Buying a French apartment? Beware of management costs!

Buying an apartment in France, as opposed to a freehold house, may seem like an attractive low-cost alternative - until you come to add up the associated 'management fees'. Many seemingly cheap apartments can turn out to be an expensive investment.

In my home town I have been looking at lost-cost apartments, many of them located in the best part of town, facing south onto a park (the old bit of open urban space there is) and many priced at under 50,000 euros for a small studio under 25 square metres, and attractive as a 'pied à terre' or as an income earning buy-to-let investment.

Part of their attraction can include a balcony or terrace, high levels of security, sometimes a resident concierge, central heating and hot water, car parking, and a lift (many are eight storeys or more high). Occcasionaly extra amenities such as a swimming pool, gardens or tennis courts form part of the package.

All these attractive extras however come at a price. Buying an apartment in a share building involveds purchasing the freehold in your individual apartment and in addition a number of shares in the building itself - sometimes refered to as tantièmes - the quantity calculated according to the size of your apartment. You effectively own part of the freehold and details will be written into your contract of purchase - the equivalent of title deeds to your property.

Buildings may be managed by a committee of co-owners - you become one on purchase of your apartment and become entitled to vote at the annual general meeting or indeed become a member of the co-owners' committee. Within smaller buildings, day to day management as well as major decisions such as external painting or renewal of the lift, may be handled by the (voluntary) 'syndic' (committee of co-owners). This can work well for buildings comprise, say, up to ten or twelve apartments. (I currently live in a building with just four co-owners, the largest owning two whole floors, and we meet and discuss informally any needed expernditure. There are no fixed annual costs, other than the obligatory building insurance, which we all share in proportion to our share, in addition to the insurance of our invidivual apartments).

Above this figure it is more usual to employ a firm of external building managers, some of whom are part of a larger group of insurance companies, banks or property investors. And they charge for their services. Many of these organisations have come in for criticism in recent years - for overcharging, poor management and in some cases downright fraud. They succeed in getting away with it because apartment owners are not interested in how the building is run and will pay the monthly bill of charges to the managers without raising too many questions. Until active individuals or members of an alert co-owners committee start to investigate.

The first thing you will know about the level of 'building charges' will be in the state agents' details of the apartment you are interested in buying (in addition of course to local property taxes paid to the commune). And it is at this point you will realise that the 'cheap' apartment you are being shown round may be subject to management charges from 500 to over 1000 euros per year - and possibly additional costs planned in the near future, to pay for external painting or replacement of the lift.

As a general rule the larger the building the higher the cost to maintain and pay for unforeseen contingencies, and as a result the higher the charges demanded - once again in proportion to the size of your apartment. As a result, as part of your French property hunting, if you are looking at apartments you need to be fully aware of the likelihood of additional management charges, which over the years are most likely to rise, while the value of your apartment may fall.

Posted by peterdanton@orange.fr

Simplifying the rules when buying a French apartment

Following the widespread criticism of the loi Alur, the French government has announced imminent changes to the procedures for buying and selling apartments and other types of property situated within a co-ownership complex or condominium.

Under the loi Alur, promoted by the then housing minister Cecile Duflot, owners are asked to provide large amounts of extra documentation detailing the history of the building in which the property is situated, including any works undertaken and planned, and detailed accounts going back several years. These have to be provided by the syndic (the building managers) before a would-be purchaser signs a pre-contract ('compromis de vente') and at which point he/she is entitled to withdraw - creating additional costs for the owner/vendor for the work needed to compile the dossier.

The new procedures have created serious delays, of up to three or more months, before the 'compromis' can be prepared and hopefully signed, and in some cases have increased the number of documents required from 30 to 300 or more pages.

No detailed information about the proposed changes is as yet available and is awaited in a decree promised for mid-September. The only detail announced is that documents may be sent in electronic form rather than hard copy, but their is no indication about how the quantity may be reduced. 

You and your syndic

If you live in a typical French apartment building or in some cases an enclosed estate comprising a mix of villas and apartments, it is likely that the complex will be managed by a professional organsiation, known as the 'syndic'. They charge fees for their services, which are collected from each occupier according to the size of their apartment or villa.

The syndic can be either the property management division of a local estate agency or increasinly an office of the one of the specialist companies such as Foncia or Nexity, which are in turn owned by major banks and financinal institutional. A recent consumer report has criticised a number of syndics for over-charging, poor management, lack of communication and in some cases outright fraud. How can you guard against such excesses?

The first point to note is that residents have the right to dismiss and appoint the syndic, a decision which can be voted on at the annual general meeting of all the residents. If you have a strong residents committee, one of its tasks will be to keep a close watch on expenditure, both on management fees, and building maintenance costs and necessary repairs. As the consumer report noted, where there is no strong representation by residents - often in very large complexes - abuses can go unchecked.

As a resident you have a right to vote on all issues, your vote depending on how many shares you have in the complex (according to the size of your property) and if your French is up to it, you could consider taking a more active role by joining the residents committee. At the very least, you should study carefully the agenda for the annual meeting, describing what issues are to be voted on, and either attend or appoint a fellow resident as your proxy, with the power to vote on your behalf.

If you are buying into a complex that is managed by a syndic, your estage agent or Notaire should provide you with copies of recent decisions by the syndic, so that you can check for any major expenditure that may have been voted, and the cost of which you may inherit.

Major cost items can include interior and exterior painting, lift maintenance and repair, the salary of a concierge if resident on site, maintenance of grounds (including swimming pools etc). A property in a well maintain complex has added value and a strong residents committe will ensure that expenditure is kept to a minimum. A good syndic will also have sensible rules to regulate the complex for all concerned, covering such issues as noise, pets, sub-letting etc.

Some very small shared buildings - such as a group of less than 10 apartments - may be managed by a voluntary syndic made up of the residents. This is quite legal but the only point to watch is that routine repairs and maintenance have not been neglected, as failure to act soon can create more serious problems later.

Paris - short-term rentals under threat

Owners of furnished apartments that are let out short-term to visitors and tourists are once again facing threats of prosecution by the socialist Mairie de Paris.

A recent article in the LeMonde tells the story of one such owner who, as a frequent user of furnished rental apartments on his visits to the capital, decided to invest an eye-watering 350 000 euros in a two-room apartment in the fashionable Marais district, paid for by a mortgate of 2 500 euros per month over 20 years.

Between the owner's visits the apartment was let furnished and rapidly produced an income of around 1 700 euros per week, less agency fees and charges for cleaning and changeover. All was going well until a fellow resident in the block where the apartment was located issued a complaint about noise and continual disruption caused by the comings and goings of short-term tenants, and threatened to report the situation to the Mairie.

The Paris Mairie has the unenviable task of trying to cope with the capital's perennial housing shortage and therefore discourages - and even forbids - such short term rentals, arguing that they deprive the resident population of affordable housing. Hoteliers concerned about their own livelihood have added their voice but are challenged by those anxious to encouarge tourism and offer an attractive form of accomodation that is popular with visitors to Paris - and incidentally many other European cities. Over 100 estate agencies are reported to be engaged in the short term rental business in Central Paris. There have so far been only 15 legal cases brought by the Mairie against owners.

Wherever apartments are let, particularly short term, conflicts can arise between resident owners and those who are virtually absentee landlords. This occurs in holiday areas, where second homes are left empty for 10 months of the year but can account for 70% of the local housing stock. Nationally, 10% (or 3 million) of French properties are classified as second homes, out of a total 30 million properties. Again the rental market is huge and encouraged by communes living off seasonal tourism. An active and vigilant owners syndic (management team) offers the most effective means of resolving any conflicts that may arise.

Potential buyers of property in resort areas should ideally inform themselves of current legilsation on short-term letting, local bye-laws and the policy of the building's managers.

Keeping an eye on your syndic

It is about this time of year that owners of co-ownership properties - apartments or villas within a complex offering shared facilities - receive their invitation to attend the annual general meeting of the co-owners (co-propriétaires). The meeting discusses the expenditure during the previous 12 months, agrees the budget for the comming 12, authorises any addtional expendicture required (for maintenance, decorating, lift repairs etc) and gives or occasionally refuses applications from individual owners, for example to add a closed loggia to their terrace or balcony.

Co-owners have a right to vote on all these issues, according to the number of parts (known as tantièmes) that they own in the property - in additional to the freehold of their apartment or villa - and in proportion to the size of their property. An owner of a four-bed apartment accordingly has more voting power than a studio. Despite the importance of the issues raised at the AGM and their effect on the building chargers, paid by the owners, research shows that the majority of owners do not bother to attend the AGM or even check the annual report, leaving decisions to a small handful of residents or the residents committee (conseil syndical).

With the takeover of many local management firms - usually estate agencies that offer this service in addition to selling and renting properties - by large glomerates (among them Foncia, Lamy, Nexity) which are often owned by banks and insurance companies, several residents pressure groups have reported widespread abuses, includingover-spending by professioal managers mainly due to the laxity of the residents and the residents committee. At the oppsotive end of the scale, many building syndics (managers) have failed to maintain the property correctly, and properties have now run out of funds to carry out urgent repairs, as the residents cannot afford, or refuse, to pay the increased charges now required.

To take a local example - a block of 60 apartments ranging from 2- to 4-rooms - a two-person residents committee (far too small for a building this size) had simply gone through the motions of verifying that cheques paid by the syndic matched the invoices submitted but had made no effort to check that the expenditure was justified. Now faced with huge additional charges for external and internal painting, two activist residents went through all the recent figures and presented their findings, including numerous examples of uncontrolled over-expenditure, to a shell-shocked meeting of residents. The two were personally attacked by the managers for 'nitpicking' but the upshot was that the residents are now considering sacking the managers and running the building themselves, with an enlarged residents committee. They realised that among themselves they had experts in building maintenance, cost management and legal issues.

This example - and there are others - shows that it pays (literally) to take an active part in the management of a co-ownership property, including offering your services to the residents committee, and at very least studying the agenda and minutes of the annual general meeting, and using your power to vote. This can be done by proxy if you are unable to attend in person. After all, it is your money they are spending.

French Property News August 2011

In this month's issue of French Property News I look at the importance of studyng a number of documents that you can consulted before taking a decision to buy a French property - or not. These include the cadastral plan of the area where your chosen property is situated; the plan local d'urbanisme which will define whether a particular sector is for example zoned for housing, commerical development or designated as 'green space; and the plan de prévention des risques naturels which is the report concerning risks such as fire, flooding or other hazards, and how these make affect what can or cannot be constructed. These documents should be available via the estate agent, the notaire handling the transaction or from the mairie.

If you are considering buying a property such as an apartment within a co-ownership building, essential documents to consult include the rules of the syndic (building management) governing issues such as sub-letting, keeping pets or working at home. Also important to study are the recent reports of the annual general meeting of co-owners which will give an idea of any expenditures voted (for example, for external painting or modernigisng the lift), the cost of which will be inherited by the new owner. The latest reports of the syndic should be provided by the estate agent or notaire.

Source: http://www.french-property-news.com/

Tighter rules for syndics

The French government has just issued new rules for the operation and management of 'syndics' - the professional building managers who look after multi-occupancy properties on behalf of their co-owners, such as blocks of apartments or private estates.

The emphasis of the new regulations is on greater transparency in relation to the financial management of the building, including right of access to documents such as estimates and invoices received for building and maintenance, and clarification of management charges. The new law also forebids demands for additional payments for information such as a copy of the syndic rules, building plans and explanation of the maintenance charges - all information that would typically be requested by someone considering buying a property in the building.

The changes reflect the government's concern about criticisms of some professional syndics that have been widely expressed on French television and in some consumer magazines, in particular relating to the activities of several syndic organisations which have recently become subsidiaries of major finance and banking groups.

Source: Arreté 19 March 2010 modifying that of 2 December 1986, JORF 21 March 2010 p 5673.

Checking your 'syndic'....

Co-ownership ('co-propiété') properties in France are similar to the American style condominium, where residents own their apartment or villa, and in addition have a share in the property's common parts - corridors, staircases, lift, gardens or grounds if they are present. Such properties are usually managed by professional organisations known as a 'syndic' which is appointed by the residents, usually through a residents' committee and the annual meeting of the co-owners.

A number of recent articles in French consumer magazines have been highly critical of some professional syndics, particularly those belonging to large groups such as Foncia (part of Banque Populaire). Specific complaints include high administrative charges, and the recent costs associated with bringing passenger lifts up to the new standards required by the French government. A typical eight-storey apartment building in my region would pay around 80,000 euros for replacing the lift - the cost borne by the residents in proportion to the size of their apartment and the floor level on which it is situated.

Residents however have been fighting back, sometimes appointing outside specialists to examine expenditures, check that competitive estimates have been secured before any work commences, and vetting income and payments. In some cases, syndics owned by large conglomerates have been sacked by the residents in favour of smaller, local firms who have effectively cut back on management costs.

If you are considering buying a co-ownership property, such as apartment, you should ask to see the minutes of recent AGMs, to check what expenditure is anticipated and what are the standing maintenance charges. Particularly high cost items are outside painting ('ravalement'), interior decoration, and lift maintenance or replacement. Buildings with extensive grounds and amenities such as a pool or tennis court will naturally attract higher annual charges than, say, a small building divided into flats.

As an owner you have a right to attend and vote at the annual general meeting, and if your French is up to it, you could consider putting yourself forward as a member of the residents' committee ('conseil syndical'). At the very least, you should exercise your right to vote, which can be done by proxy if you are not free during the months of July and August when most AGMs seem to take place.

French Property News - December

In this month's issue I write about the role of the 'syndic', the professional managers responsible for running a co-ownership property such as an apartment building, and appointed by the owners. The article describes how the syndic works, what typically happens at the annual general meeting of owners, voting procedures, the role of the residents' committee, how the budget is arrived at and costs allocated, and some typical problems that can arise. Also issues such as repairs and maintenance, what you can and cannot do inside your own apartment, outside painting of the facade, building insurance and much more - all based on real life cases.
www.french-property-news.com

The syndic - apartment owners have wide choice

With some 2.8 million French co-ownership properties managed by professional organisations ('syndics'), owners are faced with a wide range of options when selecting the managers of their building. Only the smallest multi-occupancy buildings are run by a group of volunteers, and most opt instead for some kind of formal arrangement in order to cope with the complexities of insurance, maintenance, planning applications, upkeep of the common parts, collecting the annual charges and mediating between neighbours.

Traditionally much of this work has been done by local estate agents whose licence ('G') enables them to offer the services of professional building management ('gestion'). Inreasingly however, banks and other financial conglomerates are moving in this (lucrative) area and among the largest are companies such as Foncia (Banque Populaire), Lamy (Nexity), Urbania, Immo de France (Procivis), Icade (CDC), Tagerim etc. Some of these groups have taken over small local firms - reminiscent of the days when British banks and insurance companies moved into the estate agency sector, and subsequently withdrew after incurring heavy losses.

There has been some dissatisfaction expressed by owners about the loss of the local company presence and the large groups are not always popular, due to their appearance as remote and impersonal. A number of problems were highlighted in the April 2009 issue of the French consumer magazine '60 million consommateurs'.

Apartment owners have considerable power and can use the annual general meeting to vote the professional syndic out of office, and in all cases it is their vote alone which decides how much or how little can be spent in the comming year, and which determines the future of the building they part own through their shares.

Syndic voted for building works?

One of the essential pre-purchase checks when buying a French co-ownership property (such as an apartment) concerns the 'syndic', the professinal management company responsible for administering the building, in conjunction with an owners' committee (known as the 'conseil syndical').

The estate agent handling the apartment sale should be able to provide a record of recent annual general meetings of the syndic and the co-owners, in which you can find details of building works, such as repairs and decoration, recently undertaken, in progress or planned for the future. The costs are apportioned among the co-owners, in accordance with the size of their apartment, which in turn determines the number of shares each owner holds in the freehold of the building.

The syndic is typically responsible for insuring the building fabric, and maintaining the common parts such as entrance, hall ways, corridors, stairs, lifts and outside areas such as a garden, car parking or swimming pool. Each apartment owner contributes an annual service charge to help defray the costs involved, and occasional calls for additional funds voted by the AGM.

Your decision to purchase - or not - may well be influenced by the scale and type of works in hand or planned, as a share of the cost will fall on you, the buyer. Typical major works can include exterior painting ('ravalement'), internal decoration, and repair or replacement of the lift to comply with recent norms. Many apartment blocks from the 1970s and 80s now require major refurbishment, and when visiting properties it is advisable to check the condition of the building overall, in addition to the apartment you may be considering buying.

Typical costs recently incurred involving buildings in my region include internal painting at 60,000 euros (individual contribution from 600 euros for a studio apartment) and replacing the lift in an eight-storey block at 80,000 euros. The cost in this case is based on a combination of factors - size of the apartment and floor level. A 50m² second floor apartment had to contribute 1,600 euros and an 8th floor studio 1,800 euros.

The overall costs of future work, based normally on at least three competitive estimates, should be available from the syndic, together with an estimate of the individual contribtuion that will be required from the apartment you may be thinking of buying.

Apartment owners are generally reluctant spenders but essential works have to be carried out from time to time in order to keep a building in good repair and maintain its value.

The syndic pt 3

We have all now received a copy of the minutes of the meeting of the syndic (the building management company) held in July and known as the 'procès-verbal'. Few surprises, but some points of interest for other co-owners:

1. Ownership of the building's common parts is divided among the co-owners in proportion to the size of their apartment, and comprises a total of 100,000 shares, sometimes called 'tantièmes'. The bigger your apartment, the more shares you own. Just over half (53,100) of the share owners were present or represented by proxy, against 46,900 absentees. So any subsequent voting was based on the views of just half the apartment owners.....

2. Routine matters were dealt with first, such as approval of last year's accounts and the provisions for 2009/10. The only point of interest was that the syndic management company asked for a three-tear renewal of their contract but it was voted to renew it for just one year. The reason cited was the fact that the local firm we use has recently been taken over and the co-owners wished to adopt a 'wait and see' approach before approving a three year contract.

3. It was also decided to go ahead with the internal painting of the building - corridors, entrance hall, stairways etc. Two estimates were considered, one at 62,000euros and another at 52,000 euros, including laying new carpeting in the corridors. The lower estimate was approved, from a local firm. There will be a special call for funds in October, divided among the owners in proportion to their shares. My personal share will be about 550 euros.

4. As reported below, the co-owners also voted to instruct lawyers in the matter of the restaurants on the ground floor of the building, but with a limit of 2,000 euros. There will be a special call for funds in January 2010.

5. Proposals to set up a provisional fund against the cost of future building and maintenance works was outvoted unanimously.

6. Among the informal issues discussed was a decision to reduce the number of estate agents' For Sale and To Let signs on the outside of the building, and a reminder that dogs should be kept on a leash while in the building.

Altogether a typical, rather uneventful AGM which nonetheless lasted nearly three hours!

Parties communes, parties privatives

When buying a property in a co-ownership building ('copropriété'), such as a block of apartments, it is important to distinguish between the parts that are designated as 'held in common' and those that you own outright ('parties privatives').

Generally you own outright your own apartment, and also acquire a share in the building's common parts, the share being calculated in relation to the size of your apartment and included in your property deeds. The building's common parts include the ground it is built on, foundations, gardens, driveways, entrance, hallway, corridors, stairways, service areas (for dustbins etc), lift, roof structure, technical services (heating, ventilation, TV aerial etc), and communal facilities such as a swimming pool or tennis court.

What you own outright is the space within your own four walls, within which you can do more or less what you like (such as re-arranging the layout or installing a new kitchen), provided you do not endanger or damage the building's infrastructure, for example by removing a supporting wall.

It is important to note the position in relation to balconies and terraces. In some buildings, you may find that they are designated as a 'partie commune' of which you have exclusive use. Under a 1965 law it was decided that you own the floor of a balcony or terrace (so you could re-tile it, for example) but not its structure (so cannot remove it). You also do not have the right to sell your balcony or terrace separately from your apartment!

As a result, it is invariably necessary to ask the syndic (building management) for permission to alter a balcony, loggia or terrace, for example if you wish to enclose it. There are also rules about changing the floor, in relation to drainage from the building's common parts and the risk of flooding an apartment below yours.

The syndic may also have strict rules about what you can and cannot do on your balcony, for example relating to shrubs and plants, sunblinds - and the hanging of washing. My own syndic has recently voted to ban estate agency For Sale and To Let signs in the interest of aesthetics, using their right to apply rules in respect of the balconies which are defined in our syndic's constitution as common parts.

The syndic pt 2

Following my earlier post in June about the 'syndic' (the co-owners' building managers) we had our annual general meeting this morning. Among the items for discussion were the problem of cooking smells from some of the restaurants on the ground floor of our apartment building, and re-painting of the interior.

After a lot of heated discussion, it was decided that the offending restaurants should submit plans for bringing their ventilation systems up to norms, and only after approval by an independent expert, they would be given permission to proceed with the necessary work. This will involve constructing ventilation ducts up through the stairwell and installing extraction equipment and filters on the roof. Fortunately this can be largely hidden from view.

The alternative is that the co-owners would petition the court for their closure. I tried to dissuade the committee from this course of action but was out-voted, largely because it is a potential waste of money (we are on the verge of achieving a solution)and a court case could be a long drawn-out affair, with no certainty of winning. My view is that the co-owners are on weak ground as the restaurants have been in place in some cases for ten years or more, and only now have some residents decided to complain about the 'nuisance' of the smells.

Even if we won a claim for damages, which is in my view unlikely, all the restaurants are independent small family businesses, in some cases limited companies, and they would probably have to consider bankruptcy rather than pay damages. Bad enough that they are faced with a potentially large bill to cover the cost of installing correct ventilation, although it has to be admitted that they have been operating 'illegally' - though it appears with the knowledge of the management company and the local authority.

The syndic also voted for the interior decoration of the building, which is certainly needed after fiften years, and to replace the carpeting with tiles, for ease of maintenance. The outside painting was completed a year before I bought my apartment, so I was spared my contribution to that cost. Three estimates were provided, and a breakdown of each owner's contribution to the total cost, according to the number of shares they own in the building.

In an interesting display of people power, the management company's request for a three year renewal of its contract was turned down, in favour of an extension for just twelve months. The local estate agency who are the current managers have recently been taken over by a large national group and I think the idea is to see how we get on with the new management before commiting to a long-term contract.

The Syndic

Living in a co-ownership property, such as an apartment, you will come across the building management service (known as the syndic) and usually a committee of residents who employ them. As well as owning your apartment you will also have a share of the building's common parts - corridors, lifts, stairs, garden, pool etc - and your monthly charges will include sums for maintaining these. Your voting power at the building's AGM depends on the size of your apartment and the number of 'units' (shares or tantièmes) you own in the building, in addition to the freehold of your apartment.

Normally everything runs smoohtly, and discussion at the AGM centres around everyday issues such as painting and maintenance, noise, dogs, permission from someone to add a terrace or close in their loggia, and so on. These are voted on according to the total number of points accumulated - a large apartment has more, a studio less, and so on. Occasionally there can be more serious issues, such as the one I am facing in relation to my own building.

It appears that since the last AGM in August 2008, a group of residents made a formal complaint to the syndic about offensive cooking smells coming from three of the restaurants on the ground floor below me. This led to an expert being called in, a court case and a meeting with the restaurant owners, who have been found to be in breach of local laws regarding correct air extraction equipment from their premises, and they have been told to put things right. Some of them have come up with proposals, while protesting that they have been established in the building in some cases for nearly ten years and there have been no complaints until now.

This has led to a mix of views among the residents, some who say they don't want unsightly air extraction ducts spoiling the look of the building and the restaurants should simply be shut down; while others argue we are on weak ground owing to the long period the restaurants have been operating without complaint and they have now offered to put things right, at their expense.

I have been taking soundings among people I know in the building, as all this arises when yet another faction says they are unhappy with the syndic's management of the problem and general levels of expenditure on cleaning etc; and want to sack them and replace them with another firm, which is within the power of the co-owners to do so. There is also the matter of interior decoration which is needed but ideally should be put on hold until any necessary work is done to accomodate the new air ducts which is more urgent. There is also the perennial conflict between the views of residents who live here all year round (very few of us) and absentee owners who visit occasionally and try and rent out their apartments during the summer season.

All this is outlined in the agenda for next month's meeting which may prove to be a lively one, and I will report on the outcome in due course.