Mistakes to avoid when buying in a student residence

Pitfalls to avoid when buying property in a student residence

What mistakes to avoid before buying in France ?

BE ON THE ALERT: Don’t be blinded by the tax benefits

1. The mirage of the “guaranteed” financial investment “without risk”

You are not buying a “financial product” – a “guaranteed investment without risk”. The selling point of “tax exemption” in France should not make you forget that it is a PROPERTY PURCHASE carried out by YOU ONLY. It is the only version of reality which will appear on the contracts and legal documents you sign in France.

The fact that you neither created the documents, nor signed them in person, nor even saw the property is no excuse under French law (actually this is similar to the laws in most countries).

2. Buying property that is much too expensive in medium-sized towns

A common mistakes is believing that the law will protect you against loss incurred when buying such property in France. The tax benefit should not lead to the purchase of a property that will be unsellable (and sometimes hard to rent) in the future.

3. Buying  in a student residence without checking the number of students and the local market

You should invest in a student residence in cities with a strong university potential (Lyon, Bordeaux, Lille, Marseille, Nice or Montpellier) to ensure an occupancy rate that is high enough for the operating leaseholder and the lessor who will be paid only if the company makes a profit. Beware of investments in medium-sized towns already jammed with housing where the developer who approaches you is offering hundreds of accommodations in addition to yours.

4. Don’t invest in a student residence which is badly located even in a City full of students

Despite all the “guarantees” offered by the sales representative who approaches you, you must not forget the golden rule of property purchase: LOCATION, LOCATION, LOCATION.

THREE TIPS TO AVOID MISTAKES

  • Enquire about the rental market (existing studies) and the schools and universities in the proposed town/city,
  • Check the exact location of the accommodation (using googlemap, google earth or mappy, for example) to avoid buying property that is too far from the main schools.
  • Involve local experts, who know the market. We can help.

RISKS

  • Frequent and recurring risk of unpaid rents (for several years sometimes)
  • Attempts by the company that holds the lease to renegotiate a lower rent
  • Capital loss on the property’s sale, including after 10 years (!)
  • Bankruptcy of the company that holds the lease
  • Substantial work to be funded after ten years or so, despite low rental income

PLEASE FEEL FREE TO ASK YOUR QUESTION (FREE OF CHARGE)

We believe in LOW COST and CLIENT ORIENTED legal services in France for English speaking customers.

WHO ARE WE ?

  • Lawyers members of the Paris Bar since 10 and 13 years
  • English-speaking lawyers (we used to live in Sydney and we love to travel)
  • Doing Business mainly in Paris and on the French Riviera but able to represent you all over the country

WHY US ?

  • We know what it feel like to be a “foreigner” and not understand a word of the situation
  • We answer our phones (and phone calls/skype are free!)
  • We are small : you case will be taking care of by one the main partner

Me Bruno Traesch on radio FRANCE BLEU:

http://www.francebleu.fr/emissions/les-experts-france-bleu-107-1/maitre-bruno-traesch-expert-en-droit-de-l-immobilier

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Real estate Latent Defects (vice caché) French Law

Legal remedies Legal definition of Latent Defect

The issue of latent defect causes numerous real estate disputes

According to article 1641 of the French civil code: « A seller is bound to a warranty on account of the latent defects of the thing sold which render it unfit for the use for which it was intended, or which so impair that use that the buyer would not have acquired it, or would only have given a lesser price for it, had he known of them ». The latent defect affecting the building impairs the use for which it was intended; is latent and unknown to the buyer, and must exist before the sale.

What are the remedies available to the buyer who discovers a latent defect after the sale ?

Under the French Law, a latent defect has to affect the use of the building or so impair that use that the buyer would not have acquired it, or would have given a lesser price for it. When the buyer is not a professional, the defect is considered latent, if he may legitimately have been unaware of the defect at the time of the sale, after having inspected the building with the conscientiousness normally demonstrated by someone who is concerned with his best interests. The clause which excludes the warranty against latent defects is valid between non-professionals but it can only be used by a seller who was unaware of the defects affecting the building, in good faith (article 1643 of the French civil code). The clause cannot be used in case of gross misconduct (corrupt practices or withholding of information). If the seller was aware of the latent defect of the building, his bad faith is established. (article 1645 of civil code, Cass. 3e civ., 18 juin 2008, nos 06-20.713 et 06-21.062, Bull. civ. III, no 110). The professional seller is expected to be aware of the defects of the building, so he is considered as a seller of bad faith.

How long after the signature of the notarial deed can the buyer put forward the notion of latent defect ?

According to article 1648 of the French civil code, the buyer may take legal action for latent defect up to two years after he discovered the defect.

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Buying property in France that needs refurbishing

Buying a property in France that needs refurbishing – Lowering of the sale price

Buying property in France: you better be careful before signing any binding agreement.

How to negotiate the sale price when buying property that is to be renovated

Negotiate a lowered price BEFORE the signature of the prelimenary sale agreement (called under the French Law: promesse de vente)

Many buyers negotiate a lowered price taking into account the renovation work. Before buying property for a reduced price, verify if there are no hidden issues.

If an agreement is reached, the price stipulated is fixed (allowing for legal exceptions). It is crucial to carry out an evaluation in order to establish the actual cost of the work to be carried out. The evaluation helps to detect the non-conformities and to establish the actual cost of the work, and the contractor performing the evaluation will be responsible for any fault or omission. Here is some guidance about how to negotiate the price of a renovation project and avoid unpleasant surprises.

Hire an architect or a real estate expert to assess the actual costs

Firstly, we advise you to hire an architect or a real estate expert to carry out a reliable evaluation of the works. Save a lot of money and prevent unpleasant surprises (latent defects). Our second advice is to contact several potential contractors. You can compare them with the evaluation of the expert or the architect.

In this way, you will be able to select the lowest bid. Negotiate the lowering of the price during the seven day-withdrawal period after the agreement has been drafted. The withdrawal period begins with the reception of the agreement by registered mail or delivery to the addressee in person. During that time, the buyer can make a counter-proposal or abandon the sale without incurring legal penalties.

Buying Property : Hire a real estate lawyer in France

First question and first answer are free of charge

We believe that, in the end, our services are an investment to protect you and keep your total costs as low as possible. These costs are not just the initial property price, but later unexpected renovations, and complicated legal issues. Please contact us. We can offer an initial response quickly and free of charge. We hope to earn your trust and become your legal advisors in France.

Our firm believes in a first phone call or email free of charge. It is a good way for the lawyer to prove his client he knows the field. It is the best for both parties to see if the relationship can be successful.

Review the real estate contract

We can review a real estate contract for a few hundred Euros, to insure that you are protected, and to explain your obligations and those of the other party. Our lawyers practice french real estate law on a everyday basis. We know the pitfalls and legal loopholes. However, we understand our client do not want to spend to much on contract review.

Write some new clauses for the real estate contract

When buying property in France you should ask for legal advice.

A lawyer can write some clause in the contract in order to secure your investment. It could help if anything goes wrong.

A lawyer is working for his client, not for the sale

The buyer pays the notary only if the sale is signed. A lawyer is paid for his work. A lawyer works for the client, not for the sale. Feel free to ask us any question related to the French law.

Me Bruno Traesch on radio FRANCE BLEU, in FRENCH:

http://www.francebleu.fr/emissions/les-experts-france-bleu-107-1/maitre-bruno-traesch-expert-en-droit-de-l-immobilier

Other related articles written by our lawyers:

Housing lease: Notice period under the French Law

How long is the notice period of a housing lease under the French Law?

You are lessor or tenant under a housing lease contract in France.

WATCH OUT: the landlord cannot give notice at any time and for any reason, see:  Can I terminate the lease ?

HOUSING LEASE OF A UNFURNISHED FLAT

6 months for the landlord

If the flat or house is UNFURNISHED, the lease is governed by the July 6th, 1989 law. Article 15 of the July 6th 1989 law states that the notice period is six months before the end of the three-year lease if it is the landlord who wishes to terminate the lease.

1 or 3 months for the tenant AND at any time

The tenant who wants to leave his flat/house has to give a  3 months notice period, at any time during the lease.

The notice period for the tenant is 1 month if:

  • the apartment is in Paris (“zone très tendue”)
  • A first job
  • A new job after a recent job loss
  • A transfer to a far location
  • The tenant has a serious medical condition and has to move for medical reasons (if lease signed after 27th March 2014).
  • The tenant is a beneficiary of the welfare income “RSA”.

HOUSING LEASE OF A FURNISHED FLAT

Article L. 632-1 of the Code de la construction et de l’habitation

Article L. 632-1 of the Code de la construction et de l’habitation  governed the lease if :

  • the apartment or house is furnished,
  • it is the main residence of the tenant.

1 month notice period for the tenant

The notice period is one month for the tenant of a furnished flat.

3 months notice period for the landlord

The notice period is three months for the landlord/lessor of a furnished flat.

Mandatory notice by registered mail

Tenant and landlord have to send the notice letter by registered mail (or by a bailiff).

Beginning of the notice period

It is only after the tenant or the landlord accepts the notification by registered mail, that the 1 month period starts.

If the tenant/the landlord does not collect the registered/return mail,  the tenant/the landlord has to hire a bailiff.

Ask your question to our English-speaking lawyers for advice.

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Selling a commercial lease in France

Selling a Commercial Lease in France

You own a French leaseback property ?

Under French law, if the tenant is selling his commercial lease, he has to notify the lessor and ask for the approval of the new tenant. But, the lessor needs a legal justification according to the case law.

In the field of French leaseback property, there are numerous such disputes wich result in a trial. We can help avoid this situation, wich could be costly and time-consuming.

Clause for Approval of the Commercial Lease Buyer

Following the approval clause, the transfer of the commercial lease to the buyer is submitted to the lessor for prior approval. However, the lessor cannot reject the new tenant without a strong reason. The case law is more in the tenant’s favor.

Tacit approval of the commercial lease buyer by the lessor

If the tenant has not carried out the approval formality according to the terms of the commercial lease, he may try to prove that the lessor has accepted tacitly and unequivocally the transfer of the lease (Cass. Com. 4.1.1965). We can advice you on the best legal protection against this occurence.

Examples of insufficient evidence of the unequivocal approval of the lessor

We cannot prove that the buyer has been unequivocally accepted by the lessor even with:

  • evidence that the lessor has received money from the buyer (Cass civ 3, 29/4/1969),
  • an offer to reach a settlement agreement which has come to nothing.

Evidence of the unequivocal approval of the lessor of a French leaseback property

We can establish that the lessor has given his unequivocal approval with:

  • the authorisation given to the buyer to have the gas company install gas fittings

Legality of the clause requiring the express and written authorization for any commercial lease transfer

The clause requiring express and written authorization for any lease transfer is legal. Nevertheless, if the lessor does not give his authorization without legal ground, the tenant can take legal action to obtain the authorization to sell the commercial lease.

Grounds for rejecting the agreement which are accepted by the court

The court recognizes the following reasons:

  • well-known insolvency of the buyer,
  • the activity of the buyer is incompatible with the commercial lease and requires the approval of the lessor in an additional clause which the lessor refuses to give,
  • the transfer of the lease without the business, when the commercial lease makes the transfer of the business mandatory.

What if the lessor refuses to approve the buyer?

A lawyer may ask the lessor – in a letter of formal notice – to clarify his reasons for refusing to approve the potential buyer of the commercial lease of the French leaseback property.

If the lessor persistently refuses to give his approval, a lawyer should be commissioned to initiate legal proceedings before the ‘juge des référés’ (Urgent Applications Judge).

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Termination Of A Furnished Lease Under The French Law

Milwaukee skyline and the apartment buidlings

TERMINATION OF A FURNISHED LEASE UNDER THE FRENCH LAW

FURNISHED AND MAIN RESIDENCE OF THE TENANT

IF the apartment or house is:

rented furnished

AND

Is the tenant’s main residence,

The lease is governed by article L. 632-1 of the Code de la construction et de l’habitation.

  • TERMINATION BY THE TENANT

AT ANY TIME

The tenant can terminate the lease AT ANY TIME during the one year lease and WITHOUT ANY REASON (No justification is needed).

1 MONTH NOTICE PERIOD

The tenant must do so with a 1 MONTH’s notice. The notice period is 1 MONTH for the tenant.

  • TERMINATION BY THE LANDLORD/LESSOR

TERMINATION SUBJECT TO SELLING, MOVING IN OR LONG TERM REPAIRS

However, the landlord is allowed to terminate the lease ONLY IF:

  • The apartment or house is to be sold,
  • The landlord or his children or parents are to move into the apartment,
  • Long term repairs in the flat are necessary,

3 MONTHS NOTICE PERIOD

The lessor/landlord has to give a 3 months notice period before the end of the one year lease renewed every year.

LATE NOTICE OR LEGALLY UNJUSTIFIED NOTICE

If the lessor gives a late notice or legally unjustified notice, the lease is renewed for 3 years.

Ask a question to our English-speaking lawyers (free of charge)

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Me Bruno Traesch on radio FRANCE BLEU:

http://www.francebleu.fr/emissions/les-experts-france-bleu-107-1/maitre-bruno-traesch-expert-en-droit-de-l-immobilier

Tenant in France is not paying rent

How to deal with a tenant who is not paying rent in France?

Unpaid rent in France ? What should I do ?

1°) First thing to do: Notification called a “Commandement de payer” (CDP)

If needed, the next step is an official order delivered by a bailiff.

The “Commandement de payer” is a notice that sets a time limit for your tenant to pay you (two months for a flat lease and one month for a commercial lease). This official order has to be delivered by a bailiff (our firm can hire a bailiff and follow his work).

The “Commandement de payer” is mandatory before filing a case in court.

It states that if the tenant does not pay the arrears of rent within one month (or two months) the landlord can ask for the cancellation of the lease in court.

The CDP give the landlord leverage and the tenant enough time to repay his debt.

If the tenant doesn’t comply with the demands stated in the CDP, your lawyer will bring a lawsuit against the tenant (payment and/or eviction).

Watch out! If you merely change the lock to avoid legal proceedings, the tenant may sue you. You risk being fined by the court and ordered to allow the tenant to stay (even if the rent is not paid).

2 months (housing lease) or 1 month later (commercial lease): We can initiate proceedings before the Judge des “référés” (quick and simple court proceedings)

2°) Unpaid Rent : File a case in Court

In court, you can ask for the debt, as well as the termination of the lease because of the unpaid rent.

Quite often, the tenant pays his debt in court during the (oral) pleadings.

  • A repayment schedule (36 months max.) can be decided by the Judge

The tenant is entitled to ask for a 36 months term of payment (24 months for a commercial lease)

If the tenant appears in court the day of the oral pleadings in court, the judge often sets a repayment schedule. If the tenant doesn’t pay on a  timely basis, meaning every month, the lease is terminated without having to refile a claim in court. The landlord is entitled to evict the tenant, with the help of the police and a bailiff.

Regarding the legal fees, the judge can require the tenant to reimburse all the legal fees.

The judgment for eviction is called “Ordonnance d’expulsion”.

3°) Eviction process (Bailiff and the Police)

The tenant has 2 months to move out voluntarily (following the notice called “Commandement de quitter les lieux”).

The bailiff and the police will forcibly remove the tenant from your property.

According to the French law, no eviction can be enforced between November 1st and March 15th (not applicable to a commercial lease).

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Litigation in France

Litigation word cloud concept with legal law related tags

Real Estate Disputes : Court Jurisdiction in France

Real estate disputes can be related to commercial lease, housing lease or selling contracts.

Lease disputes: several court jurisdictions

Housing Lease disputes

Housing lease disputes are decided by the Tribunal d’instance. (in Paris one in each arrondissement townhall)

Commercial lease disputes

The Tribunal de grande instance has jurisdiction over commercial lease cases.

Real estate disputes (selling contracts)

Two different courts can have jurisidiction over  real estate disputes, regarding the sale contract or the real estate agent, depending of the claim:

  • Tribunal d’instance if less than 10.000 euros;
  • Tribunal de grande instance, if more than 10.000 euros.

Role of the bailiff: eviction and freezing an account

1) Judicial notifications

Notifications of an official warning in case of arrears of rent or writ (written pleadings and information of the date of the pleading) or notice of eviction (after a judgment) have to be done by a sworn bailiff (called in France “huissier de justice”).

The costs are around 60-100 euros each notification, depending of the amount of the claim.

2) Eviction process

If a tenant who is not paying rent of the commercial or housing lease and not leaving the building after the judgment, the landlord has to start an eviction process.

The bailiff is in charge of the eviction process with the police and a locksmith, if needed.

3) Cease/freeze the bank account of the tenant

The bailiff can cease or freeze the bank account of the tenant.

Ask your question to our English-speaking lawyers in France (free).

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Eviction of a Tenant under the French Law

a village with old houses in france

1) If the tenant is not paying rent

First thing to do: Notification called a “Commandement de payer” (CDP)

If needed, the next step is an official order delivered by a bailiff.

The “Commandement de payer” is a notice that sets a time limit for your tenant to pay you (two months for a flat lease and one month for a commercial lease). This official order has to be delivered by a bailiff (our firm can hire a bailiff and follow his work).

The “Commandement de payer” is mandatory before filing a case in court.

It states that if the tenant does not pay the arrears of rent within one month (or two months) the landlord can ask for the cancellation of the lease in court.

The CDP give the landlord leverage and the tenant enough time to repay his debt.

If the tenant doesn’t comply with the demands stated in the CDP, your lawyer will bring a lawsuit against the tenant (payment and/or eviction).

Watch out! If you merely change the lock to avoid legal proceedings, the tenant may sue you. You risk being fined by the court and ordered to allow the tenant to stay (even if the rent is not paid).

2 months (housing lease) or 1 month later (commercial lease): We can initiate proceedings before the Judge des “référés” (quick and simple court proceedings).

2) If the tenant / resident breaches the leasing contract

The lessor/landlord has to notify a notice to remedy the breach (ie an official warning).

The termination of the lease is granted only for serious problem during the tenancy.

3) Filing a case in Court

In court, you can ask for past rent, as well as the termination of the lease.

Quite often, the tenant pays past rent in court during the (oral) pleadings.

  • A repayment schedule (36 months max.) can be decided by the Judge

The tenant is entitled to ask for a 36 months term of payment (24 months max. if commercial lease).

If the tenant appears the day of the oral pleadings in court, the judge often sets a repayment schedule. If the tenant doesn’t pay on a timely basis, meaning every month, the lease is terminated without having to refile a claim in court. The landlord is entitled to evict the tenant, with the help of the police and a bailiff.

Regarding the legal fees, the judge can require the tenant to reimburse all the legal fees.

The judgment for eviction is called “Ordonnance d’expulsion”.

4) Eviction process (Bailiff and the Police)

The tenant has 2 months to move out voluntarily (following the notice called “Commandement de quitter les lieux”).

The bailiff and the police will forcibly remove the tenant from your property.

According to the French law, no eviction can be enforced between November 1st and March 15th (not applicable to the commercial lease)

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Contract with the French real estate agent

FRENCH REAL ESTATE CONTRACT

MISTAKES WHEN HIRING A FRENCH REAL ESTATE AGENT

Be certain to completely understand the real estate fees. For example, is it a fixed price contract, or based upon a percentage of the sale ?

WATCH OUT FOR OVER-QUOTES TO WIN THE CONTRACT

The initial selling price quoted by the real estate agent is often optimistic, in order to gain your business.

It is likely that your property will be sold at a lower price and we recommend that you agree to a percentage (vs. fixed fee) contract with the agent.

PITFALLS WHEN SIGNING WITH AN AGENT IN FRANCE

Legal rules applying to an exclusive agreement signed with a real estate agent:

  • A 3 months contract with 15 days notice,
  • If you sell the property yourself during the exclusive contract period, you are likely to be subject to paying all or most of the agent’s fees anyway (100 % or sometimes 50 % (Subject to the Contract).

You could be tied to a real estate agent, even if you want to terminate this contract.

A non exclusive agreement

If the real estate agent seems to be trustworthy, just sign a non exclusive agreement with the real estate agent.

ADVICE

A word of Advice

  • Don’t sign anything before obtaining qualified legal guidance
  • Hire a lawyer in France to review the contract (approx. cost: 200 euros).

Worst scenario: the exclusive agreement was a bad idea

Sometimes, the sale of the house/apartment is locked in an exclusive agreement (“mandat exclusif”), even if the real estate agent in France is not looking for new clients.

In some cases, the real estate agent in France will advise you after few weeks/months to lower the price.

Two possible reasons:

  1. The French real estate agent wants to quickly sell the real estate without too much effort,
  2. The quote was way above the market (in order to win your contract).

Ask your question to our English-speaking lawyers in France (free)

 

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