Is anybody and expert on Article 606? As an owner of a leaseback property, typically what could I be liable to pay for under Article 606 and what should I not be expected to pay for? Anyone know?
Unless otherwise agreed, the leaseback company bears the cost of repairs and maintenance, except for major structural repairs (grosses réparations, as defined under Article 606 of the Civil Code).
Here is article 606's definition:
Major repairs are those to main walls and vaults, the restoring of beams and of entire coverings;
That of dams, breast walls and enclosing walls also in entirety.
All other repairs are of maintenance.
Where the lease states that rent is net of all charges, costs and expenses, the tenant bears all repair costs, including all major structural repairs. This rarely happens to be the case.
Many French leaseback agreements not only exclude those repairs defined under article 606 of the Commercial Code, but also other specific expenses e.g. works necessitated for health and safety, planning or other compliance purposes. These can be costly, especially when new lifts must be installed in the building for example.
One common issue leaseback investors face is that maintenance and repairs costs are dealt with by the building's Factor called 'Syndic'. Where such Syndic has been appointed from the outset by the property developer, there may be a risk that the Syndic in question could be biaised towards the leaseback company. One major leaseback company currently subject to liquidation proceedings had their own subsidiary or sister company acting as Syndic for instance... Needless to say such situations give rise to potential conflicts of interest, the risk being that some of the costs which normally are for the leaseback company to pay end up being charged to leaseback owners. In some cases, the Syndic's bills can be unclear as to what are the costs which are recoverable from the leaseback company and those who aren't! Syndics quarterly bills ought to be carefully checked. Do not hesitate to ask for a detailed breakdown of those 'charges de copropriete', especially when they are directly offset from your rent.
I hope this is informative. The above obviously is general guidance and does not amount to legal advice.
This is the clause in our lease so it would appear to be clear.
La société preneuse supportera les réparations de toutes natures, à l’exclusion des grosses réparations définies par l’article 606 du Code civil.
At our resort, we have had to pay for a "foaming process" which apparently protects the roof tiles from atmospheric damage because the resort is near the sea, and the sea air can be abrasive. Also there have been charges associated with repairs to the facades of the properties. Like many French properties, they have a render type finish which is then painted and some of these have needed repairs presumably because parts have cracked or are falling off.
In my view neither of these are structural issues ie the roofs are not collapsing and the walls are not falling down.
So how does one go about interpreting what is meant by "major repair"? Are there any further guidelines?
The foaming treatment you describe is NOT included in the limitative list set out by article 606 of the Civil Code and does not, therefore, amount to structural repairs owners are responsible for.
Many thanks for your reply. This is very helpful. We have already paid the charges and I will try to get them reimbursed - although I don't hold out much hope!
You didn't comment on the part of my query regarding the repairs to rendering on the walls which I mentioned. It would appear that as this work was not of a structural nature, then it too would be classed as maintenance and not come within the Article 606 definition. Would I be correct in thinking this?
Hi Fabien we have just discovered that the Developer.Promeo, the Management Company, Village Centre, the Maintenance Company Opaleo and the new Management company MMV all are registered under the same company number or connected. MMV took over the management iof our building n July. I as an owner heard about it in Sept 2013 when I was asked to attend a meeting in France to discuss a reduction in rent and to ask us for money towards cost of upgrading the building (even though it was totally renovated in 2008). At the meeting which was in French, MMV gave a very dim picture of the previous management and maintenance of the building. We were given the impression that MMV was a totally different conpany. MMV have served notice to quit the leases to many in our building (pre 2009) and said they were looking at getting a new Management company to take over. Then Opaleo have said that we would not be able to get a new Management Company in until work on the swimming pool at a cost of over €200,000 is paid. This was separate to other more minor work that needed to be done but which Promeo said they would look after, i.e. cracked bathroom suites that would be covered under suppliers guarantee etc. so in effect costing them almost nothing. It later transpired that there was not a problem with the pool, but there was with the ground around the pool area which leaks into shops underneath when it is raining. Opaleo produced 6 builders estimates for the work to be done and said it was the owners responsibility as this work was not done by the builders/developer Promeo in 2008 - it was a total renovation of a previous hotel into apartments and they said that the area around the pool was not touched so was not covered under the builders guarantee. A sense of panic I believe was deliberately brought about by Opaleo and an urgent AGM with little notice to owners was called by Opaleo in France where it was voted that the owners should pay for this cost. Opaleo 'kindly' arranged loans if required at a higher than usual interest rate for 82 owners to pay this money! At the AGM It was agreed to set up an Association of owners to deal with this and seemingly this has a legal basis. There are people on this association I strongly suspect are looking after the Management company's interests but I cant prove this.
It feels like we are being treated like idiots. Owners took everything at face value and trusted what we were being told. How can large companies be allowed to get away with this. Can you tell me have we any protection by law on any of this - I presume this would be very expensive so is there an alternative. Any advice would be greatly appreciated as I feel totally dejected with all of this. Can we get out of the agreement to pay the €200,000? Is there any Government Department that has responsibility for Leasebacks and are they aware that this is going on - should we write to them. Is there any point contacting newspapers/radio in France, that certainly works in Ireland. Are there any laws protecting us from this situation, is it fraudulent or are they working within the law? This is very very worrying and any comments would be greatly appreciated.
English
Français
Unless otherwise agreed, the leaseback company bears the cost of repairs and maintenance, except for major structural repairs (grosses réparations, as defined under Article 606 of the Civil Code).
Here is article 606's definition:
Major repairs are those to main walls and vaults, the restoring of beams and of entire coverings;
That of dams, breast walls and enclosing walls also in entirety.
All other repairs are of maintenance.
Where the lease states that rent is net of all charges, costs and expenses, the tenant bears all repair costs, including all major structural repairs. This rarely happens to be the case.
Many French leaseback agreements not only exclude those repairs defined under article 606 of the Commercial Code, but also other specific expenses e.g. works necessitated for health and safety, planning or other compliance purposes. These can be costly, especially when new lifts must be installed in the building for example.
One common issue leaseback investors face is that maintenance and repairs costs are dealt with by the building's Factor called 'Syndic'. Where such Syndic has been appointed from the outset by the property developer, there may be a risk that the Syndic in question could be biaised towards the leaseback company. One major leaseback company currently subject to liquidation proceedings had their own subsidiary or sister company acting as Syndic for instance... Needless to say such situations give rise to potential conflicts of interest, the risk being that some of the costs which normally are for the leaseback company to pay end up being charged to leaseback owners. In some cases, the Syndic's bills can be unclear as to what are the costs which are recoverable from the leaseback company and those who aren't! Syndics quarterly bills ought to be carefully checked. Do not hesitate to ask for a detailed breakdown of those 'charges de copropriete', especially when they are directly offset from your rent.
I hope this is informative. The above obviously is general guidance and does not amount to legal advice.
Fabien
http://www.french-lawyers.com
Thanks Fabien
This is the clause in our lease so it would appear to be clear.
La société preneuse supportera les réparations de toutes natures, à l’exclusion des grosses réparations définies par l’article 606 du Code civil.
At our resort, we have had to pay for a "foaming process" which apparently protects the roof tiles from atmospheric damage because the resort is near the sea, and the sea air can be abrasive. Also there have been charges associated with repairs to the facades of the properties. Like many French properties, they have a render type finish which is then painted and some of these have needed repairs presumably because parts have cracked or are falling off.
In my view neither of these are structural issues ie the roofs are not collapsing and the walls are not falling down.
So how does one go about interpreting what is meant by "major repair"? Are there any further guidelines?
Kind Regards Pat
Dear Pat,
The foaming treatment you describe is NOT included in the limitative list set out by article 606 of the Civil Code and does not, therefore, amount to structural repairs owners are responsible for.
Dear Fabien
Many thanks for your reply. This is very helpful. We have already paid the charges and I will try to get them reimbursed - although I don't hold out much hope!
You didn't comment on the part of my query regarding the repairs to rendering on the walls which I mentioned. It would appear that as this work was not of a structural nature, then it too would be classed as maintenance and not come within the Article 606 definition. Would I be correct in thinking this?
Kind Regards
Pat
Hi Fabien we have just discovered that the Developer.Promeo, the Management Company, Village Centre, the Maintenance Company Opaleo and the new Management company MMV all are registered under the same company number or connected. MMV took over the management iof our building n July. I as an owner heard about it in Sept 2013 when I was asked to attend a meeting in France to discuss a reduction in rent and to ask us for money towards cost of upgrading the building (even though it was totally renovated in 2008). At the meeting which was in French, MMV gave a very dim picture of the previous management and maintenance of the building. We were given the impression that MMV was a totally different conpany. MMV have served notice to quit the leases to many in our building (pre 2009) and said they were looking at getting a new Management company to take over. Then Opaleo have said that we would not be able to get a new Management Company in until work on the swimming pool at a cost of over €200,000 is paid. This was separate to other more minor work that needed to be done but which Promeo said they would look after, i.e. cracked bathroom suites that would be covered under suppliers guarantee etc. so in effect costing them almost nothing. It later transpired that there was not a problem with the pool, but there was with the ground around the pool area which leaks into shops underneath when it is raining. Opaleo produced 6 builders estimates for the work to be done and said it was the owners responsibility as this work was not done by the builders/developer Promeo in 2008 - it was a total renovation of a previous hotel into apartments and they said that the area around the pool was not touched so was not covered under the builders guarantee. A sense of panic I believe was deliberately brought about by Opaleo and an urgent AGM with little notice to owners was called by Opaleo in France where it was voted that the owners should pay for this cost. Opaleo 'kindly' arranged loans if required at a higher than usual interest rate for 82 owners to pay this money! At the AGM It was agreed to set up an Association of owners to deal with this and seemingly this has a legal basis. There are people on this association I strongly suspect are looking after the Management company's interests but I cant prove this.
It feels like we are being treated like idiots. Owners took everything at face value and trusted what we were being told. How can large companies be allowed to get away with this. Can you tell me have we any protection by law on any of this - I presume this would be very expensive so is there an alternative. Any advice would be greatly appreciated as I feel totally dejected with all of this. Can we get out of the agreement to pay the €200,000? Is there any Government Department that has responsibility for Leasebacks and are they aware that this is going on - should we write to them. Is there any point contacting newspapers/radio in France, that certainly works in Ireland. Are there any laws protecting us from this situation, is it fraudulent or are they working within the law? This is very very worrying and any comments would be greatly appreciated.