Nov 27

Can a French bank obtain repayment of unpaid mortgage from a debtor residing in another EU country?

I am frequently questioned by property owners in France facing difficulties to repay a mortgage signed with a French bank.

Under French law you cannot just “give the keys back to the Bank”.

Any transfer of property implies a deed of sale through a French solicitor (“Notaire”).

If an owner stops repayment, it is very likely that the Bank will obtain a court decision ordering payment of capital due plus legal fees and interest.

If the owner does not comply with the court order then the Bank would probably have the property sold through a court auction.

Properties vended at court auctions are usually sold far below the market price.

It is far from certain, especial with the current state of the real estate market, that the price of sale will be sufficient to repay the Bank completely.

The Bank could then try and obtain payment of the shortfall.

If the owner is a French resident this process would be very straight forward.

It would be much more complex concerning owners with no other assets in France.

Nevertheless, there are international treaties and EU regulations organising and simplifying the implementation of foreign decisions in EU countries.

I would notably refer to the “Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters” agreed at Lugano, on 16 September 1998.

Article 26 stipulates:
“A judgment given in a Contracting state shall be recognised in the other Contracting States without any special procedure being required”

Article 31 specifies that:
“A judgment given in a Contracting State and enforceable in that State shall be enforced in another Contracting State when on application of any interested party, it has been declared enforceable there”

Finally, article 33 considers that “the procedure for making the application shall be governed by the law of the state in which enforcement is sought”.

This means that a French decision can enforced through an application procedure before the jurisdictions of another country.

It may be possible to challenge this application procedure before the local courts, if the French decision does not comply with the stipulations of the Treaty (individuals facing these difficulties should seek the advice of a local lawyer).

To conclude, it is crucial if sued by a French bank in France to defend yourself in France, because a French court decision could be enforceable out of France.

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