Newsletter No. 17 – Real Estate Law
REGULATIONS
Standard condominium management contract and specific services,
March 26, 2015
JURISPRUDENCE
February 18, 2015
Effect of handing over the keys with respect to the co-tenant
… February 19, 2015 Address for service of a summons on a legal entity
… February 16, 2015 ALUR Law: Application over time of the new payment deadline granted to the tenant
… March 3, 2015
Authorization to cut branches overhanging a neighboring property
… February 18, 2015 Procedures for establishing a homeowners' association (ASL)
… February 19, 2015 Consequence of the cancellation of the order to pay constituting a real estate seizure
… February 18, 2015 Majority applicable to decisions relating to the closure of the co-ownership
… March 11, 2015
No subsidiary right of pre-emption for the tenant during the bulk sale of a building
… February 18, 2015
Application of Article L.290-1 of the French Construction and Housing Code (CCH) to any promise of sale of a building
… February 11 2015
Conditions for residents to be entitled to compensation in the event of traffic changes
REGULATIONS
Publication of the decree defining the standard condominium management contract and specific services
The ALUR law (law no. 2014-366 of March 24, 2014, for access to housing and urban renewal) introduced two key changes to the rules governing property management contracts. These changes concern, firstly, the form and content of the contract and, secondly, the property manager's remuneration.
We therefore draw your attention to Decree No. 2015-342 of March 26, 2015, which defines the standard condominium management contract and the specific services provided for in Article 18-1 A of Law No. 65-557 of July 10, 1965, as amended, establishing the status of co-ownership of buildings, applicable to management contracts concluded or renewed from July 1, 2015.
The new Article 18-1 A of Law No. 65-557 of July 10, 1965, establishing the status of co-ownership of buildings, now mandates the use of a standard condominium management contract defined by decree. The decree of March 26 is issued for the application of this provision and sets out in its appendix a model contract as well as the minimum font size, which cannot be smaller than eight-point type. However, the provisions of this standard contract may be waived when the condominium association is composed exclusively of legal entities and the building is entirely used for purposes other than residential.
Article 18-1 A also establishes the principle of a fixed fee for the property manager and additional compensation for certain specifically listed services. The standard contract, as defined by Decree No. 2015-342 of March 26, 2015, which establishes the standard condominium management contract and the specific services provided for in Article 18-1 A of Law No. 65-557 of July 10, 1965, as amended, which sets forth the status of co-ownership of buildings, includes a non-exhaustive list of services included in the fixed fee, such as periodic building inspections and checks, handling insurance claims, and managing payments. Annex 2 of the decree sets out the exhaustive list of services that may give rise to additional remuneration and classifies them into six categories. Additional remuneration may therefore be received for:
- Services relating to additional meetings and visits: This includes the preparation, convening and holding of additional general meetings and exceeding the agreed reference time slots.
- Organizing additional meetings with the condominium board and conducting additional visits to the condominium.
- Services relating to the condominium regulations and the descriptive statement of division: the decree provides for additional remuneration for the establishment or modification of the condominium regulations following a decision of the syndicate and the publication of the descriptive statement of division and the condominium regulations or the modifications made to these acts.
- Administrative and material management services related to claims: These include travel to the site for taking protective measures, assistance with expert assessments, and monitoring of the case with the insurer.
- Services relating to technical works and studies, the list of which is set out in article 44 of the decree of 17 March 1967 issued for the application of the law of 10 July 1965.
- Services relating to disputes and litigation (excluding debt recovery from co-owners): The decree here refers to the formal notice by registered letter with acknowledgment of receipt, the preparation of the file sent to the lawyer, the bailiff, the legal protection insurer, as well as the monitoring of the file sent to the lawyer.
Other services: This last category includes tasks specifically related to preparing decisions regarding the acquisition or disposal of common areas, the resumption of accounting for one or more prior fiscal years that were not approved or allocated, in the event of a change of property manager, the representation of the owners' association at meetings of an external structure (secondary association, union of associations, free association) created during the term of office, as well as at additional meetings of these same structures if they existed prior to the signing of the property management contract. The decree also covers the preparation and monitoring of loan applications taken out in the name of the owners' association, the preparation and monitoring of grant applications for the benefit of the owners' association, and the initial registration of the owners' association.
JURISPRUDENCE
Effect of handing over the keys with regard to the co-tenant
3rd Civil Chamber, February 18, 2015 (No. 14-10.510) FS-PB:
The liquidator of a company, a joint tenant of a lease, notified the landlord of the termination of the contract. The landlord then sued the guarantors, including one of the joint tenants, for payment of rent, judicial termination of the contract, and eviction of the tenants. The Court of Appeal held that the lease was terminated with respect to the joint tenant, on the grounds that, by letter dated March 26, 2009, the auctioneer, acting on the instructions of the liquidator, handed over the keys to the premises to the landlord, who accepted them without reservation, and that the return of the keys terminated the lease with respect to all tenants.
The Court of Cassation overturned the judgment. Indeed, according to the Court, unless otherwise stipulated by agreement, the handing over of the keys to the landlord by the auctioneer, acting on the instructions of the liquidator, while demonstrating only the latter's intention to terminate the lease, cannot suffice to terminate the contract with respect to the other joint tenants.
Address for service of a summons on a legal entity
2nd Civil Chamber, February 19, 2015 (No. 13-28.140) F-PB:
In this case, a landlord company served the tenant with a payment order invoking the termination clause. The tenant then sued the landlord before the summary proceedings judge, who ordered the suspension of the termination clause. The landlord then appealed, arguing that the initiating document was invalid.
To declare the summons, all subsequent actions, and the summary proceedings order invalid, the Court of Appeal held that, since the summons could not be served at the company's registered office address, the bailiff should have served it at the residence of the company's representative.
The Court of Cassation held that the address to which the bailiff had effected service was that of the company's registered office. Consequently, the Court of Cassation quashed the judgment on the grounds that the Court of Appeal had violated Article 690 of the Code of Civil Procedure.
Alur Law: Application over time of the new payment deadline granted to the tenant
Opinion of the Court of Cassation, February 16, 2015 (No. 15.002):
Article 24 of the Law of July 6, 1989, as amended by the ALUR Law, sets a maximum payment period of three years that can be granted to a tenant in arrears, during which the effects of the termination clause are suspended.
The Court of Cassation was asked whether this provision applied to leases in effect when the ALUR Law came into force, given that this law includes Article 14, which defines a list of immediately applicable provisions, among which Article 24 is not included.
According to the explanatory note accompanying its opinion, the Court of Cassation held that the judge's power to grant a payment period constitutes a legal effect of the lease, not a mechanism subject to the parties' freedom of contract, but a power granted to the judge by law. The Court of Cassation thus considered that the amended article 24 of the law of July 6, 1989 applied to leases in force on the date of entry into force of the ALUR law.
Permission to cut branches overhanging a neighboring property
3rd Civ. March 3, 2015 (n°14-40.051) FS-PB:
The question was put to the Court of Cassation as to whether Article 673 of the Civil Code, insofar as it authorizes a neighbor to compel the owner to cut the branches of trees overhanging the neighboring property without the possibility for the tree owner to raise any defense, infringes upon the rights and freedoms guaranteed, on the one hand, by the preamble, Articles 1 to 4 and 6 of the Charter of the Environment and, on the other hand, by Articles 2 and 17 of the Declaration of the Rights of Man and of the Citizen of 1789? Finding the question not to be of a serious nature, the Court of Cassation refused to refer it to the Constitutional Council.
Procedures for setting up a homeowners' association (ASL)
3rd Civil Chamber, February 18, 2015 (No. 13-25.122) FS-PB:
In this case, a co-owner sued for unpaid fees challenged the validity of the founding general meeting of the homeowners' association (ASL) and the validity of the addendum to the specifications governing the subdivision's expansion, arguing that the owners did not unanimously agree at the founding meeting.
The Court of Appeal and the Court of Cassation rejected the co-owner's arguments. In support of its decision, the Court of Cassation clarified that the consent of all co-owners stems from their commitment in the deed of acquisition to comply with the specifications that provide for the establishment of an ASL. According to the Court, it follows that the unanimous agreement of the co-owners is not required for the establishment of subsequent bylaws.
Consequence of the cancellation of the order to pay serving as a notice of seizure of real estate
2nd Civil Chamber, February 19, 2015 (No. 14-10.622) FS-PB:
On April 14, 2008, a bank issued a payment order equivalent to a seizure of real estate, followed by a summons. After the auction of the seized real estate had taken place, an enforcement judge declared the payment order and all subsequent procedural acts null and void. The bank issued a new payment order equivalent to a seizure of real estate on April 26, 2012, which the debtors challenged before an enforcement judge, arguing that the bank's action was time-barred. To dismiss the objection of inadmissibility based on the statute of limitations for the bank's action against them, which sought to continue the public auction of their real estate assets and rights, the Court of Appeal held that the limitation period was interrupted by the debtors' acknowledgment of the bank's right against them in their submissions of November 3, 2009, and April 6, 2011, and by their submissions of September 10, 2012.
The Court of Cassation overturned the judgment, finding that, since the submissions of November 3, 2009, and April 6, 2011, had been annulled, the acknowledgment they contained could not have had the effect of interrupting the two-year limitation period under Article L. 137-2 of the Consumer Code. Since the conclusions of September 10, 2012 were subsequent to the expiry of this period, the Court of Appeal violated Articles 2240 and 2241 of the Civil Code and Article L. 137-2 of the Consumer Code.
Majority applicable to decisions relating to the closure of the condominium
3rd Civil Chamber, February 18, 2015 (No. 13-25.974) FS-PBI:
A co-owner practicing medicine sued the condominium association to have the general meeting's decision to close the condominium with an automatic barrier and to permanently open pedestrian access to the property overturned.
The Court of Cassation was asked to determine the applicable majority rule for such a decision.
The Court of Cassation first noted that, according to Article 26e of the Law of July 10, 1965 (now Article 26c), decisions concerning the opening and closing procedures for buildings are adopted by a majority of the association members representing at least two-thirds of the votes. The Court then notes that the co-owners had decided to close the property with an automatic barrier, controlled by a remote control for residents and a keypad for visitors, and that, according to the agenda of the general meeting, the co-owners had deliberated on the operating procedures of the barrier, particularly the closing times, and decided that it would remain permanently closed. Consequently, this decision required a qualified majority vote as defined in Article 26 of the Law of 10 July 1965.
The tenant has no subsidiary right of pre-emption when a building is sold as a whole
3rd Civ. March 11, 2015 (n°14-10.447) FS-PB:
In this case, the tenant of a property, who had not complied with the notice to vacate issued by his landlord for the purpose of selling the property, sought to have the subsequent sale of the entire building annulled. In support of his claim, the tenant argued that his subsidiary right of first refusal had been violated.
The Court of Appeal, upheld by the Court of Cassation, rejected this claim on the grounds that the sale of the entire building did not entitle the tenant to exercise a right of first refusal.
Application of Article L.290-1 of the French Construction and Housing Code to all promises to sell buildings
3rd Civil Chamber, February 18, 2015 (No. 14-14.416) FS-PBR:
A preliminary sales agreement with a validity period exceeding 18 months was concluded by private agreement. Following a disagreement between the parties, the beneficiary of the agreement sued the seller to have the sale declared final.
The Court of Appeal having declared the preliminary sales agreement null and void, the beneficiary appealed to the Court of Cassation.
The Court of Cassation dismissed the appeal and reiterated that Article L. 290-1 of the French Construction and Housing Code (CCH) applies to any preliminary sales agreement concerning the transfer of real estate or real property rights by an individual. In this case, the preliminary sales agreement, with a validity period exceeding 18 months, was therefore automatically subject to this provision and consequently had to be executed by notarial deed.
Conditions for residents to be entitled to compensation in the event of traffic changes
CE 11 February 2015 (no. 367342):
In this case, the owner of a commercial property, which he leased to a car repair company, sought to hold the municipality liable for damages resulting from roadworks that had made access to his premises more difficult for vehicles exceeding a certain size. The Court of Appeal dismissed the claim for compensation on the grounds that the works in question had not resulted in the claimant being completely cut off from the public road.
The Council of State first reiterates that, in principle, modifications to general traffic resulting either from changes to the layout, direction, or design of public roads, or from the creation of new roads, do not give rise to compensation. However, where these modifications result in prohibiting or making excessively difficult access to the public road for residents, they do give rise to a right to compensation. Consequently, the court, which dismissed the application without investigating whether the modifications had resulted in making this access excessively difficult and whether, in the circumstances of the case, this resulted in serious and special harm to the person concerned, committed an error of law.
