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.

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.