LADY LIBERTY

LAND OF HOPE AND FREEDOM

"Keep, ancient lands, your storied pomp!" cries she
with silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore,
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!"

This is a citation from a poem written in 1883 by Emma Lazarus to help raise funds for the Pedestal of the Statue of Liberty.

The two words “HOPE” and “FREEDOM” are deeply associated with the United States of America, a nation largely made of immigrants seeking a better life.

France also has a long history of welcoming immigrants but in a very different way. In France, people entrust the government with their “hope and freedom.”

THE DARK SIDE OF AUTO-ENTREPRENEUR STATUS
As of the end of 2009, half of the people who had registered for Auto-Entrepreneur status – created on the first day of 2009 – had no other job activity and were registered as being unemployed. French and American people will interpret this very differently, because they will focus on two different issues.

1 – Americans view entrepreneurism in a very positive light, perhaps because they also view failure as an opportunity to rebound. When they hear about the number of people who have registered for auto-entrepreneur status, they think: “Good for them; they are taking initiative and I wish them the best. Even if they fail, they will have learned a lot and this will help them be a better employee or business owner in the future.” Entrepreneurs make up a large part of the American workforce, and every new job that is created is viewed as a boost to the economy (and consequentially the country), even if it is self-created.

A great quote by Debbi Fields (the Mrs. Fields of cookie fame) sums up this attitude very well: “The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.”

2 – The French, on the other hand, tend to think along these lines: “I pity the poor guys who have been driven to such extremes! They have almost no chance of success, and will be in even worse condition once they fail. The government should protect them from being forced to destroy their lives.”

I want to stay away from the polemic that sparks from this difference in evaluation. What interests me here is that no matter how much the French government wants to help small businesses grow and prosper, such a policy will have a very limited effect on the country’s economy and people unless the French attitude towards entrepreneurship changes!

As long as the majority of the French see being self-employed or going into business for yourself as a curse or a last resort, and believe the only people who are really eager to do it are crooks, liars and cheaters, any program promoting self-employment will have no hope of success. Today’s legislation still follows this logic, which comes from laws issued during the reign of Louis the XIV by Colbert and incorporated in the “Code de Commerce.” As long as this mentality prevails, any new legislation will always come up against negative attitudes towards running an independent business. Change must address the root of the problem so that France embraces the entrepreneurial spirit and gives proper respect to people who dare to go into business for themselves, whether by choice or by necessity.

THE STATUE OF LIBERTY, ELLIS ISLAND AND THE 21st CENTURY IMMIGRANT
For an American, thinking about immigration often brings to mind stories of families that have shaped the country. The narrative is almost always about long boat journeys undertaken by very poor people to reach what was then considered to be the promised land of wealth and freedom. Family tales depict ancestors wiping tears from their eyes at their first sighting of the Statue of Liberty, after which they arrived at Ellis Island to undergo the immigration process. Their entire future depended on those few minutes with the immigration officer and then the doctor, who were there to verify people’s identities and to separate the healthy immigrants from the sick, undesirable ones. Even today, many decades later, the word immigration is still linked emotionally to a crucial part of American history. It is no wonder, then, when I give a presentation about the process for Americans wishing to immigrate to France, that there are plenty of misconceptions to address before I can explain the rules and give the advice needed to make this process as easy as possible.

Today, most of the Americans I meet who inquire about establishing residency in France, have flown across the Atlantic on numerous occasions and barely notice the immigration officer who takes about twenty seconds to look at their passport. They have the financial means to establish permanent residency, and they often buy upscale apartments in Paris. In other words, they never resemble the “immigrant” image so prevalent throughout US history. As a result, I need to stay away from two extreme positions in discussing this topic:

1. I never state that the process is simple and easy and that being issued a visa is just a formality. Acquiring an immigrant visa requires a lot more work than just passing through the French immigration procedure as a tourist.


2. I also avoid giving the list of all the documents required for the visa request and the list of all the tasks that must be done between the moment the request is submitted and the moment the applicant receives the carte de séjour, which is the most common French immigration document. The audience would be completely discouraged before I got halfway though the inventory, and would feel that this is a colossal task that is not worth the effort.

I choose instead to present the six types of immigration visas and then focus on the easiest to get. After all, you can immigrate to France if you can provide evidence of having minimum reserves of $22,000 (for one year), a place to live and a comprehensive health insurance program that is valid in France. That makes it sound much easier because these requirements make sense. However, France being the paper-loving country that it is, civil servants will want several documents to satisfy each of these requirements, not to mention documents to prove the applicant’s identity.

The point is that when people immigrate to the United States, there has always been a “gatekeeper” who decides whether to let them in. France gives the impression of allowing people to come and go freely, despite the fact that it, too, has a very real “gatekeeper.”

These days, so many people regularly travel abroad that crossing a border no longer seems like crossing a real frontier. For some, waiting in line to have their documents inspected by the immigration officer feels no worse than an annoyingly long line at the post office or supermarket. It is no longer a big deal: holding an American passport means being able to travel freely among Western nations. The split second the officer takes to look at the passport is nothing like the complete review of all immigration documents. There is nothing left to compare with what went on at Ellis island, except the fact that people are crossing a border.

Moreover, this shift in perceptions regarding immigration comes at a time when all Western countries have significantly increased the protection of their borders. They now try to monitor the foreigners coming in, almost handpicking those who get the right to immigrate. This is particularly true for the USA. Throughout most of its history, it was known as a country that was proud of welcoming immigrants with open arms. This all changed, seemingly on a single day: now it seems to suspect every foreigner of posing a potential threat to national security. As a result it is now harder than ever to obtain and retain immigrant status in the USA.

These two coinciding developments make immigration issues quite difficult to grasp, especially for Americans, who have a hard time accepting that the border they can cross easily as tourists becomes an iron door when they try to settle in a foreign country. I believe that the most difficult thing for Americans in France to accept is the feeling that they are trapped, that they have no recourse except to go back to the USA and request an immigration visa. While American citizens may stay months or even years in France without immigration documents, such stays constitute a felony under French law, although there exists a grey area that means they may benefit from extremely lenient treatment by the French police. Still, such leniency does not apply at the Préfecture de Police, where immigration documentation is requested. The message I often hear from these trapped Americans is: ”How come I can’t get legal status in France now that I’m here? If this is the law, then I should NOT have been allowed to enter the country in the first place. Therefore it is the French police’s fault if I am in this situation. I have a right to proper information.”

This is why I often evoke the Statue of Liberty and Ellis Island in my explanation, to materialize the frontier and what it means to be an immigrant. It puts the topic back in perspective.

Best regards,

Q & A

HOW TO COMPLY WITH THE NEW LAW REGARDING SHORT-TERM RENTAL IN PARIS

QUESTION
I read your answer about the new legislation and I am not sure I agree with the advice you gave. Would it not be in the best interests of the property owners to comply fully with the law rather than to skirt it?

This is the section I am referring to:
“My advice to property owners is not to panic, but to reorganize the way they conduct their business so that the nuisance coming from the apartment no longer bothers the neighbors. It could mean increasing the minimum stay to five nights or more, so as to reduce the suitcase traffic and other noise linked to settling in and leaving. Remove the address of the properties from the web, as well as any information that would identify the exact location of the apartment. And of course it is always a good policy to stay on good terms with your neighbors as much as possible.”



ANSWER
Your reaction perfectly illustrates the difficulties Anglo-Saxons, and especially North Americans, have in dealing with how to comply with the law in France. This takes us back to the difference that exists between what is autorisé (authorized), toléré (tolerated), and interdit (forbidden). American law, or at least American tradition, seems to have no nuanced grey area such as toléré; either something is permitted or it is prohibited.

In my analysis, since nobody in the French administration informed the public of this new regulation, the real-estate professionals understood that the regulation would be implemented “slowly,” with some warning signals given when the authorities were ready to act. The rule was instated on January 1st 2009 and the relevant division at City Hall decided to wait until May 1st 2009 before starting to move on this issue – but did not warn anyone.

In the USA, when implementing a new law is complicated, the law itself provides for a transition period, which makes it easy to work with.

The new regulation defines the shortest legal “short-term lease” as nine months for students and one year for the rest of the population. This leaves very few legal solutions for people currently offering shorter rental periods.

1. Sell the apartment right away and stop the rental activity as quickly as possible.


2. Completely change the rental terms to comply with the new definition of a legal residential lease.


3. Move into the apartment yourself or have a member of your immediate family move in.


4. Keep the apartment empty for your personal use only.


5. Ask for a change in zoning, with all the uncertainty that such a request entails.

Some short-term rental apartments are booked a year in advance, which means that successfully implementing the right solution is a complex job that takes time: it involves monitoring the immediate rentals and weaning out others as quickly as possible. Furthermore, as the available solutions are very different, evaluating which one is best for a given owner will also take a long time, since a wise decision requires doing a fair amount of research on many different topics. For a foreigner who does not know much about France and its laws and regulations – not to mention the real-estate market, the way residential leases work, how to submit a change of zoning request, the chances of success, the full consequences of such a change, and so on –all these solutions take the owner into unknown territory.

In other words, this is a completely different situation from one in which it is very simple to comply with the law instantly. In dealing with speed limits, for example, you simply adapt your speed to the posted limit; there is no need for adaptation or a transition period.

In France, where compliance with a law necessitates massive reorganization, normally there is a long transition period. And the French administration is very good at giving people ample time to get used to the change and to modify their situation and practices accordingly.

This is why I have stressed that the way the foreign owner sees the situation and the way the administration does are completely opposite.

The law was passed late December 2008 and took effect on January 1st 2009. The first letters to owners went out in May 2009; clearly the administration thought that was ample time for the changes to be implemented.

Nevertheless, for the property owner, having to decide how to react can be a true nightmare. Let’s review the options again to see how feasible each one is.

1. Sell the apartment right away and stop the rental activity as quickly as possible.
   Preparing the offer – which means deciding on the selling price and choosing the real estate agent(s) who will sell the property and the notaire who will handle the drafting of the legal documents, including the title – will take several weeks, or maybe more unless you have these professionals in your network already. Then of course it is impossible to say how long the apartment will stay on the market before it finds a buyer. And there are usually three months between the signing of the presale contract and the closing and the issuance of the new title. Many people cannot afford to continue paying down their mortgage without the rental revenue. Be that as it may, you might be able to convince the bank to suspend the mortgage once the presale contract has been signed and the buyer has been determined not to pose a risk for the bank. Negotiating such an agreement with the bank will give the owner one or two months during which the mortgage will not be a problem, but this will not help while you are preparing the offer. This means that you must determine your rental policy while the property is still on the market, and putting that policy into place will also take some time. Should you be apprehended during the final phase of the process, the good news is the charges brought against you by the City would probably be dropped or suspended until the sale is final. Having said this, I must tell you the bad news is that you still need to organize your rental so that it does not show up on City Hall’s radar; doing so will put you in a safer situation at the time you start the process outlined above. At that stage of the process you have nothing to show that proves that you are working on complying with the law.



2. Rent out the property using a legitimate French residential lease.
   The problem with this solution is that the average price of a short-term rental is about four times the rent with a long-term lease. Some of my clients get 1,300 euros per week for an apartment that would normally be rented for 1,300 euros per month. Even though the cost of running a short-term rental is much higher, the income more than makes up for it. Generally the property loan will have been calculated on the basis of this higher income, even with a conservative approach. Therefore, given that the residential rent is 25% or so of what was previously being received, for the vast majority of owners this solution is simply impossible unless the loan can be restructured. One last aspect of this issue, it takes more than THREE YEARS to expel a non-paying tenant! It has reached the point where French insurance companies issue policies to cover the risk of the tenant defaulting on the rent. I would think that many foreigners would find this solution exceedingly risky even with the insurance policy. Once you add the cost of a management company to the extra insurance on top of the normal cost of managing a rental, there is not much profit left and certainly much less than short-term rentals bring in. Finding a way to make this solution practical, will be arduous and time-consuming, if it is even possible. The French real-estate industry has created requirements and procedures for choosing “safe tenants who remain safe” for the duration of the lease. It is clear that you should be well acquainted with this aspect of the situation.



3. Move in the apartment yourself or have a member of your immediate family move in.
   On paper, this solution is the simplest and the most efficient. There are two huge problems that are not easy to solve.
   
   
   1. The first one is:
      Is there a member of the owner’s family who wants to immigrate to France and resettle there? All foreign owners love France – that is why they invest in French real estate –, but this does not necessarily make them or their children good candidates for immigrating to France. Starting your life again from scratch in a foreign country is something that only a few people can do.
   
   
   2. The second one is:
      How can non-European citizens acquire the right to work in France as part of their immigration status? It is rare for a freshly-arrived immigrant to be able to earn money legally right away.
   
   This raises the question: ”How one can live in France without working AND reimburse the loan every month?” This is very expensive. The support that the parents can give might not be enough. I would not be surprised if the monthly cost exceeds 5,000 euros, which is more than many people are paid.



4. Keep the apartment empty for your personal use only.
   For those with the means to implement it, this is the quickest and simplest solution.



5. Ask for a change in zoning, with all the uncertainty that such a request entails.
   First, it takes quite a while to put together the request, which is a legal file and therefore is long and complex. Once it is submitted, the French administration has to review the request. This always takes quite a long time and my intuition tells me that such requests will systematically be reviewed much more slowly than the rest. Anyone choosing this solution must be able to afford to wait three to six months for a decision – during which time you must stop all rentals if you want to have any chance of success. I have a hunch that this solution is clearly designed to be a trap.

In the final analysis, it can take months, or even up to a couple of years, to implement a good solution for the owner. Remember that the original property purchases were made as investments: cutting one’s losses, or at least limiting them when they cannot be avoided, is always an excellent reflex for any investor.

So the essential question becomes how to secure enough breathing space to make the right decision. This is what I tried to explain in the previous issue. I hear your question loud and clear: “Would it not be in the best interest of the property owners to COMPLY with the law fully and not skirt it?”

I advise everybody to comply with the law. In this instance, however, there is no immediate solution – and, even more important, there is no good solution that fits everybody’s situation. Nor is there any real way to immediately comply with the law without the risk of losing a lot of money. The reactions I have received from owners invariably indicate that none of the above solutions is a good one because the monetary risks are way too high.

To conclude, I would like to return to the speed-limit analogy. It may be a bad comparison but it gives a very graphic representation of the situation. Speeding while driving a car is always illegal, but the chances of getting caught and the respective legal consequences are not the same if one drives five miles over the limit and if one drives at twice the speed limit.