An investigation by the consumer watchdog is under way after hundreds of Irish housebuyers alleged “abuse” of a leaseback scheme in France had left them without rent to cover mortgage repayments.
A leaseback is where buyers sign a lease with a management company to rent and manage a property they have bought. The initiative was introduced in France from about 2005 to promote new-build accommodation in tourist areas.
A 19.6 per cent VAT rebate was given as a tax incentive to buyers, who had to sign a nine- or 11-year contract with the development’s management company to lease back the property to them to rent out.
In exchange, the management company of the development involved offered a specific return – usually 3-5 per cent – and handled the lettings themselves. However, many housebuyers have alleged that the collapse of management companies has left many owners without rents.
The scheme was advertised extensively in the Irish media from its outset. Now, at least 300 Irish citizens have signed an online petition calling for the French and European Union authorities to intervene and “effectively regulate” the sector.
EU consumer protection legislation protects consumers from mis-selling, even on a cross-border basis.
Investigation
In response to queries from The Irish Times, the Competition and Consumer Protection Commission (CCPC) said an investigation into the matter was under way and that it was in contact with its French counterparts.
“We can confirm that the CCPC has received information in respect of issues which have been experienced by Irish citizens in relation to French leaseback property transactions,” it said.
“We are in the process of analysing this information to determine what, if any breaches of consumer protection legislation are highlighted.
“As the complaints relate to property transactions in France, we have been in contact with our French counterpart authority, the Direction Générale de la Concurrence, de la Consommation et de la Rèpression des Fraudes (DGCCRF).
“The DGCCRF has indicated to us that it is aware of French consumers and owners of such tourism properties being harmed by commercial practices in this area.
“The CCPC is currently reviewing and preparing the documentation we have received for submission to our French colleagues as appropriate. This documentation will be provided to DGCCRF to assist them in their analysis of these matters and their assessment of the legal framework in which the products operate.”
Two-bedroom house
Noel Cocoman (59) from Co Kildare bought a "well-furnished" two-bedroom house between Narbonne and Toulouse in the south of France for €255,000 as part of the scheme in 2006.
“We would have holidayed in France a number of times,” he said yesterday. “We had young kids. We liked France, and I was a rugby fan. It wasn’t sitting in a swimming pool with a gin and tonic. It was a question of countryside, a village and a nice resort.
"These properties were advertised in The Irish Times and the Sunday Business Post and the like. One of the reasons I was drawn to it was a banner headline about guaranteed rent.
“I had been thinking of buying property there but obviously the big decision was what to do with it when we weren’t there. We realised looking at this that it was expensive but thought that if there was guaranteed rent we’d be getting an income.”
Mr Cocoman said companies “abused” the system, and that “a number of aspects” led to “our undoing” on the deal. “The operator failed after a year or two,” he said. “Rents were substantially reduced and we were never told of all the management charges.
“We would have borrowed because the developer in our case put us in touch with banks who arranged the mortgage. Obviously we got into difficulty and I defaulted about two years ago, which was the best decision I ever made.
“We’re obviously waiting for progress on it. We’ve made a submission to the CCPC and they have responded very positively. They are looking into it and are in touch with their French counterparts.”
