Manager replacement in co-ownership Properties in France

Manager replacement in co-ownership Properties in France. The leaseback system in France has been incredibly popular with overseas-based buyers, especially Irish and British investors.

However, many of those who invested in French leasebacks have had mostly negative experiences, with leaseback companies defaulting, imposing rent cuts and expecting investors to pay them extortionate amounts to end the lease.

To make matters worse, French leaseback investors are often facing escalating running costs and are at loss on how to deal with such co-ownership charges through the “Syndic de Copropriété” (Building Manager).

Most such ‘Syndics’ were appointed by property developers, when investors were buying leasebacks off-plan. People are often having very bad experiences with the firms that were initially appointed as Syndics. Poor management, combined with the feeling that the Syndic is biased, leads leaseback owners to consider getting rid of the current syndic.

This article provides a short overview of how such replacement can be achieved.

What legal options do co-owners have, in French condominiums, to change building managers (their building’s ‘Syndic’)?

In essence, French building managers can be revoked over a dismissal procedure, or by owners not renewing their contract.

1.1. Dismissing a Syndic presupposes in principle the holding of an “extraordinary” general meeting, with a relatively cumbersome convening procedure. Such revocation may take place at any time before the expiry of the agreed term…… provided that the revocation is justified. The right of revocation can only be exercised for a legitimate reason (French Supreme Court, 27 Apr. 1988).

It is up to co-owners to provide evidence of a serious and legitimate reason, specifically a breach of the Syndic’s contractual or legal obligations (Paris Court of Appeal, 19th ch., sect. B, 10 October 1996, n° 95/6228). Here are a few examples that justify a Syndic’s revocation:

– Commencement of works without co-owners’ authorisation over a general meeting and in contradiction with a resolution requiring an extraordinary general meeting to be held: Paris Court of Appeal, 23rd ch., sect. A, Nov. 6, 1996, No. 95-11679 ;

– Choice of a service provider other than the one chosen by the co-owners over a general meeting;

– Carrying out works voted on in the assembly late, so that the notified subsidies are no longer awarded;

– Non-subscription, by the Syndic, of compulsory insurance.

A dismissal duly approved through a vote over a special co-owners’ meeting immediately ends the Syndic’s duties. Subsequently, the building manager is no longer entitled to claim any fees. Co-owners should however be mindful that in the event of abusive dismissal their building’s Syndic can claim damages.

Thus, revocation should be backed-up with strong, varied indisputable evidence of the Syndic’s negligence.

1.2. Non-renewal of contract upon its term.

Another, easier option consists in preventing the Syndic’s contract from being renewed when such contract comes up to its term. The paragraphs below provide guidance as to what precautions co-owners should take to achieve this.

Who can/should take the initiative of replacing a French condominium’s building manager?

It primary is the responsibility of the ‘Conseil Syndical’ (the Board Management or ‘the Board’) to ensure that the Syndic’s replacement gets added to the next owners meeting’s agenda. Pursuant to Article 21, paragraph 3 of the 1965 Act which governs French condominiums (‘the Act’), any co-owner may also ask the Syndic to include such replacement on the meeting’s agenda.

The Board plays a major role in the selection of the future Syndic. It is the Board who usually identifies the candidates, requests the estimates, analyses and compares the offers received and, ultimately, negotiates the contract with the selected candidate(s) to propose its appointment over a co-owners’ meeting. In other words, this selection work requires a strong involvement of the Board members and technical and legal skills that are not necessarily within everyone’s reach. Especially since Syndics contracts are difficult to compare with each other.

The Board may issue a short written opinion on each of the draft Syndic’s contracts. Where this happens, such opinion is then attached to the convening of the general meeting, together with the draft contracts. The opinion is not mandatory and the Board members may instead make, at a meeting, a verbal presentation of the various contracts they have collected, by explaining their preferences.

The above-mentioned pre-selection of possible alternatives should be made well ahead of the next co-owners’ meeting.

When should such initiative be taken and how?

The Syndic’s contract and the condominium’s articles (the Règlement de Copropriété’ document), provide answers to this questions.

A co-owners’ meeting is always needed in order to replace a French condominium’s Syndic. The Board therefore needs to ensure that the Syndic’s replacement gets added to the next meeting’s agenda.

The way Annual General Meetings are being scheduled is set by a Decree n°67-223 of 17 March 1967 (‘the Decree’).

Article 7 of the said Decree poses the principle that such AGMs are convened, at least once every 12 months, by the Syndic. The convening of the meeting also is by right when it is requested by the Board, or by one or more co-owners representing at least one quarter of the votes of all the co-owners. The request to convene a co-owners’ meeting, which shall be notified to the Syndic, shall specify the items for which inclusion on the agenda of the meeting is requested.

The wording of a request, by the Board, to convene an AGM can take the form of a simple letter. The letter in question must mandatorily be served by registered mail, with a postal receipt for the Syndic to sign.

Where a building manager fails to respond or fails to set a date and time for the next AGM, pursuant to the aforementioned Decree, should a formal notice to the Article 9 of the Decree provides directions on how much advance notice is needed for convening an AGM. Except in emergency cases, notice shall be given to all-co-owners at least 21 days before the date of the meeting, unless the co-ownership’s articles provide for a longer period. The information as to what minimum advance notice is required can also be included in the ‘Règlement de Copropriété’ document. Since the ‘Allur Act’ came into force in 2015, as a matter of statute, the minimum advance notice required to set up an AGM now is 21 days and this supersedes any shorter period which a ‘Règlement de Copropriété’ might state.

What details and information should be included, in a co-owners’ meeting agenda, to replace a building manager?

Article 10 of the Decree of 17 March 1967 provides that one or more co-owners, or the Board, can at any time notify the Syndic the items which they wish to be included on the agenda. The Syndic is under a strict obligation to include these matters on the agenda for the convening of the next general meeting.

Again, the request should be made by registered mail, with a postal receipt for the Syndic to sign. This can in fact be the same letter as the one requesting the Syndic to set a date and time for the next AGM.

Article 11 I, 4° of the Decree of 17 March 1967 provides that the draft contract(s) of the (new) Syndic shall be notified at the latest at the same time as the meeting’s agenda.

By definition, the co-owners’ Board therefore has the possibility of making its choice upstream, in the light of the contracts put out to competition, and presenting only one candidate. This is what we recommend, to avoid, the scattering of votes and therefore the risk of being without a new Syndic because the required quorum cannot be reached.

What quorum, or voting majority, is required in order to appoint a new Syndic?

The election of the Syndic, whether for a renewal or a new appointment, is carried out by a majority of the votes of all the co-owners (art. 25 of the 1965 Act). If more than one candidate is suggested, a separate vote will take place in respect of each of the candidates. Where a 50% majority cannot be achieved, a second vote takes place.

• If at least one third of the votes of all the co-owners approves the Syndic’s replacement, the same meeting may immediately proceed to a second vote and the appointment of another Syndic then only requires a majority of the votes from the co-owners who are present or are being represented;

• If, over the first vote, the project to replace the current Syndic was approved by less than one third of the votes, a new general meeting may be convened within 3 months to decide, again by a majority of the votes from those co-owners present or represented.

For this reason, co-owners should ensure that the meeting is held well ahead of their current Syndic’s contract termination date. Indeed, if the current Syndic’s contract ends without a successor having been appointed, it will be necessary to resort to a provisional Syndic appointed by the Court.

The above-mentioned majority rules apply irrespective of the fact the Syndic’s replacement is being debated and made subject to a vote over and AGM or an EGM.

Advice on the amount/value of proxies that each attendee can hold – to make sure voting rights can be used as much as possible.

The Elan Act was ratified by the French Parliament on 23 November 2018 and came into force on 1 December 2018. The new Act introduces significant changes to the 1965 Act regarding co-ownerships.

It allows co-owners to hold more than 3 proxies if the total number of voting rights available to him or her (the proxy-holder and those of his principals) does not exceed 10% of the overall voting rights (instead of 5% until now). By voting rights, we are referring here to the ‘tantièmes’ i.e. the individual owner’s voting rights percentage.

Further, from now on, any designated agent may expressly sub-delegate his or her proxy to another person, provided that the proxy does not prohibit such delegation.

The new Act also enshrines the following two solutions, which until now were a matter of case-law: – Where the Syndic has received blank proxies, that is to say without an indication of who should hold the proxy, the Syndic may neither keep them to vote in the principal’s name nor distribute them himself to a proxy holder of his choice. So, a Syndic can no longer receive blank proxies and allocate these to ‘sympathetic’ co-owners of their choice over the meeting;

– Where two or more individuals hold property in “common”, they can each personally be appointed as proxy-holders.

The Elan Act also provides that:

– Co-owners can now participate in AGMs or EGMs by videoconference;

– Co-owners may vote by mail before the General Assembly is held, using a form; forms that do not give a precise voting direction or express an abstention will be considered as unfavourable votes.

These provisions, and many others deriving from the Elan Act, will be specified in a Decree yet to be published at the date this article is written.

Advice on how to force a building manager to disclose the names and addresses of all the owners in the development.

It often can prove beneficial to the Board to be able to make direct contact with all owners. Some French Syndics refuse such requests for co-owners’ contact details, citing ‘recent legislation’. Owners are however entitled to the information, on statutory grounds.

Art. 26 of the Decree of 17 March 1967 expressly entitles one or more members of the co-owner’s Board to obtain, from the Syndic, copies of any document concerning the administration of the condominium. This implicitly includes the list of co-owners.

French Syndics’ duty to disclose the co-owners’ list to the Board has been strengthened by the Elan Act which came into force on 1 December 2018.

The 1965 Act’s (amended) article 21 provides, under section 6, that the Board may examine, and take copies, at its request, and after having given notice to the Syndic, any document, correspondence or registers relating to the co-ownership’s management. This of course does include the co-owners’ list and full contact details.

The new Act provides that, beyond a period of one month from the Board’s request, in the event the Syndic fails to send the documents, daily penalties shall be offset from the Syndic’s standard fees, the minimum amount of which shall be fixed by decree. At the date we write this article, such Decree is yet to be published.

What else should French condominium property owners take into account to achieve the replacement of their building’s Syndic?

First and foremost, owners should double-check when exactly was their Syndic’s contract renewed and how long for. The information is always provided in the Syndic’s contract itself.

The Elan Act empowers the French Government to issue 2 Ordinances, one within 2 years and the other within 1 year from 24 November 2018, to modernise and simplify those rules which apply to co-ownership i.e. French condominiums. The legal framework relating to Syndics’ replacement may therefore substantially change again over the coming months.

Fabien Cordiez French Lawyer, Member of the Aix-en-Provence Law Society Solicitor (England & Wales, qualified, admitted, on the Roll held by the SRA. Solely practising as French lawyer).