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France – mortgage – Coronavirus

Investors have purchased property in France through a mortgage.

Many investors are having difficulties to pay the instalments due to the ongoing epidemic.

Non-payment of mortgage instalments is a breach of contract.

Banks will attempt to terminate lease based on this non-performance and claim for reimbursement of capital and interest still due, plus penalties.

Further, some mortgage contracts contain stipulations authorising the mortgagee to ask for a holiday period usually up to 6 months.

Another option exists under article L.313-12 of French Consumer Code, the “Tribunal Judiciaire” (civil court for petty claims) can suspend payment of mortgage instalment and interest for a maximum period of two years.

The Judge will order this holiday period if the investor can prove that holiday can help to overcome his temporary financial difficulties.

This could mean for instance: replacement the management company by a new non-defaulting one, the investor’s financial situation improves (i.e. new employment) or the property is sold.

Once the holiday period has been granted the investor/debtor is in a stronger position to negotiate a long-term solution with the bank.

Each case is different; investors face this kind of difficulty should contact the practice.