The plight of UK investors faced with significant costs after purchasing leaseback properties in France has highlighted the need for potential buyers to take legal advice before signing on the dotted line.
French property leaseback schemes have been labelled as a ‘slow-burning’ catastrophe, leaving UK investors locked into expensive contracts. Daniel Dalton, MEP, criticised the failure of the schemes, advertised as risk-free investments, that encouraged people to buy French properties with the intention of renting them out as holiday lets.
However, owners have been left out of pocket after promises of guaranteed investment returns failed to materialise. To compound their misery, many of those who signed up now find themselves tied to lengthy contracts with management companies that were signed with the incentive of tax breaks offered.
Owners attempting to extricate themselves from the deals have been faced with bills amounting to thousands of euros. This is due to the management companies being able to claim compensation for their loss of income resulting from cancellation under French commercial law.
Mr Dalton has called on the French authorities to investigate the matter and provide a remedy for owners. He believes that some of the contracts were in breach of EU directives and mis-sold.
Many of those affected are taking legal action and have petitioned the EU for redress.
A law introduced in 2009 aimed to achieve more clarity for prospective purchasers, as it is now mandatory for the marketing documentation of leaseback properties to expressly include information regarding the “loss of earning” compensation that owners must pay to the management company when ending their contract with them. This includes an explanation of how the compensation is to be calculated.
