December 23

How to evict the tenant of a French commercial lease

Many British or Irish citizens have purchased property in France as part of leaseback development projects.

All properties in the same development are usually leased out through a commercial lease to a management company responsible for subletting it to students, elderly persons or holidaymakers.

Owner of property in France frequently ask how to evict a tenant who is in breach of contract for not paying rent.

I am afraid that there is no miracle process.

I can nevertheless outline the standard procedure to obtain a court ruling containing a payment of rent arrears and eviction order.

Prior to any court procedure, the owner must instruct a French bailiff (“huissier de justice”) to serve an injunction to pay rent arrears on the tenant (“commandement de payer”).

Under French Commercial Code (“Code de Commerce”) the tenant will then have a limited period (usually one month as stipulated in lease contract) to pay rent in arrear.

We will suppose the tenant does not pay the sum quoted in the injunction within the required delay or challenge the validity of the claim.

The owner can then have a summons to appear in court served on the tenant.

The case will be judged summarily within one to three month of service of summons. (Despite the dossier being adjourned at least once to allow defendant to prepare its case).

If proof of non-payment of rent is provided to the judge, judicial termination of lease for breach of contract will be ordered.

The Judge will also order payment of areas and eviction.

Once the eviction has been ordered, the situation will vary depending if the tenant vacates the property spontaneously or not:

– If the tenant complies with the court order and evicts the flats spontaneously and rapidly: the owners can repossess  property.

– If the tenant dos not vacate, owners must instruct a bailiff to force the tenant to leave the premises, possibly with the help of the police.

IMPORTANT 1: Owners can request a payment order without eviction if they do not wish to terminate lease.

IMPORTANT 2: at any time if tenant no longer has the cash to pay rent, it can ask the Commercial Tribunal to place it under receivership. The consequences, of receivership are that until a decision is taken on the future of tenant (continuation, takeover, liquidation):

1. All eviction and payment procedures are suspended, the owner must declare the rent arrears due to the receiver within a limited period of time.

2. The receiver has to pay rent for the period after opening of receivership procedure. If rent cannot be paid the receiver must terminate leases.

3. As part of a continuation / takeover plan the receiver cannot force owner to accept substantial changes to the provisions of the lease (reduction of rent for instance). If receiver cannot pay rent lease must be terminated (see point 2 above).

IMPORTANT 3: Procedure to evict tenant of commercial lease differ form procedures concerning housing or residential lease (“bail d’habitation”). Indeed the statutory provisions on residential leases are very favourable to tenants to protect their housing right (“droit au logement”). This question will be developed in a future poste.

November 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.

November 24

How can you obtain a two year suspension of payment of mortgage installments?

Many individual investors having acquired properties in France under leaseback programs are now facing difficulties to pay the monthly installments of their French mortgage.

These investors had purchased a property in France, usually in a “Residence de Tourisme”

To beneficiate from this tax advantages (notably reimbursement of VAT), all the investor in a residence had the obligation of renting out the newly acquired properties to the same management company under a nine year French commercial lease (“bail commercial”).

The management is responsible for subletting the properties, the most often to holidaymakers for package holidays.

If these leaseback programs have often been profitable to all parties there have been many situations where the tenant, due to crisis in the tourism industry , has defaulted in payment of rent.

The failure of the tenant to pay rent has put the investor in the incapacity to repay their mortgage leading to litigation with French banks.

Our Practice is often questioned about possibilities of obtaining extra delays from the bank having granted the mortgage.

French banks are rarely willing to negotiate rescheduling of installments unless the debtor is prepared to pay a substantial sum up front.

Further, owners who do not live in France are not eligible to French consumer insolvency procedures “procedure de surendettement”.

Nevertheless, there is an option for investors having difficulties to repay mortgage in France.

Under article L.313-12 of French Consumer Code The “Tribunal d’Instance” (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 claimant can prove that it can help to overcome the investor’s 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; owners face this kind of difficulty should contact us.

September 6

How is the amount of child support determined by the Judge?

Support is paid in the form of monthly instalment by the parent who doses not have custody to the one who does.

In case of shared custody, the Judge will only rarely grant support if there is a very substantial difference of income between parents.

There is no fixed scale established by statute.

Each judge will estimate the amount of monthly support necessary depending on the income and expenses of the parents, the age and needs of the child, the number of children.

For instance with an income of 2000 €/ Month a parent could expect to pay for one child between 150 and 300 € Month.

At any time until the child is capable of supporting itself, a parent can ask a judge to increase of reduce the amount of support depending on the changes in the situation of parents and child.

Obligation to pay child support does not stop when the child is 18. This obligation continues until the child is capable of subsisting alone (usually when studies are over).