French leasback

Lobby

VEFA statutory regulation

Most of the French leaseback schemes start with a two stages process contract: a contrat de réservation (preliminary contract) is signed before entering into the final vente en l’état futur d’achèvement (VEFA) contract.   

The VEFA contrat provides many benefits such as payment plan, construction completion guarantee, etc...

The French Supreme Court ruled that the premises in the building which is in the process of being converted into a residence hotel could have such legal framework if the buyer made payments before the completion of work and if the building is used for residential use only (as opposed to business use). 

(Supreme Court, Civ. 3rd, 23 May 2019, n° 17-17.908)​

Letter-Marked-with-Rubber-Stamp

LMP status

The French Constitutional Court ruled that the requirement of the registration of a Loueur Meublé Professionnel (professional lessor of furnished property) with the French Trade and Company Registrar is unconstitutional. In fact, the rental activity of a furnished property is not considered as a commercial transaction in the meaning of Article L. 110-1 of the French Commercial Code. As a result, such requirement is no longer needed to be an LMP.   

(Constitutional Court, 8 February 2019, n° 2017-689)​

Hardwood Floor

Charges of the unoccupied premises of an operated residence

The French Supreme Court ruled that the co-owners of unoccupied premises of an operated residence have to pay the charges in relation to the catering and hotel agreements provided under the co-ownership rules even though those premises are not operated by the company that manages the catering and hotel services. 

 

(Supreme Court, Civ. 3rd, 29 November 2018, 17-27.526)

Calculator

Reviewed rent

Knowing that the rents are typically overestimated, the operators of residences of tourism are willing to make the rent judicially set at their rental value before the term of the leases. Such judicial action may be used if there is any evidence of material change of local market factors. The French Supreme Court ruled that the presence of other competitors does not imply a material change of the local market factors. More precisely, the fact that other local competitors managed to decrease the amount of the rent paid by the co-owners and were thus able to offer better prices to tourists cannot be considered as a material change of the local market factors. 

(Supreme Court, Civ 3rd, 25 October 2018, n°17-22.129)​

Hotel TV

Television licence fee

The French Council of State (Supreme court for administrative justice) ruled that the operator of a tourist residence shall bear the television licence fee. Such charge cannot be paid by the owner nor the occupant of an apartment managed by an operator. This is because: as (i) the apartment rented to an operator cannot be considered as being part of the owner-occupied dwelling and (ii) the occupant can only rent the apartment on a short term basis. 

(Council of State, 6 June 2018, n°411510, Soderev Tour)

Resume

The liability of the real estate agency

In this case, the Supreme Court ruled that the real estate agency specialised in real estate investments breached its obligation to provide the relevant information and advices to the purchasers of a property brought through a VEFA contract (vente en l’état futur d’achèvement) and operated in a tourist residence. The agency has also been held liable for not drawing the attention of the purchasers on the potential failure of the operator to operate the residence as well as on the potential non payment of the rent. 

(Supreme, civ 3rd. , 8 February 2018, n° 17-11051)

Leasing a Home

Validity of a VEFA contract

Most of the French leaseback schemes start with a two stages process contract: a contrat de réservation (preliminary contract) is signed before entering into the final vente en l’état futur d’achèvement (VEFA) contract.

The French Supreme Court once again confirmed that the preliminary contract is a separate and autonomous contract, meaning that if such contract is declared void, this has no implications on the validity of the final VEFA contract. 

(Supreme Court, civ 3rd, 12 April 2018, n° 17-13.118)

Drywall

The liability of the notary and the real estate consultant

The purchaser concluded a VEFA contract as well as a commercial lease with an operator. Under French law such sale allows the purchaser to pay in accordance with the construction work progress. In this case, the 90% of the price paid by the purchaser was completely inconsistent with the construction work progress.  The operator stopped paying the rent to the purchaser due to the fact that the construction work was abandoned.

The Supreme Court held the notary liable for not checking the relevant documents as well as the real estate consultant for not having researched of information.  

 

(Supreme Court, civ. 1st , 25 January 2017, n° 15-21.186)