Odalys

Gerry,

You won't see it in your management contract!It's enshrined in French commercial law!

We paid these boneheads for this information and didn't get it!

The Lawyers,Notaires and management would have known of the existence of these major clauses.I suspect that some of the agents knew and some didn't.So they were either crooked or incompetent!

Regards

John

The penalty to exit from a commercial lease in France is not written in the lease contract as it is what we call "d'ordre public". It means that it is no use to remind this clause as it is automatic!

However regarding leaseback it is tricky as this penalty compensate the loss of business for the tenant. ResidHotel and Pierre et Vacances ask for application of the clause and normally it is 2 years rental income. it is subject to negotiation of course.

C'est La VIe BLM

Bertrand

By rental income do you mean the rent they earn in one year from tourists or the rent they pay the lessor per year?

How on earth are foreigners (we Brits & others) supposed to know this?

This is where the promoters, notaires, management companies etc. have a duty to provide information BEFORE signing the contract.

Regards

Sheridan

I agree with you a leaseback is not as simple as it is said, it is very tecnical but even French do not know this. The loss of business maybe the turnover made by the management company.

In France we have a principle "nul n'est censé ignorer la loi"= everybody is supposed to know the law!

In fact when you are investing you should always ask the following questions: can the tenat pay the rent, what is his financial situation, how can I exit.....

Bertrand

Sheridan

I agree. If we want to look at it this way. If the Notaires tell us about this, as I believe they should then they won't get their fee beacuse we are likely to back out of the sale. If the proper information is given to us then too many incomes are lost for developers, agents, translators and notaires! This may be public knowledge in France but there should be an information pack made available for international buyers.

In my case, I did ask all those questions and even took advice from an English bilingual lawyer who examined the lease agreement and told me that there should be no problem. I quote:

"I have read this document (the lease) very carefully and confirm that it is in accordance with French law and does not present any problems. For example, you will have no problems in obtaining vacant possession at the expiry of the term of the lease without having to pay an indemnity to the developers."

We are not a bunch of naive, unintelligent investors and I do know that many French people were unaware of the full implications as evidenced by the numerous French forums on this subject. The fact is that we were misinformed and crucial information was omitted.

Regards

Sheridan

I can only speak for Ireland ... If this happened in Ireland the Director for Consumer Affairs and the ministers (Justics & Finance) would step in and protect buyers. In Ireland, the current way of selling leasebacks would be considerd fraudulent, i.e. it is fraud. To make matters worse the French legal system endorses it. Surely the EU has to step in here. For your information a group of French leaseback owners are meeting Paris on 14th March.

There are many parallels with the sale of Time Shares and I have no doubt that at some stage the mis-selling of leasebacks will be referred to the EU and a Directive similar to that of the Time Share Directive will be drawn up.

Regards

Sheridan

Gerry,

When i first looked at leasebacks 8 years ago,there was no books or websites to which you could refer.

I was clear when i bought,that my timescale was 9-10 years,so i definately wouldn't have bought if i had known there could be a hefty penalty!So i was mis-sold.

Also i wouldn't have bought if i had known the Tennant could break the lease at 3,6, intervals leaving me with no rent!

I asked this before and no one has responded yet!

Was anyone told,before purchase, of the exit penalty charges or the 3,6,year break clauses?

regards

john

Firstly, all credit to you Seamus for allowing this forum.

The issues you raise have been exercising my mind for some time - who exactly would you sue. It requires the opinion of a lawyer in my view and a very good one at that. It might be worth making enquiries as to the cost of getting such an opinion.

Regards

Sheridan

Sheridan,

I agree with you 100% regarding Seamus and the forum.It is a great scource for contacting other owners with similar problems.Also it should flag up warning signs to potential purchasers.

As to who is responsible for the mis-selling i think we can rule out the Developer and the Management company---- Cavat Emptor!

Definateley the agent,and i agree with Seamus on this,most didn,t have the knowledge or experiance in commercial law to advise us!But they did take there fee in full!.So are therefore responsible for mis-selling!.

And most definateley the Lawyer,if you used one!

As in your case Sheridan,Your lawyer clearly responded in writing,saying that there were no penalties at the end of the first 9 year period!

As we all know no,it is not in your management lease but in French commercial law.As it was "Residence de Tourism",governed by commercial law they should have known!

I would say it is the Agent,Lawyer or both!

regards

John

John

What about the Notaires? They are equally responsible. They can't argue they are just looking after the freehold aspect as suggested in another post. The legal document you are signing is a bail commercial not a simple set of freehold deeds. They should make you aware of the implications of the legal document you are signing. If this was Ireland or the UK this sneaky, underhand behaviour would not happen. And the French pride themselves on the rigour of their legal system...what a joke!

In Ireland we now have an affordable housing scheme. The minister responsible was on the radio yesterday clearly highlighting the implications of such a purchase e.g. you cannot rent it out and if you sell it within 20 years you must pay a percentage of the sale to the state who funded your cheap house. The issue here is all of these things are up front. Yesterday I found the website of the French tourism minister. I think he should be lobbied. I do not think French tourism will suffer if we take over our apartments as the vast majority of us will rent them out to tourists anyway (it is the only way we can cover our mortgage). In another post Seamus indicated that the French Tourism minister is on record indicating that having to pay compensation to the tenant if you break the lease is unfair. Is he doing anything to remedy this? Talk is cheap. How do we lobby this guy? Should we be lobbying the Irish Minister for Foreign Affairs and the British Foreign Minister to get this guy to act? Any suggestions?

I have just emailed Irwin Mitchell a large firm of solicitors who specialise in class actions, outlining the problems we have. I will let you know if I get a reply.

Meanwhile, take a look at this website:

http://www.oft.gov.uk/shared_oft/speeches/spe0105.pdf.

which has some interesting things to say about contracts, particularly Lord Bingham's view:

The regulations say that unfair standard terms in consumer contracts are not binding on consumers. Their scope excludes the terms − sometimes called the 'core' terms − that define the main subject matter of the contract and the price of the goods or services supplied. A term is unfair if contrary to the requirement of good faith it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer. In the words of Lord Bingham: <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

'The requirement of good faith in this context is one of fair and open dealing.

Openness requires that the terms should be expressed fully, clearly and legibly,

containing no concealed pitfalls or traps. Appropriate prominence should be given to

terms which might operate disadvantageously to the customer. Fair dealing requires

that a supplier should not, whether deliberately or unconsciously, take advantage of

the consumer's necessity, indigence, lack of experience, unfamiliarity with the

subject matter of the contract, weak bargaining position or any other factor listed in

or xxxogous to those listed in Schedule 2 of the regulations."

Regards

Sheridan

terms in consumer contracts are not binding on consumers. Their scope excludes the

terms − sometimes called the 'core' terms − that define the main subject matter of the

contract and the price of the goods or services supplied. A term is unfair if contrary to

the requirement of good faith it causes a significant imbalance in the parties' rights and

obligations under the contract to the detriment of the consumer. In the words of Lord

Bingham:

'The requirement of good faith in this context is one of fair and open dealing.

Openness requires that the terms should be expressed fully, clearly and legibly,

containing no concealed pitfalls or traps. Appropriate prominence should be given to

terms which might operate disadvantageously to the customer. Fair dealing requires

that a supplier should not, whether deliberately or unconsciously, take advantage of

the consumer's necessity, indigence, lack of experience, unfamiliarity with the

subject matter of the contract, weak bargaining position or any other factor listed in

or xxxogous to those listed in Schedule 2 of the regulations.

Juan Azur,

I thought that i was going to the Notaires office to sign all documents including the Bail Commercial for the management!

As i said in a previous post,the Notaire phoned me in response to my 2 questions regarding his failure to imform me about a possible "exit penalty"and the 3 year break clauses!

He said that his duty was only for the purchase of the Freehold property,which he is required to notarise.If this is true i can see why he didn't refer to commercial lease clauses.

What experiences did other owners have when they signed?

Sheridan,

I think the clauses that we refer to are clearly legal in French and English commercial law!

But these clauses wern't in our "bail commercial" with the management company.

So the question is, should the agent and lawyer have picked them up?

regards

John

John,

They may be admissible under French law but surely they can be challenged under EU legislation as being unfair. "concealed pitfalls and traps" - that is exactly the situation here.

Regards

Sheridan

Sheridan,

I agree with you,they could be challenged under E.U. law but would be a lenghty and costly process!They are clearly biased in favour of the tennant!

With the agent and the lawyer i think its clear that they knew that leasebacks fell into commercial law,but didn't know or didn't tell owners of the implications!Either way they were negligent!

Regards

John

Hi, what one the outcome of the group of owners who met in Paris on the 14th March? Has anyone been able to take this thread to a higher level?.......working towards it..

Surely the High Council of Notaire's does not want its name dirtied with these acts of fraud.

Hi Gerry,

I own a leaseback on the Cote Dzur managed by Odalys and we also have been paid late for the last two qtrs.I also have heard comments regarding financial difficulties,but don't know if its true!

They have now brought payments up to date!

Regards

John

Hi Gerry

There is a thread on DroitFinancesnet entitled 'Problèmes avec Odalys'. It is mostly about the fact that people were unaware that you have to pay a hefty charge if you want to discontinue renting at the end of the 9-year lease.

However, there are a few discussions about late rent and someone has mentioned that there was a meeting with an Odalys manager who said that they were having financial difficulties due to the fact that they had invested in other companies.

Regards

Pam

Financially Odalys is suffering from cashflow problems since 1 year. The business is profitable, occupancy rates good but equity is quite poor due to rapid growth. The solution may be an capital equity increase or debt. Our opinion is still very positive.

Rents have been paid last week as far as I know. Odalys is a serious company and normally communicate easily. For more info contact us on info@clvproperties.com

BLM

Bertrand

Rapid growth is greed. There are no excuses for these companies. They expanded too fast knowing that the poor owners would have to suffer the burden. We cannot turn around to our banks and say 'I can't pay my mortgage because my management company won't pay my rent'. If you try this your bank will say that if you cannot pay your mortgage your property will be repossessed because your mortgage is a legal agreement. A lease is also a legal agreement but I bet it is easier for a French bank to repossess your property than it is for you to repossess your property for non-payment of rent. The French legal system is biased way too much in favour of the tenant i.e. management company. When will they realise that most property owners are ordinary working people with mortgages to pay? The French Law or Justice Minister should now step in and introduce emergency legislation that protects property owners from unscrupulous greedy developers.

Gerry,

Who was the agent?We can also add him to the long list of agents,lawyers and notairs who didn't tell there clients of the financial penalties to exit the lease!

I would be interested to learn if any members were told!

John