Money for Nothing

May 2020

From Wikipedia:
““Money for Nothing” is a single by British rock band Dire Straits, taken from their 1985 studio albumBrothers in Arms. The song's lyrics are written from the point of view of two working-class men watching music videos and commenting on what they see.”

So many things are happening, especially in the USA, most likely because it is a federal country and different states have very different policies and they are dealing with the pandemic in very different ways.

As far back as I can remember, the US government has never distributed cash in this way because of an economic crisis.

Congress passed the Coronavirus Aid Relief and Economic Security (CARES) Act, which the president signed into law on March 27th. This was a first; it was a big deal and was widely commented on in the media and in Congress. Many conservatives strongly criticized it. The argument that struck me the most, as a Frenchman, was that it was dangerous, inappropriate, maybe even counterproductive to give out large sums of money just like that because times are hard. For American conservatives, it went against fundamental American values.

There were cash payments (technically, tax credits) for individuals and families. Essentially, an individual earning less than $75,000 a year receives $1,200, and a couple earning less than $150,000 a year receives $2,400. Families also receive $500 per child. Individuals and families making more than that receive reduced amounts, up to certain thresholds. Individuals making more than $99,000 and married couples making more than $198,000 receive no cash payment.

The conservatives see welfare, which includes distributing food stamps and unemployment benefits, as a burden on society. At the same time, they argue for a legal right to use the tax code to one’s benefit.

The theme I heard was that if the federal government gives out too much money and for too long, it will weaken the American spirit of entrepreneurship and the self-made man.

I think in the long run it is cheaper to let the businesses of the country remain open. The best way to do that in an extreme crisis is to make sure poor and middle-class people have enough money to pay for their housing, food and transportation – in other words, the basic necessities of life. A family that is evicted, and therefore homeless, does not pay rent to anyone. A repossessed car sitting in a parking lot does not use gas and does not need parts and oil changes. Many other examples, with details that in the course of a normal life we all take for granted, could illustrate my point.

In September 2009, I raised a similar issue about President Obama’s bailout plan, under the title

HOW MUCH IS A CLUNKER WORTH?
I was again discussing the type of help being offered. The overall amount was considerably less and targeted only the big three American car manufacturers. Here is what I wrote then:

“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 end because new cars will not sell as well and the sizable drop in sales will hurt the car industry. …
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.”

Today I would like to make two very different points. The first is about the French system of subsidies to individuals regardless of the pandemic. Most of the payments are issued by the Caisses d’Allocation Familiales (CAF), a program that originally provided families with financial support during pregnancy and the first three months of a child’s life. The CAF now has 18 programs dealing with four major situations:

  • Petite enfance – infancy
  • Enfance et jeunesse – childhood and youth
  • Logement et cadre de vie – housing and living conditions
  • Solidarité et insertion – solidarity and economic integration

In 2017, the CAF provided payments totaling 73.2 billion euros. Almost half the French population receives some subsidy from the CAF. The French as a nation recognize the need to help certain categories of people. Culturally there is no stigma attached to receiving such subsidies, especially payments other than theRevenu de Solidarité Active, (R.S.A.), which is the equivalent of income assistance. Consequently, the decision to have a stimulus plan somewhat similar to the US one was not criticized, and the French administration knows exactly how to do this. Furthermore, because France has universal health coverage, requirements to wear a mask, get tested or go to a hospital involve little cost to individuals and no one has to wonder how much it will cost, and whether the patient can pay or what services are covered.

My second point concerns the cost of the economy collapsing. There are always those who will criticize any government financial involvement in the private sector and in people’s lives. I understand and respect the fact that this makes perfect sense for a certain type of morals or ethics. The American Republican Party has long held such views. It also favored controlling and limiting public spending, which again makes total sense in that context.

Anyone who works in social services, either as a profession or with a non-profit organization, such as the Salvation Army, quickly realizes how much it costs a country to support people who become homeless and destitute. One consequence is that they are no longer consumers who can sustain the economy with their spending; they have no money because they have no jobs worth talking about. Within just a few days of being evicted, the average person who becomes homeless is broken so severely that it takes years to get them back into normal society. But people who keep their home and receive enough public money that they do not have to worry about being evicted can work on getting a job, sending applications or preparing to launch a new business. When the worst of the crisis is over, they are ready to get back to work regardless of what they do. In terms of just contributing to the IRS and Social Security, subsidizing part of the population for a short period costs relatively little, given how much they will contribute later on.

Thus there is no such thing as “money for nothing” in such situations. The money enables people to keep their dignity and their ability to work and contribute. Maybe instead of rehearsing financial and economic reasons to choose this or that policy, we should ask what it takes to treat a country’s population with respect and understanding of their needs. On several occasions, the US presidential campaign has brought up this issue as a topic of discussion.

Criticizing “Money for nothing” and stating “the state is infringing my constitutional right to freedom” are, to me, two sides of the same coin.

This opens up a new discussion in view of the pandemic that is sweeping the USA. Maybe it is time to put people’s lives first when political decisions are being made.

PREFECTURES REMAIN CLOSED; THE VALIDITY OF FRENCH IMMIGRATION IDs IS EXTENDED FOR SIX MONTHS
All prefectures in France have been closed since March 17th. Cartes de séjour, récépissés, visas,autorisations provisoires de séjour (APS) and so on that expired or will expire since then have had their validity extended for at least six months. When the system reopens, all those expired documents will be considered valid and procedures will resume as usual.

The extension went into effect on April 22nd in application of Article 16 of the emergency law dealing with the Covid 19 epidemic. So far it concerns all of the following documents that expire(d) between March 16th and May 15th:

  • long-stay visas
  • residence permits (mainly cartes de séjour) except diplomatic ones
  • carte de séjour RESE « Recherche d’Emploi / création d’Entreprise » previously called student APSAutorisations Provisoires de Séjour
  • récépissés

OVERSTAYING THE SCHENGEN PERIOD BECAUSE OF THE VIRUS
I have helped many US citizens who have overstayed the three months they are allowed to be in the Schengen area. They often get fined or have to miss their plane and therefore get stuck for a while in another Schengen country. French officials, especially the Charles de Gaulle Airport police, have always given lenient treatment to US citizens who overstay, even several times. I am sure this leniency will continue in May, as the crisis situation evolves both in France and in destination countries.

Since airlines cancelled almost all flights because so many countries, including France, shut their borders, foreigners with tourist status, whether a short-term visa or visa-free entry, often could not leave France on time. For some, overstaying would have few effects, as mentioned above. But others could run the risk of serious consequences, such as criminal prosecution and being banned from re-entering France for several years.

To avoid this, the Paris prefecture has created an email address where people can ask for an official document a few days before their legal stay ends, allowing them to legally leave France at the end of the lockdown (note that this is specific to the Paris prefecture). The request, sent to pp-dpg-sdaeprolongationvisa@interieur.gouv.fr, must include scans of the following documents:

  • the ID page of the passport and the page that was stamped upon entering France
  • if applicable, the C tourist visa issued by a French consulate, expiring in less than a week
  • proof of accommodation in Paris (e.g. copy of hotel reception certificate or affidavit of lodging -attestation d'accueil)
  • proof of your difficulty in returning to your country of origin.

FRENCH INCOME TAX: THE TIME TO DECLARE HAS BEGUN
Regarding the more mundane topic of income tax, I would like to remind everybody that paper versions of the 2019 income declaration must be filed in France by June 12th 2020 midnight. The declaration forms are available at www.impots.gouv.fr. You can file your declaration on the same website, unless it is your first time, in which case you must file on paper. To file online, which has been possible since April 20th, you need your tax ID number and some access codes.

Note that if you file online, the deadline is later. The schedule depends on your postal code:

  • départements 01 to 19 must file by midnight on June 4th.
  • départements 20 to 49 by June 8th.
  • départements 50 or higher by June 11th.

An important reminder: If you are a French fiscal resident (i.e. if you hold a carte de séjour or an immigration visa validated with an OFII stamp, and comply with the requirements), you must declare your worldwide income to the French authorities even if you have no income in France and do not have the right to work in France. There is no penalty for neglecting to file, but not meeting this obligation is illegal and can have consequences.

You are a French fiscal resident if you:

  • stay in France 183 days in a calendar year, whether you have legal immigration status or not
  • have immediate family members (spouse and/or minor children) living in France
  • have a French employer
  • run a French business, even something like tutoring schoolchildren in English.

Current government-sponsored advertising campaigns refer to paper forms as thing of the past. For now, declaring electronically gives you an extension of a few weeks.

Some foreigners neglect to declare their worldwide income to France. Some of them hold a student immigration status, and think that this obligation does not apply to them. Some of them hold the ‘visiteur’ immigration status and think that the prohibition to work included in this status, prevents them from declaring to the French tax office. After all, why declare your income to France when you are prohibited from earning money in France? When they realize their mistake, they wish to file for the last three years as the statute of limitations for this kind of fiscal issue allows it.

What infuriates me is that I have recently seen a trend in which tax offices in the Paris region systematically refuse declarations that they considered too old. Thus, in 2020, one can declare income for 2019, 2018 and 2017. But many of my clients who have tried to declare three years at once have had the filing refused on the grounds that visiteur immigration status, even with proof of a stable long-term address in France, is not enough to be considered a fiscal resident. In one case, the tax inspector took up an entire A4 page detailing why such status could not be accepted for a single American man who had lived in France for a decade. The letter listed all the reasons this client did not fit in but purposefully “forgot” the criterion of staying physically in France for a minimum of 183 days. And yet declarations that are not filed late, even the first ones done on paper, go through the system and create no problem.

Keep in mind that to request a carte de résident, you have to have, among other things, proof of five years of fiscal residence, which requires the avis d’imposition sur le revenu.

HOW THE PANDEMIC AFFECTS SCHEDULING OF CO-OWNER GENERAL MEETINGS
The annual assemblée générale (general meeting) of a copropriété (property co-owners) must be held in order to vote on at least two things: the budget, and the amount the co-owners will pay; and the contract with the syndic (property management firm). Normally the meeting must occur no more than six months after the books are closed. As that generally takes place on December 31st, the meeting must be held by June 30th.

Because of the lockdown, however, many meetings could not be held, so a special regulation has been issued. Any meetings scheduled before March 14th should have been held and thus are not affected, but any meetings scheduled after that date will have been cancelled, and the new regulation applies. The syndic will not be allowed to call the meeting until after the government declares the health emergency over, allowing meetings again.

These two regulations, the ordonnance n° 2020-304 issued on March 25th 2020, then modified by the Ordonnance n° 2020-460 issued on April 22nd 2020, very exceptionally authorized these meetings to be held until the end of this year.

THE NAVIGO PASS WILL BE REIMBURSED IN MAY
A website will be launched in early May on which holders of the Navigo transportation pass, which costs 75.20 euros a month, can request reimbursement for April and the first part of May. The same will apply for the 37.60-euro senior and ImaginR student passes. Since most employers already pay half the cost of the Navigo, this will boost the spending power of many local residents. The reimbursement will also apply to teleworkers, employees on partial or complete unemployment, and self-employed people who have had to close their business.

www.service-public.fr/particuliers/actualites/A14010

GOVERNMENT HELP FOR SMALL BUSINESSES AND INDEPENDENTS
As is often the case, the French system takes people’s real financial situation into consideration when deciding what assistance they receive for losses incurred because of the pandemic. This means that to obtain this financial help, independents and small business owners have to fil out a form documenting their financial loss.

Since the conditions are rather complicated, here is a link to a site that explain them:
https://www.secu-independants.fr/action-sociale/aide-coronavirus/

SUMMER VACATION: THE OFFICE WILL BE CLOSED JULY 17th to AUGUST 24th
The office will be closed for one month, starting Friday, July 19th, reopening on Monday, August 24th. As always, I will be reachable by e-mail for emergencies and important matters. My service of receiving mail for clients will continue while the office is closed.

MY MINOR FEES WILL INCREASE ON SEPTEMBER 1st, 2020
Handling mail in my office: 40 euros per month
Handling mail received at my home: 50 euros per month
Surcharge for out-of-the-office meetings: 60 euros which corresponds to less than 30 minutes’ transportation
Surcharge for meetings and phone calls at the client's request after 7PM weekdays, all weekend and during national French holidays and vacations: 30%

Best regards,

WHEN A NON-PAYING TENANT HAS A GUARANTOR

QUESTION

I live in the USA and I own an apartment in the 7th. My tenant chosen by the agency has not paid the rent for over six months. My tenant is a young single mother. About a year ago, she asked me to certify her payments for allocations familiales/aide au logement and I signed the form and kept a copy for myself. The owner of the agency met with her last week and confirmed that the tenant does not have the means to pay the rent. The baby and Covid 19 are hurting her business really badly. But I cannot continue hosting them for free! The lease agreement is for a furnished apartment as a primary residence. The debt is now 12,500 euros. At the time of signing the contract in late 2017, I asked for a guarantor and I have documentation relating to a lady who I assume was her employer at the time.

Given this picture of the situation, please clarify:

  • What is the eviction practice in France in these situations? Approximately how long will it take to get the apartment free again?
  • What action do you suggest I take against the guarantor? Is the guarantee subject to a time limit?
  • Is it possible to check the condition of my apartment? (I fear for my paintings and furnishings.)

I need a definitive solution fast, as I need this money.

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ANSWER

Your question presents two distinct issues that should be looked at differently. I am almost tempted to say, “Pick your fight: Do you want the apartment back or the rent money?” This is the critical decision you must make right away.

Evicting a non-paying tenant takes about three years in France, as it is actually a double procedure. The first is relatively short: about a year from the time you file with the court to when you get the court decision terminating the lease. The second aspect is a lot trickier, as it deals with protection of the person’s domicile and entails considerable limitations on when and how to evict.

The CAF, which pays the allocations familiales/aide au logement, can pay the subsidy directly to you as the owner. It is a fraction of the full rent but its payment is guaranteed every month.

Since she has a guarantor, it would not take much to force this person to pay with existing collection tools. You would first have to try using the same approach on your tenant, but there is no need to push her too much since she has no money. Your best bet, then, is to hammer at this guarantor as hard as you can to get the situation moving in your interest.

In any case, you are in for a court case and legal fees. The question is whether you go to court to evict the tenant or to get the back rent.

I will address both procedures for your information. The second one costs less, takes less time and should get much better results. As a property owner who needs the money, you are likely more interested in being paid than who lives in the apartment.

1 – Expelling the tenant
The standard procedure is that, after the tenant has not paid for two months, you send a huissier (bailiff) to serve an order to pay. It includes a grace period of a further two months to pay the rent owed. For instance, say the rent for January and February is not paid. The huissier serves on March 1st and the grace period lasts until May 1st. If the rent for March and April also is not paid, in early May your lawyer files in court and the huissier now serves the tenant with a court summons and an order to pay the four months owed.

The first hearing is scheduled about five months later, i.e. in early October. Suppose the tenant explains that the financial difficulties caused by the Covid 19 crisis are still difficult to overcome but the future looks better, so she will be able to pay in full. The court approves a schedule of payment and refuses to terminate the lease. If she continues to default on the payments, you go through the same procedure to get a second hearing, where the lease is terminated for good.

The tenant can then ask the court to delay the consequences of this ruling to give her time to find another place to live. If the court approves this request it can allow a delay lasting from three months to three years, depending on the situation.

At the end of this delay, if the tenant is still living in your property, the file goes to the prefecture, as the police are needed to evict the tenant. The team then consists of a police officer, a locksmith and a huissier. But first, social services are asked to do everything they can to keep the tenant from ending up on the street. Only after they give up on finding a solution can the eviction be scheduled – provided the trève hivernale does not come into effect in the meantime! By law, no evictions can occur between November 1st and March 31st.

Now you see why eviction takes three years or more, especially if the tenant is well informed on procedures that delay the outcome.

Be aware that if the owner tries to carry out the eviction personally, it is considered trespassing on private property, which carries a sentence of three years in jail and a fine of 30,000 euros.

Even if you just want to enter your property because you want to see its condition, the tenant can block you or your personal representative from entering, again on grounds that entering their home against their will would be trespassing. There is nothing to gain from trying to visit the apartment, considering what is at stake

2 – Going after the money
This procedure starts with the CAF, the organization paying the subsidies. There are two types of payments: 1) the woman was pregnant and from the third month of pregnancy until the child is three months old, theallocation jeune enfant is paid, and 2) a separate subsidy helps poor people pay rent, with the amount depending on their income, the amount of the rent and the size of the family.

You may not have known that the CAF allows the owner to get the money directly rather than having it go through the tenant. To receive the money, you simply notify the CAF and give your French banking information (RIB). Since you kept a copy of the form authorizing the subsidies, you have all the ID information of your tenant with the CAF, and the CAF knows you for the same reason.

The agency clearly has been useless in helping with the situation thus far, but it has the entire file regarding this rental, which means a fair amount of documentation regarding the tenant and guarantor. You will need this information to collect the money owed. The special contract the guarantor signs has provisions that link its validity to the existence of the lease, as well as to the money owed directly or indirectly because of the lease. So it is certain that the guarantor contract can easily be enforced.

Little if anything can be done until the Covid 19 crisis ends. Once that happens, however, you first send ahuissier to serve an order to pay. As in the eviction procedure, it includes a two-month grace period. At about the same time, the huissier serves a similar document to the guarantor. If neither has paid by the end of the grace period, you are entitled to ask the huissier to freeze the bank accounts of both people to protect your interests.

If your tenant continues to have little or no money, your hope lies with the guarantor. One critical point is the identity of the guarantor. If she is the tenant’s employer, it will not take much to get the money from the company as part of the tenant’s compensation. Or, if the guarantor is an employee, you can serve her employer and seize a fraction of her salary.

As long as the guarantor’s bank accounts are frozen, she will not be able to use them at all. The lien on the accounts can be lifted in one of two ways. Either the amount of money owed is paid, or there is a filing in court to the effect that the person does not owe the money, which will buy some time. In any case there is bound to be serious discussion between the tenant and guarantor, both of whom have a strong financial interest in either getting your tenant to pay the back rent and start paying the rent on time or, more likely, find a way to move out fast so the guarantor is no longer liable for the amount owed.

Your legal fees will be low, as there is little to do to prepare the court summons. You can easily turn the guarantor’s life into hell using basic collection procedures before and after the court ruling. If the ruling is in your favor, you can have her car repossessed and sold and her bank accounts blocked. Having the court order makes this procedure different as it has more weight. The more you know about the guarantor, the more pressure you can put on her to give her an incentive to fix the situation so the drain of money stops.

 

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INSURANCE CLAIM WHILE RENTING AN AIRBNB-TYPE PROPERTY

QUESTION

I managed to rent a large studio, through an agency in Paris and I have learned that it is a vacation lease signed with the owner. The reality is that the agency does not manage the lodging. As the middleman, it communicates with the owner, and deals with my numerous grievances. Today I found a small leak behind the faucet of the shower in my bathroom. I let a plumber in and the repair was done in 5 minutes. There was no visible damage to my apartment. There was some damage downstairs. The agency representative asked me to complete the damage report with the downstairs neighbor, and told me that I have had a policy in my name, purchased by them when the lease was issued.

What should I do next? The owner has insurance and the agency has insurance, and they say this policy is in my name. The owner seemed to infer that I do not need to worry about it. It would be a huge issue if I was made to pay for the damage done to the apartment below, because I have no idea what the neighbor downstairs is going to claim.

 

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ANSWER

In this type of case, there are the normal situations and there are the tourist ones.

1 – Normal
In France, a multirisques habitation insurance policy is mandatory for the people living in the lodging. A tenant who has a primary residence or, in some cases, secondary residence lease has a legal obligation to be insured in his/her name. The owner or agency asks once a year on the anniversary date of the policy for a statement confirming that the coverage has been renewed. Occasionally the lease states that everything is included in the rent and there is no need to insure the place. If you read the lease carefully, it almost always states that your belongings are not covered by the owner and you are responsible if something happens to the place, including the furniture and appliances. Therefore, you should buy your own policy, even if the lease states that it is a secondary residence: if it is for one year, you are assumed to be responsible for insuring your rental unit. In France such insurance is cheap, and it is often the only way to prove your address with the prefecture so it obviates the problem of reaching the owner or agency to get a recent affidavit of lodging and supporting documents.

2 – Tourist
Vacation rentals, summer houses on the beach and so on are insured either by the owner or the agency, preferably both. The guest is liable only for personal wrongdoing, e.g. breaking things intentionally.

In many ways you are in this kind of situation. Nothing is in your name. You are not supposed to stay there long term. Depending on the nature of the leak or other problem, the insurance of either the owner or the agency covers the liability that the tenant normally has. Thus, technically speaking, you should not have tenant liability insurance.

3 – In between
As so often happens in France, people find solutions that do not fit inside the box and are done almost unnoticeably, even clandestinely. This is called système D. The letter D stands for a variety of words, but most commonly it is taken to mean débrouille, which can be translated as ingenuity (se débrouiller is to sort things out). When a tourist lease is for a year or so, it is for long-term lodging. This means the owner, the agency or both are cheating in plain sight. When the tenant takes the place, the agency, without saying anything, takes a tenant insurance policy in the renter’s name and the cost of the premium is part of the overall rent without being disaggregated. The statement of coverage may be part of the documents given to the tenant upon moving in, which few read in detail. When there is a need to file a tenant claim, the coverage is revealed and the tenant is asked to file. This can be unsettling, as filling out a French form is never easy, especially in a stressful situation.

From what you wrote, it appears that you are in this third category. Once you overcome the initial shock of finding out about this policy in your name, you can rest assured that nothing will happen to you – as long as you filled out the constat amiable dégâts des eaux (insurance report) correctly, which is a completely different discussion.

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DISCLAIMER

Please forward this message to all those who would be interested in its contents. The information contained in this newsletter is intended only as general information. I strongly urge readers to seek professional guidance concerning the legal and tax matters mentioned. This newsletter is intended as a general guide and is not to be taken as professional advice.

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