December 28

Hanon Law “Loi Hanon” March 17 2014 brings simplification to termination of house insurance contacts on French properties

Under French Law a house insurance contract is automatically renewed on anniversary date.

Before the “Loi Hamon” reform, failing to give notice 2 month before anniversary date, the contract was automatically renewed for one year without possibility of terminating it before the next anniversary date.

Loi Hamon” has simplified conditions of termination.

After the first year, the contract can be terminated at any time 30 days after notice of termination by registered poste.

The house insurance contract can also be terminated at any time if the insurer has not informed his client of the possibility of not renewing the contract as explained above.

When a dispute arises between the parties, the client can sue his insured during 2 years from the refusal by the insure to guarantee damage. Past this delay, it is no longer possible to  litigate against the insurance company.

In such a these mater it is wise to seek the advice of a legal practitioner.

December 28

Succession issues for properties purchased in France by UK or Irish citizens

Many UK or Irish citizens who have purchased a property in France are concerned about the future of their property after their death.

Indeed inheritance rules differ substantially.

Each situation is different and would have to be analysed individually, but here are some general consideration for an Irish married couple, residing In Ireland with children.

The general rule is: any real property owned in France will be governed by the French law of succession.

To avoid this it has been common practice for owners not residing in France to purchase property through a company (SCI ie: SOCIETE CIVILE IMMOBILIERE) because shares of a company are not considered as real estate so they can, under certain conditions, be ruled under Irish law.

The problem with this option is that the management of an SCI can be demanding (accountancy costs, tax declaration, no consumer law protection).

Another option is just to apply French law.

The disadvantage is that French law allows less freedom for individuals to decide what will become of their assets after death. For instance it is not possible for parents to pass a will to advantage unreasonably one child rather than another.

On the other hand, the law is protective of heirs, since it is generally not possible for children or spouses of deceased to dispose of property without the consent of all the other heirs.

Whatever option you chose, it will not dispense you from paying French taxes on inheritance.

The rules applicable vary depending on many factors notably: number of children, existence of a prenuptial agreement in Ireland, children from a first marriage etc…

Each case being different, I would advise owners to contact me directly to discuss their situation before eventually referring them to a NOTAIRE who could draft a will if it is relevant.

Some of you may have come across EU Regulation 650/2012 on « jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession » this was adopted by EU on 04 July 2012.

This Regulation will simplify rules of succession in the EU although UK Ireland and Denmark have opted out of it…

January 23

On which grounds can French property owners litigate against French banks to claim compensation for professional negligence?

The Practice is regularly questioned by English speaking owners who have purchased properties in France financed through a mortgage with a French bank.

Owners are no longer in capacity to pay monthly instalments of the mortgage because of financial issues.

Many owners believe that the bank is at least partially responsible for the situation.

Owners wish to implement a procedure against the French bank to challenge the validity of the mortgages and claim  compensation for professional negligence.

a) Professional negligence

It is case law that, prior to loan, the bank must warn the borrower regarding its financial capacity and about the risks of debt resulting from the loan.

A debt / income ratio superior to 33 % is considered to be unreasonable. This rule is applied with more flexibility for higher income (for French standards) above 3000 €.

b) Consequences if the bank is found to be negligent

It is difficult to estimate what are the financial consequences of the absence of warning on the risks of debt resulting from the loan and hence calculate the damages clients could be entitled to.

There are three possible methods to award damages:

Sum equivalent to the total due to the Bank

The judges rarely grant damages using this method anymore because they deem it is “too favourable to the debtor”.

Sums equivalent to the interest, penalties and bank fees paid because of the mortgage

During past years, this method has been largely used by judges (Cour de cassation, Civ. 1ère, 1er juillet 2010, n°09-16.474).

Other methods of evaluation have been used in recent years.

In a particular instance, a French court has estimated that if the mortgagee had been warned of the risk of debt, there is a 5% chance that he would not have subscribed.

Consequently the Judge granted the mortgagee 5% of the sums initially borrowed from the bank.

(Cour d’appel de Grenoble, 2 juillet 2013, n°11/01558, Jurisdata 2013-014188). (Cour d’appel d’Aix-en-Provence, 14 juin 2013, n°2013/342, Jurisdata 2013-104975).

To obtain a satisfactory and substantial compensation it is important to provide the Judge with comprehensive prof of all the financial consequences of the inappropriate mortgage.

c) Validity of the mortgage

Indeed the signature of a mortgage is subject to strict and mandatory stipulations of Consumer Law.

The mortgagee must notably have a ten days cooling of period from date of reception of the mortgage offer (by recorder delivery) before signing and returning the contract.

Judges usually demand that the bank proves date of reception by producing copy of envelope with stamp.

Further, the mortgage offer must mention the “TAUX EFFECTIF GLOBAL” (“effective interest rate”).

If the offer does not comply with these rules interest and penalties are no longer due. Only the capital is due.

Owners who are encountering difficulties with their bank should contact the practice.