Celine Naughton – Why my French property dream has been scuppered by the fine print

Now that pandemic restrictions are settling down, international travel has opened up again and winter is looming, you may be one of many Irish people considering investing in a bolthole abroad.

ccording to aplaceinthesun.com, the online arm of the popular TV series, France is second only to Spain in popularity among European holiday home buyers, followed by Portugal.

The Irish love affair with France was celebrated last August during President Emmanuel Macron’s visit to Ireland, when Taoiseach Micheál Martin assured him that “France and Ireland are the oldest and best of friends.”

President Macron echoed the sentiment, calling Ireland a “trusted friend of France” and pointed out that France is now Ireland’s closest European neighbour since Brexit.

It’s official then, we’re bezzies and nearest EU neighbours and sure a flight is only two hours to the Riviera, which boasts 300 days of sunshine a year.

Wouldn’t it be grand, says you, to have a place to call your own that you could hop down to several times a year and recharge the batteries? Be careful what you wish for. I know. I have one.

Set in the town of Mandelieu-La Napoule on the outskirts of Cannes, it’s one of 280 low-rise apartments built around a lake with turtles, fish and ducks swimming about. Across the road is a quiet river walk leading down to the sea and on to the 14th century Chateau de la Napoule where U2’s The Edge got married.

Sometimes the only sounds to be heard on the balcony are the whack of a ball from the Old Golf Course next door or the roar of a jet engine as another millionaire whizzes past from the private airport down the road.

So why are owners in this corner of heaven queuing up to sell, even at a loss? Because the dream sold to us in the Noughties turned sour and it made us all fierce philosophical. As one of my French pals explained when he shifted his apartment earlier this year, “The apartment is only money. There is also life, love, roses and the sound and colour of things.”

Ah yes, there is that right enough. Watch that old crooner Jean Gabin sing Maintenant, Je Sais on YouTube and you’ll get the drift. Another friend, this one from the UK, sold his pad recently as he’d rather spend time smelling the roses than pushing up the daisies before his time from the stress of it all.

Others are knocking on the doors of local estate agents — that is, those who are not having their properties seized by the banks and being sold at auction to vultures waiting in the wings.

I’ve made a lot of friends from my money pit on the Cote d’Azur — people as diverse as you like, whom I’d be unlikely to have ever met otherwise.

Getting to know them has been the best part of the entire experience, but as one commented while we basked in bonhomie on a night out, “Jayz Celine, that’s an expensive way to make friends. Would you not just join a choir?”

Yes, he’s right, but isn’t it also about life, love, roses and… Oh, come on, who am I kidding? We didn’t get into this for love and flowers. It was meant to be a secure financial investment and, as a self-employed person, a support for a future pension.

So what went wrong?

As briefly as I can make it: the leaseback scheme, known in France as ‘Résidences de Tourisme,’ was dreamt up in the 1980s by a cohort of French government ministers as a means to boost national tourism. It came into its own here in the Noughties when it was flogged at property fairs and in newspaper ads buzzing over the Celtic Tiger honeypot.

This is what we were told: if you buy a French leaseback property off-plan, you’ll get 20pc of the build price back in a VAT rebate and you’ll have no annual costs to pay. In return, you agree to make your property available to a commercial holiday operator to rent out to guests when you’re not there, thus providing you with a guaranteed annual rent for a minimum of nine years.

French banks will give you the mortgage you need, which you can pay off with the guaranteed income, plus you can enjoy the place yourself several times a year. And when the lease ends, you’ll be free to do with your property whatever you wish.

“It’s a no-brainer,” said the agents. “You couldn’t get a more secure investment —it’s backed by the French government.”

Not anymore it isn’t. Ask the French government today where its backing is and you’re likely to get no more than a French shrug.

In a nutshell, this is what happened. Each of us found ourselves in a twisted ménage à trois — a developer, a commercial operator/management company and the investor.

With remarkable coincidence, three years after opening, operators found reasons to reduce or default on rent. A broken swimming pool, the economy, a fall-off in tourism, riots, the price of a baguette —anything was fair game.

Online, investors in identical schemes in all corners of France started coming together asking, ‘did this happen to you?’ Yes. It is generally accepted in the leaseback community that the arrangement was agreed from the start between the developers who sold at inflated prices to fund rent for three years and the operators who managed the resorts for the same period before reducing the so-called ‘guaranteed rent.’

To add insult to injury, it turned out that if owners thought that at the end of their lease they were free to do as they wished with their own property, they were sadly mistaken.

A clause in the commercial contract with which most French leasebacks are sold stipulates that if you do not renew the lease at the end of its duration, the operator can sue you for loss of future earnings. It’s called ‘eviction indemnity’.

In 2017, I attended a meeting in Dublin with the then MEP Brian Hayes during which I met two leaseback owners who were being sued by their operators for €20,000 and €30,000 respectively. In an RTÉ Radio interview on May 30, 2017, Mr Hayes described French leasebacks as “a complete scam.”

That same year, Irish leaseback owners started filing complaints with the Competition and Consumer Protection Commission (CCPC). A year later the CCPC compiled 150 of these complaints and forwarded them to the French authority responsible for investigating potential frauds.

And here we are in 2021, still waiting for a resolution.

In August this year Catherine Connolly TD asked Tánaiste Leo Varadkar what’s being done about the 150 complaints. Leo said that “although the Covid crisis has impacted the investigation, the CCPC has been assured by French authorities that the matter is being progressed.”

Yeah, yeah. Covid or no Covid, the wheels of bureaucracy in France turn very slowly. Time has a different meaning there. I’ve attended meetings with co-owners where, no matter what’s happening, everything stops for lunch (and it’s always a good one).

Reading a book on a bench by the River Siagne or sipping a glass of rosé on the Croisette in Cannes watching the world go by are simple pleasures.

There is much to love about France, but if you’re thinking of buying a property there, be very careful. Read the small print. Seek legal advice.

Bonne chance, mes amis.