English
FrançaisWe recently got out of our Leaseback arrangement with Eurogroup and I've had lots of queries from other members on this forum about it. Here I'm going to explain what we did and our understanding of the law. Please note, this is only what we understood and many others may have other experiences and better knowledge - please share if you do.
My husband and I bought a villa with private pool off plan in 2005 in the Vendee on a site by a golf course where leaseback apartments and houses sharing a communal pool had aleady been completed. We signed a Bail Commercial which was a leaseback contract allowing the management company (Eurogroup/Madame Vacances) to rent out our property between Easter - Toussaints and we could book 12+ weeks for personal use. We were told we were free to use our property in the closed season, there was no mention of who was responsible for the property in our contract. Since the site was unsupervised for the whole winter period it quickly became apparent we had to take responsibilty for our property over this time. Although the quality of the holiday experience MV gave to renters was never very good, communication with us was poor and rental statements lacked transparency, we tolerated them. Our rent typically was paid a few months late.
The situation changed in 2015. Our Bail Commercial says that we could give 6 months notice and request to leave the Leasback Scheme after 9 years with no mention of a penalty. In 2015 therefore some owners wrote to MV saying they didn't want to continue with the scheme and gave them the required notice. They heard nothing in reply, so thinking everything was ok they changed their locks thereby taking possession. This was when we all realised that things weren't that simple! Even though it is unwritten in our lease, we are bound by Commercial Law and a 1953 act so we can NEVER leave the agreement without paying an indemnity to the Lessee. They have the right to demand this for damage to their business and they have 2 years to contest the eviction notice and determine the amount of the fine, while still carrying on as usual. Therefore those owners that had changed their locks were acting too soon. Just after this we all received a letter from the Manager of Eurogroup informing us that we were trespassing on our property if we used it during the closed season as they had a right to access all year round. Anyone found disobeying would have their locks changed. This has thrown up questions about who looks after the properties in the winter as the owners pay for utilities, pool & gardening maintenance, co-ownership charges etc which normally for a year round use the tenant would be responsible for.
Some owners have been to court to challenge MVs right to an eviction indemnity as it does all seem very unbelievable and unfair but as far as I'm aware, no significant judgements have gone in their favour. The court cases drag on, are often put back and delayed. All are costly and in the meantime MV are still occupying the properties. Undoubtably we are all victims of mis-selling and while some MEPs in Ireland and the UK are investigating, this is all going to take time and is not helped for us UK citizens with Brexit. There are also arguments around whether a BC can apply to a holiday letting business anyway depending on the % uptake and the level of services offered but to my knowledge slow progress is being made on these too.
We decided that the whole arrangement was unacceptable and we needed to get out. We wanted a clean break that we could acheive over a short period of time with minimal stress. In order to do this we had to accept that we would have to pay an indemnity but we would negogiate to get this as low as possible. First, in late 2016, we employed an Avocat to send MV the necessary Conge (break notice) served by Baliffs, saying that we were giving them 6 months notice. In this we challenged their right to claim an Eviction Indemnity as this applies to a full year round Bail Commercial which they don't have as they are not on site for 5 months of the year and we had taken responsibilty for all the losses and damages that had occured when our property was empty. They replied in January 2017 to say that they rejected all our claims and they do have a Bail Commercial, albeit a Seasonal one (Bail Saissonaire) so the full BC rules apply. We had hoped they might at least offer some reduction in the indemnity for all the things they should have paid for but they just ignored this.
Our Avocat then went back to them to find out what kind of Indemnity fee they wanted. They started off by asking for nearly 4 times our annual turnover. Yes, it is calculated on turnover not on how much income they are losing. Eventually our Avocat got it down to just under 2.2 times, some of which was offset by allowing them to rent our property for the entire 2017 seaason so our rental income due was deducted from the Indemnity fee. Both us and MV signed a Settlement Agreement. We paid the balance in December 2017 and have been given back our keys.
It seems that the amount they ask for is entirely arbitrary but it is going up as more owners want to get out. They argue that the more people leave, the greater the impact on thier business so they are entitled to charge more. We are aware that some owners who got out before us paid less than 2x but now others are being told at least 3x and some have been told more like 6x. Our Avocat told us that if we took it to court, the courts would decide what a reasonable indemnity was, and their guidance is 2-5x so could be higher than we could negotiate. Therefore we saw no benefit in going down this route. As it is our legal fees have cost several thousand euros.
The only other way as we see it is to wait for the Management Company to go bankrupt and walk away. You will probably lose a year or two's rental income but this would be less than any Indemnity. You may be able to accelerate the bankruptcy by all owners sending in a CDP and forcing them to pay you at the same time - however this may not work, they still may not pay and apparently even if they haven't paid following 2 CDPs, this isn't considered a large enough breach to annul the Bail Commercial!!
I'm sure that like us, you thought that by buying a second property in France, on a French government approved scheme, you couldn't end up in this kind of mess!
We decided on taking this recommended legal path as, under the terms of our Bail Commercial, you can never get out of the contract unless you pay the eviction indemnity that they demand.
Caroline
Excellent summary Caroline
Well done Caroline.
Thanks for posting, as many are still unclear on the eviction compensation.
You're quite right, while the sale of these is under investigation by the DGCCRF in France it is unclear yet what might be achievable, and what the outcome will be.
If an owner can afford to get out then I think yourself and Wineflair are right, it's the only way to get piece of mind.
The amount they demand is not set, I've seen a figure of €30k mentioned by the operator in our place.
Having said that, I have heard recently that an operator in one Residence de Toursime may be trying to force those with no lease, and who rent the properties themselves, to rent through the operator. There is mention of the requirement somewhere (not sure if this is in a specific lease or ASL Co-proprietaires rules or French law) to have only one operator on the site.
Hopefully not!!
Is it possible if one renewed the lease after a nine year period, for another nine year period, and this new lease specified different terms and contained three x three year period with appropriate reducing eviction compensation at the end of the various three years in the lease, and if this was signed by the management company and a notaire, that these new renewed terms would be applicable. Basically the management company could not come back and look for greater amounts than those specified in the renewed lease. There appears to be some difference in law between the 1 st lease and the 2nd lease. In the 1 st lease a tenant cannot sign away its rights ( i.e by saying they dont want an eviction/termination indemnity) but I am not sure if this applies for second lease. Any views with actual exp[erience with this?
I am afraid the law applies equally regardless of the number of lease terms, but mgt companies might be more lenient after more than 1 lease period.
Thanks
Trying to think of everything! If there was a compensation clause on the second commercial bail, (i.e at the commencement of the 10th year) and the terms differed to the 1st bail, and were negotiated and signed by all parties, including witnessed by a notaire, if the owner wished to terminate before the end of the second 9 year term, would the compensation amount contained in the bail apply. Basicially the management company and the law could not claim that the terms were not applicable?
Thanks
Many thanks for this summary, I have started comptemplating selling my property but have had to reconsider as the eurogroup exit fee
quoted is 68k euro, 13.5 times last years turnover for the property for which I still haven’t received my share.
m
Michael, they haven't paid your rent and you are taking seriously their exit fee demand? Send them a CDP and then get the lease cancelled because of breach of contract...don't be a fool.
Hi juan
I've been advised that even if I submit a CPD I might get a % of what’s owed but they won’t cancel my lease, happy to be advised differently
m
Regarding non-payments of rents and serving a CDP: we were advised that while one failed payment by the managing agent within 30 days of serving the CDP allows you to take them to court, this does not mean that the judge would automatically agree to cancelling the lease for this breach. Several unpaid CDPs would be needed and the managing agent would still have a 2 year period to challenge the cancellation (and keep using the property and probably not pay any more money owed to the owner in that time).
Perhaps I am wrong, is there anyone out there who has successfully won a court case and got their lease cancelled for non payments after a CDP?
Michael, was this legal advice? If it is then I'd get a different French solicitor. A group of us owners all sent CDPs at the same time. It was the second CDP we sent in a short space of time. When the company couldn't pay we did not relent, nor would we accept a rent decrease. A receiver was appointed by the courts and he cancelled our leases. We subsequently sold our properties to a buyer who bought the entire building. It is possible but everyone must act together and all put pressure on at the same time.
Morning to all of you on here
I have spoken to Sephora and have sent documents across to allow her to build a plan, Sephora believes a group action will be stronger than multiple individual cases and as such has asked if anyone would be interested in being part of an intial conference call to discuss options and strategy.
If you would please send me an email and I'll arrange something for the end of the month
many thanks
Michael
Michael.hardy1969@gmail.com
@seamus Hi I am new to this forum and have gone through this thread which leads me to a simple question though the answer may not be.
My query is to ask your opinion as to the legal enforceability of an agreement between the letting agent and property owner where both parties
agree to renew the bail commercial for a further 9 years under the same terms BUT that both parties agree to finish after the renewed 9 years
with a specific end date without compensation where the property owner regains their property without any liability.
Hi Caroline
Could you pm me the name of the Avocat you used ?
Also, when you said they asked for 4 times, turnover, you mean the money they would receive from renting ? e.g. if i received 4k in my annual income from my management company but they let it for the year, taking in 8k in rent, it is the 8k which is considered for the multiple ?
One last one - does anyone know the average markup /profit margin they make on renting them out ? I know it can vary but are we talking nearer 30% or nearer 100% ?
Another last question ! : ) Is there the possibility to find out the Indemnity amount, without leaving ? i.e. what it would be ? Or can it only be found out/negotiated after you start the process to cancel your lease ?
Thanks in advance
Rob
French Property I am not a solicitor. For a definite answer I suggest you contact Sephora (in the thread) or her colleague David, but my opinion is that even if you have an agreement which indicates there will be no indemnity after the lease, I think that agreement can be overruled by french commercial law which states that the mgt company always has a right to compensation.
In answer to Rob's question #15:
The amount of the eviction indemnity is calculated on turnover, so in your example if your managing agent receives 8k in total
to continue:
if the managing company gets 8k in total from renting your property, this is the figure that is used to calculate the indemnity - irrespective of how much you receive of this.(or how unjust this may be!). So it can be between 2 to 5x this = 16 - 40k
Our managing company (Madame Vacances/ Eurogroup) took 45% before handing over the other 55% to us eventually
You can enquire from your company how much the eviction indemity might be without getting a lawyer involved. However, if you get an answer from them at all, it can only be viewed as to a guide. If you are enquiring before other owners at your development you may get quite a good price, if they get wind that lots of people want out, then the price is liable to rise as they will claim that more damage is being done to the viability of their business.
We used Fabien Cordiez, his details and other options are on another thread.
Caroline,
Thank you for this very useful posting. We are about to start this process with Eurogroup.
Would you be happy to share with us the contact information for your lawyer?
David Carbery
Malahide,
Co Dublin
Ireland
00353868225260
Thanks for posting this it’s very helpful. It seems that the outcomes depend very much on the unique curcumstances involved and clearly this makes the situation extremely complex.
I sent a CPD which was rejected and contested in court. I still haven’t been able to clarify what the decision was based on. The management company insist my lease is still in existence, despite me also sending notice to cancel and a court letter mentioning the lease doesn’t exist. I still can’t find anyone who can explain exactly what was said in the court papers.
I’m also reluctant to pursue anything further as I am sure this will involve costly legal fees. It might be worth paying to have a consultation face to face with a bi lingual lawyer but I’ve also found difficulty finding with with sufficient expertise in this area.
I’m also still liable for tax every year and receiving no rent.