain conditions so that the owners do not have to payback the 19.6% TVA tax to the French government. The properties can only be rented on short term holiday lets, have to be part of a registered company, pay for the services of a Syndic, charge TVA tax on all rentals and submit this to the government each year. Thereby making the sale of the property impossible on a leaseback that has gone under. The property has restrictions, and with no management company offering to pay a guaranteed rental for a lease, the properties are now no longer a good investment to buy, unless purchased at a hugely undervalued price, to allow for the very poor return on rental offered by new management companies. Leaseback properties are still being sold as safe, guaranteed investments by agents, which is something that clearly needs addressing to prevent more unsuspecting investors falling into this disastrous situation.

It may be possible that there could be some compensation sought from the UK agents, their commission is reported to have been very high in the region of 10,000 euros per property. Also the notaires do not seem to have acted in the best interests of the purchaser, as some developments had already gone into administration, when purchasers were still signing completion papers. However, any action such is this, is going to cost a lot more money, money which investors are severely lacking, and will not relieve them of the significant financial debt they owe.

This is just the beginning of a seemingly unending nightmare for investors, whereby UK citizens appear to have no rights to contest new rentals offered or be able to seek any support. I am writing therefore, to ask that you investigate this disastrous leaseback situation, which will have huge financial repercussions for so many UK citizens over the next 18 years and beyond, as any debt left by parents will automatically pass to their children to cover.

I look forward to receiving your comments as a matter of urgency.

Your sincerely

Diana Bryce