DISCERNMENT AND FAIRNESS

When any official authority makes a decision it should show discernment and fairness, in addition to applying the current legislation and the constitution. Often the authorities fail to do this, especially if they are following a political agenda, protecting the interests of a lobby, or heeding the opinion of the majority of the people. Likewise, the pertinence of a policy is not easy to see when the results are expected one or two generations later.

Right now, both in France and in the USA, there are heated public debates about policies that will affect the long-term futures of both countries.

THE BEACH AND THE “RENTREE” (BACK TO SCHOOL)
When I left Paris to go on vacation, there was sand on the banks of the river Seine along with all the conveniences that are generally found on the beaches of the best sea resorts.

“It seems the entire world truly does leave Paris in August," said one of my American clients after spending the month of August here for the first time.

These days, anyone who stays in the city can get the feeling of lying on the beach with only a short ride on the metro. This annual August phenomenon is what I call the “Sleeping Beauty” syndrome. Although long-term residents of France notice every year how much more it is “business as usual” on the first day of August, there is still this nonchalant ambiance that reigns in the city during August.

As a small child, I remember seeing my dad closing up his shop, just as we closed up the house for vacation. Even though there were not many employees in his carpentry shop, for me the closing up symbolized what was happening to businesses everywhere in the country. In the decades after the passing of the Paid Vacation Law of 1936, this tradition of closing everything the first day of the month of August was the norm, and France, except in tourist areas, “went to sleep.”

As I was landing in the USA this summer, two topics were making the news and fueling numerous conversations – the bill sponsored by President Obama regarding a national health care system in the USA and the funding of rebates to car owners trading a “clunker” in for a new car. Since France already has a national health care system and had also started a similar subsidy program in January 2009 for the car industry, I could not help but notice the comparisons between the systems in the two countries.

COST OF A NATIONAL HEALTH CARE SYSTEM
After having looked at the benefits that a national health care program would bring to many people in the USA, I would like to comment on the costs involved in implementing such a program. Americans have recently become concerned about the possible high cost of the program and the fear of an increase in taxes. Also, since a program of this magnitude involves governmental control, it raises the fear of rampant socialism in a country that has long had a solid distrust of anything organized by Washington, perceiving governmental control as inefficient and incompetent. Today I will strictly limit my comments to the cost issue.

No matter how the subject is approached, in the beginning of a new program there will always be more expenses created than any savings predicted. Any system that offers complete coverage to everyone will create a major increase in the demand for medical services. In the USA there are many people who do not go to the doctor even if they have health insurance because their upfront, out-of-pocket expenses are very costly due to their policy’s high deductible and co-payment charges. If you add this population of underinsured people to the uninsured, the cost of a national health care system is sure to increase. At present, there is limited public health care open to the public: Medicaid, Medicare, the civil servant program and veteran care facilities. This means that the expenses would skyrocket the new plan.

Within five years or so it is possible that the large increases in expenditure would start to decrease, mainly due to better accessibility of health care and the probability that the general population would take better care of their overall health. In the case of high risk maladies such as diabetes, heart disease and cancer, people would be diagnosed much sooner and receive proper medical attention for their illnesses. In the long run this will be less expensive in terms of treatment costs.

It is important to understand this simple fact in order to properly evaluate the pros and cons of a national health care program. If one looks at the issue with a 30- to 50-year perspective, then the question becomes a lot more interesting; “How much will future generations ultimately pay for health care?” Even if the program is initially funded by debt created by the government, it is possible that the price of a national health care program, including the interest and principal, would be offset by the savings in long-term medical costs. More people will be taking preventive measures for their overall health, thus leading to better screening and earlier treatment of more serious illnesses. On the other hand, failing to address the rising costs associated with private insurance premiums and medical charges to the average citizen who at this point can hardly afford health insurance, would eventually make health care affordable only to the elite, leaving the majority of the people unprotected. When I see how much a medical procedure costs in the USA versus the cost in most countries in Europe, there is something deeply wrong with the current American system. In France, the cost of seeing a GP is about 25 euros with prescription medications running about a third of the price. A good illustration of the overall difference was illustrated in my issue titled “WHAT WOULD DR. MARCUS WELBY DO?” on how a French hospital addresses a medical bill exceeding USD$100,000 when the foreign patient was uninsured. The billing division refused to put a lien on the title of their apartment in France because there are more humane ways to handle medical bills.

The other issue that could reduce the higher expenditure is the amount of the premium doctors and hospitals pay to the insurance industry for their liability policy. Even though there is no direct effect expected right away, it may be possible to see a decrease in the cost of those premiums.

The irony here is that the French health care system, in an effort to reduce its costs, has made it more expensive for poor people to access medical services. Because of this, doctors working in impoverished neighborhoods are now seeing people coming with much more advanced medical conditions that are more difficult to treat because they waited to seek advice for financial reasons.

For a country, the health of its people is always a price that will have to be paid sooner or later. Also, the lack of a national health care plan also impacts other variables such as the uninsureds’ fear of getting sick or injured or having to give up an artistic career – or any other career for that matter – in order to have a fulltime position with a major firm that offers excellent health coverage. There is a lot more to this issue than how much President Obama’s health plan will cost for its initial set-up. The vast majority of the benefits of this plan may not really be appreciated until 50 years or so from now.

HOW MUCH IS A CLUNKER WORTH?
Under normal circumstances no one would ask such a question… generally, the car dealer puts an exceedingly low market value on the clunker the customer wants to trade in.

A few months ago I was stunned by the news that GM had filed for Chapter 11 bankruptcy. For anyone who lived in the USA before the late 80’s, especially in the Midwest states, GM was the backbone of the American economy. Its dealerships were absolutely everywhere. I even remember hearing a comment in 1981 while traveling on the road between Cheyenne, Wyoming and Birmingham, Alabama. “The Federal government could go bankrupt but GM, never, it is too big.” I have realized that Europeans really have difficulties understanding the strong ties that used to exist between the American nation and this car manufacturer. The belief that GM would endure forever as the leading manufacturer was held even by Americans who did not buy GM cars.

The current massive crisis has changed a lot of things and has called for unusual solutions. At the beginning of this year many European countries had already implemented programs to subsidize the purchase of a new car, offering a sum of 1,000 euros. In France this program works if you buy a car that does not produce more than 160 grams of CO2/km and if the old vehicle being traded is more than 10 years old. The latest estimation is that it will cost the French government 390 million euros instead of the 220 million predicted. Not only is the program costing more than anticipated, but the French government has taken measures to phase the program out gradually by decreasing the amount the buyer receives. Starting the first semester of 2010, the rebate will be reduced to 800 euros and then to 400 euros by the end of 2010. The hope is that by phasing out the rebate in this manner the car industry will not experience a sudden drop in sales.

In the USA, the program mandates much higher rebates, up to $4,500. Due to its success the time period was extended after the first week. Of course, its cost is also increasing and some congressmen as well as some of the media are criticizing the policy as being too costly to help an industry undeserving of such a benefit.

On one hand, it is clear that subsidies always distort the market and therefore are unfair by their very nature for one reason or another. Furthermore, the negative effects of these subsidies are visible as soon as the programs ends because new cars will not sell as well and the sizable drop in sales will hurt the car industry. By gradually reducing the rebate the French government is trying to avoid this. The use of the car is so widespread in the USA and the automobile industry has such an impact on the global economy that choosing this controversial way of spending public money is probably the lesser of two evils. Anything that stops or limits the global recession helps the country. Is there a better way to help the American economy? Maybe, but I have no knowledge of anything better. All in all, good news is coming from the employment front and people have started to say that maybe the crisis will soon be over. Can one be related to another? Again some experts disagree about this. What I noticed was that the American nation is starting to believe that the end of the tunnel is near and this is undoubtedly excellent news for everybody, including the rest of the world.

Best regards,

Q & A

FIRING A FRENCH MANAGEMENT COMPANY

QUESTION
We are Americans and we live in Los Angeles. We own a rental house near Menton, in the southeast part of the French Riviera. We are happy with the tenants but have had problems with the property management agency. We would like to terminate this agreement and possibly seek reimbursement for certain unreasonable deductions the agent made from the rent.

ANSWER
You are looking at this issue as if you were the owner of the house and you have retained all your rights to it. Not so in France! Giving a property management company the responsibility of handling all the aspects of a residential lease as well as paying all the costs related to the property means that you have relinquished some or even most of your rights as an owner. The very first thing to do is to look at the terms and conditions mentioned in the contract that you signed with them at the beginning. You will probably be stunned by the conditions under which you can get rid of them! Also, and this is just a strategy decision, it could be cheaper and simpler to just follow the normal procedure of giving notice at first, rather than going after them right away and having your property frozen in litigation for months or years. You would have to wait until the end of the court procedure before you could regain control of your house and be in direct contact with your tenant. Now I would like to look more closely at some aspects of this issue.

1 – Getting rid of the management company
My first and most important question to you would then be:

“Will you continue to have a management company?” If the answer is NO then the situation is very clear in many ways: you will be directly involved in managing everything, which includes any problems related to the payment of the rent, to the maintenance of the house, and to the payment of taxes and other housing costs that are in your name. Without even questioning whether you are right or not to get rid of this management company, the services offered to someone as far from the premises as you are can be very valuable, so much so that I would advise you to check into finding another company if you decide to terminate the contract. Also, you have stated that your relationship with the current tenant is excellent but this can change at any time. If your current tenant leaves, you would be forced to search for another one.

Since this is a very important issue, I would like to list the points that you need to address concerning this matter:

• Is there any kind of insurance contract or protection contract currently with this management company that would be worth continuing? I am specifically referring to a guarantee of having the rent paid either by the tenant or by an insurance company
  
  
• Who will replace this management company for the basic tasks that you cannot do because you are too far away? I am thinking of tax payments, condo charges, expediting small repairs, as well as the walk through done at the beginning and end of each lease.
  
  
• What are the procedures and time frame for terminating the management contract?
  
  
• What are the advantages for you in having a good management company?

2 – Getting your money back
This is close to completely unrealistic since my guess would be that you will need a court order in your favor before this company agrees to pay you any kind of compensation. It would mean starting a lawsuit in France while you are in California.

- The first thing would be to identify, based on the terms of the contract, if you are entitled to the refunds you mentioned. Has there been a clear breach of contract or a criminal deed? If this is the case, there would be some ground for a lawsuit provided that you can prove these things. You should also identify anything that could be defined as grossly unfair. Indeed, if what has occurred is nothing more than the normal result of the terms of the contract, then these things alone would not have much weight, so you cannot base a lawsuit on them. On the other hand, if the problem of unnecessary deductions is correct and you could prove criminal intent, then you have some serious grounds for filing in court with success. Keep in mind that French courts have the right to penalize parties who file frivolous court cases.

- The second thing you should be sure of is whether it is worth it financially to go to court or not, since I assume that the amount of money you hope to collect would not exceed the normal base fee of a lawyer. In this case, you could incur more expenses than what you have already lost to the management company. French courts do not award much compensation for damages incurred and your lawyer’s fees are almost never reimbursed in full.

- The third thing is to check how much money you can somewhat safely obtain by taking advantage of the notice period you must give to the management company by having your tenant pay you directly before the notice period ends. This might be one of the few breaches of contract possible that does not expose you too much. So this way you get a little bit of money back and you might not be sued for such a small amount.

I am truly sorry if I sound a bit pessimistic regarding the timeframe and the chances of success. This said, once we have established a detailed description of the goals you have and the results you want to obtain, then the matter becomes a lot easier to handle.