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LEASEBACK IN FRANCE : COMMON EXPENSES AFTER TERMINATION OF THE LEASE

The French leaseback property is a hotel, belonging to a co-ownership of individuals. Some co-owners of a flat under a leaseback scheme have terminated their contract with the operating company. The tenant wants to bill them for some of his commercial and touristic services in the building. These co-owners are not required to bear the expenses related to several contracts.

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LEASEBACK IN FRANCE : COMMON EXPENSES AFTER TERMINATION OF THE LEASE

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  1. FRENCH LEASEBACK : TERMINATION OF THE LEASE WITHOUT DAMAGES (INDEMNITÉ D’ÉVICTION) Welcome To TraeschAvocat

  2. BUYING / SELLING or RENTING a real estate in France can be tricky • Many issues arise when you buy and sell or rent real estate in France : • Breakdown of appliances before settlement • Rent review in France • Buying real estate in France: Preliminary agreements • Deposit after signing a preliminary agreement ? • What contract should my French lawyer review ? • Selling Real Estate in France • Choosing a Real Estate Agent in France • What kind of contract should I sign with the real estate agent in France ? • Eviction of a Tenant in France (unpaid rent) • Buying property in France that needs refurbishing • Real estate Latent Defects (hidden defects) • Can I terminate the lease ?

  3. PITFALLS TO AVOID IN TAX-EXEMPT REAL ESTATE IN FRANCE Annual yield and total rent for the final client (client of the operating company) Tip 1: Be wary of promised rates of return Be wary of promised rates of return that exceed the average yield (3.5 % and 4.5 % depending on the city) of real estate properties in France. Tip 2: Check that the rents established by the operator match the prices of the local rental market Tip 3: Have a lawyer review the commercial lease Understand the contracts you sign. A few hundred euros for legal advice can prevent thousands of euros of potential losses in the future. (please see our clients’ review) Tip 4: Never buy real estate sight unseen! Whether it is tax-exempt or not! This is neither a financial transaction nor a ” guaranteed tax avoidance plan “, but a PROPERTY PURCHASE, which is subject to the same rules as any other real estate purchases (e.g. main residence, which you would never buy sight unseen). Tip 5: Never forget the real estate golden rule:  Location. Location. Location. No, the operator who “guarantees” an annual rental rate does not assume all the risks. If his returns are unsatisfactory, he will not hesitate to stop paying the rent to negotiate a reduction! Tip 6: When to sell ? Before any major repairs are required, for example 9 to 10 years maximum. Tip 7: Have an exit strategy: Inquire about the resale market for this type of property, even if it is difficult to find this information. Have an exit strategy already in place from the moment you invest: Try to think ahead to the resale of the property in France. The sale of leasebacks is very difficult and time-consuming and we can advice you on specialists in this area.

  4. LEASE BACK INVESTMENTS IN FRANCE ARE COMPLICATED • There are specific considerations for French lease back investments : • Termination of a Commercial Lease due to unpaid rents • Termination of a Commercial Lease in France • Charges and Commercial Lease in France • Obligations of the managing/operating company • Responsibilities for lease hold repairs. • Selling a Commercial Lease in France • Legal solutions and Litigation in France • The notice period under the French Law • What should I do if my tenant in France is not paying rent ? • 4 pitfalls to avoid when investing in a student residence • Trap: serviced residence rents which are too high • Service premises in a co-ownership

  5. EVICTION OF A TENANT UNDER THE FRENCH LAW 1) If the tenant is not paying rent First thing to do: Notification called a “Commandement de payer” (CDP) If needed, the next step is an official order delivered by a bailiff. The “Commandement de payer” is a notice that sets a time limit for your tenant to pay you (two months for a flat lease and one month for a commercial lease). This official order has to be delivered by a bailiff (our firm can hire a bailiff and follow his work). The “Commandement de payer” is mandatory before filing a case in court. It states that if the tenant does not pay the arrears of rent within one month (or two months) the landlord can ask for the cancellation of the lease in court. The CDP give the landlord leverage and the tenant enough time to repay his debt. If the tenant doesn’t comply with the demands stated in the CDP, your lawyer will bring a lawsuit against the tenant (payment and/or eviction). Watch out! If you merely change the lock to avoid legal proceedings, the tenant may sue you. You risk being fined by the court and ordered to allow the tenant to stay (even if the rent is not paid). 2 months (housing lease) or 1 month later (commercial lease): We can initiate proceedings before the Judge des “référés” (quick and simple court proceedings).

  6. 3) Filing a case in Court • In court, you can ask for past rent, as well as the termination of the lease. • Quite often, the tenant pays past rent in court during the (oral) pleadings. • A repayment schedule (36 months max.) can be decided by the Judge • The tenant is entitled to ask for a 36 months term of payment (24 months max. if commercial lease). • If the tenant appears the day of the oral pleadings in court, the judge often sets a repayment schedule. If the tenant doesn’t pay on a timely basis, meaning every month, the lease is terminated without having to refile a claim in court. The landlord is entitled to evict the tenant, with the help of the police and a bailiff. • Regarding the legal fees, the judge can require the tenant to reimburse all the legal fees. • The judgment for eviction is called “Ordonnance d’expulsion”. • 4) Eviction process (Bailiff and the Police) • The tenant has 2 months to move out voluntarily (following the notice called “Commandement de quitter les lieux”). • The bailiff and the police will forcibly remove the tenant from your property. • According to the French law, no eviction can be enforced between November 1st and March 15th (not applicable to the commercial lease)

  7. TERMINATION OF A FURNISHED LEASE UNDER THE FRENCH LAW FURNISHED AND MAIN RESIDENCE OF THE TENANT IF the apartment or house is: rented furnished AND Is the tenant’s main residence, The lease is governed by article L. 632-1 of the Code de la construction et de l’habitation.

  8. For More Update Please visite the below website https://frenchrealestatelaw-traesch.fr/leaseback-indemnite-eviction/

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