First of all, I would like to wish all of you a very happy and prosperous 2014! French custom dictates that New Year is wishes can be expressed until the end of January, so I have managed it a few hours before the deadline.
Most English speakers know the expression I have used as my title. This is what Wikipedia says about it:
Pardon my French or Excuse my French is a common English language phrase ostensibly disguising profanity as French. The phrase is uttered in an attempt to excuse the user of profanity or curses in the presence of those offended by it under the pretense of the words being part of a foreign language."
A possible meaning is suggested on phrases.org.uk, which suggests that the phrase derives from a literal usage of the exclamation. In the 19th century, when English people used French expressions in conversation they often apologized for it presumably because many of their listeners (then as now) wouldn't be familiar with the language. The definition cites an example from The Lady's Magazine, 1830:
Bless me, how fat you are grown! absolutely as round as a ball: you will soon be as embonpoint (excuse my French) as your poor dear father, the major. Embonpoint is French for plumpness; state of being well-nourished.
Most English speakers know the expression I’ve used as my title. This is what Wikipedia says about it:
I want to take this meaning a step further, especially thinking of the very long and quite complex Q/A of this month. Such bashing of French people makes me feel that maybe I should apologize for being French. In the mind of the person writing the question, being French ends up being a kind of profanity. The legal question in itself is not that complex. What makes the writer react so emotionally is rudeness on the part of the French professionals concerned and an almost total lack of reliable information.
I just hope most of my readers pardon me for being French no matter how much France may get on their nerves once the initial honeymoon years are over.
MORE LENIENT RULES BUT HARSHER EVALUATION OF FILES AT THE PREFECTURE
Since January 1st 2014, citizens of two of the poorer European Union countries, Romania and Bulgaria, have had full rights to work in any capacity throughout the EU, after seven years in which France and several other EU countries imposed transitional rules limiting those rights.
At the same time, people submitting requests at the prefecture are getting the feeling that obtaining work and/or residency papers is harder, that the civil servants are more demanding, that even when the file is exactly the same as it was last year, the prefecture now finds the documentation to be incomplete. I admit that I expected the civil servants to take a more understanding attitude after the May 2012 election of a more liberal government. The reality is that the prefecture is now interpreting the regulations more strictly. There is nothing personal in this, even though many people trying to get or maintain their immigration status in France feel they have been singled out and victimized.
The case of one of my clients provides an illustration. Until recently, only people on welfare, such as those benefitting from the type of public health coverage called CMU complementaire available for people who earn less than 8,000 euros a year were automatically refused any request for immigration. All other social aid programs were considered part of normal life; indeed, some of them are available to high-income people. Everybody assumed that receiving most types of social aid was part of the system in France and that there was nothing wrong with this. So I was quite surprised to learn that a branch of a Paris suburban prefecture had decided that someone on maternity leave, receiving a subsidy to compensate for the absence of the normal salary, had a precarious status not compatible with securing residency in France. When you know how workers are protected in France and what a strong obligation French employers have to take back employees after maternity leave, even if it lasts more than a year, this does not sound reasonable at all. I do not know all the ins and outs of the situation, as I was not there, so this may have been just an initial effort to avoid dealing with an odd request which happens way too often, both at the prefecture and more generally. In France, when one doesn’t know the answer to a question, the tendency is to reply No, that s not possible instead of I don t know. This is why I advise foreigners never to trust an initial No : they should challenge it by checking at a different time or with a different person, and so on.
A few days later I was able to help a client, an American citizen, faced with a similar situation. The person arrived at a branch of the Paris pre fecture at about 9AM, the opening hour, and the line was extremely long. It was 11AM when my client entered the building, and 12:05PM when this American reached the reception desk. This is an idea of the conversation that followed.
Preecture: What are you here for?
Client: To submit a request based on an illegal stay of ten years in France.
Prefecture: Sorry, those requests are only accepted in the morning. It s past noon. Come back tomorrow.
Client: But I was here at 9AM.
Prefecture: Show me your passport. You can t submit this request anyway you left France last July. Next!
That was it. So my client asked me to come.
At 2:15PM, when the civil servant was back from her lunch break, I checked with her to see if she was the person who spoke to my client. She said yes. I explained that in my client s situation, leaving France last July was irrelevant. That started a short conversation, which ended with, OK, go upstairs and meet with the manager. Within minutes, my client had the file reviewed and could expect to receive an appointment confirmation in the mail.
Putting these two situations back to back illustrates very well that requests are really reviewed case by case, and a response can come out of the blue, leaving one unsure if this is because of a true change in the regulations or an attempt to push away an odd request as those for regularization so often are.
NEW WAYS TO DECLARE PAYING AN EMPLOYEE THROUGH THE CESU PROGRAM
The system called ch que emploi-service universel (CESU) was created to discourage payments under the table for work done in the home by undeclared people such as nannies, cleaning ladies or tutors. The regulation French payslip is so complex that it requires an accounting degree to understand how it is set up and professional accounting software to issue it, with all the mandatory taxes and deductions. Since private individuals found it next to impossible to issue proper payslips, their employees were not declared. CESU was established to fight this situation, with two attractive features.
The first was a special checkbook comprising checks for the employee and easy-to-complete vouchers about the number of hours worked and net salary paid. With this information, URSSAF could issue payslips to the employee after calculating the taxes and deductions the employer needed to pay.
The second feature was that the total amount paid in salary and taxes became a tax credit for the employer, so the final cost was significantly reduced. This provision was the true incentive, which made CESU very popular.
Now the special checkbooks and vouchers have disappeared, so the only way to declare is through a special URSSAF website. The main consequence is that there is no more obligation to pay the employee by check it now can be a wire or even in cash. The tax credit is not as good as it used to be, but it still there.
One incidental aspect of this change is that people without a French social security number can be paid this way, since the new software allows the employer to declare the amount paid using the employee s date and location of birth (the French social security number is composed almost exclusively of information related to the date and location of birth). Consequently, the CESU system does not identify employees who are undocumented aliens.
Of course, it is illegal to employ and pay undocumented aliens. This must be stated again and again. However, the penalty for not paying the taxes related to an employee s salary is much higher than the penalty for employing an undocumented alien. Between these two risks, paying the taxes on the salary is the best way to limit the liability in this situation. Furthermore, a regulation issued on November 28th 2012, the circulaire Valls, defines the requirements for undocumented aliens to obtain legal status in France. They include being able to prove that one has worked for several months or several years, depending the situation.
So yes, hiring an undocumented alien is a felony, but the entire French legal system makes it a small problem compared to the various benefits linked to declaring and paying taxes for this employee: i.e., for the employer, the tax saving, and for the employee, proving the reality and the seniority of the employment.
This might seem to be completely illogical in that an illegal deed creates some benefits for the parties involved. But the French government picked its fight: it prefers the taxes to be paid rather than trying to totally stop illegal immigration. Furthermore, for about twenty years French law has created the right to obtain legal status even as an undocumented alien. All the conservative governments that have ruled France for over ten years have not stopped this, but just changed the requirements, making it either easier or harder. The message France sends to undocumented aliens staying in France can be seen as, Behave like a good resident, work honestly, pay your taxes, put your children in school, and you will be rewarded with legal status in France. Once one looks at the situation this way, the logic of the system becomes a lot easier to follow.
FRENCH INCOME TAX REMINDER
French income tax is generally paid in three installments: on February 15th, May 15th and September 15th. Everyone should have received the applicable tax statement by now. If you have not received it, but you know that you owe French income tax in 2013, you must pay the required amount, which is one-third of the total tax you paid on your 2012 revenue. Errors made by the French tax authorities never exempt the individual from complying with the law.
BANK GUARANTEE FOR FOREIGNERS RENTING IN FRANCE
Help! Why do some owners want a twelve-month caution when renting through a real-estate agency? What follows is the explanation of why I am asking the question.
Our first apartment in France required a caution. We paid it. The setting up of the caution involved me, our real estate agent and our bank representative, who was the caution expert at the bank branch where we first opened our checking account. This expert spoke very good English.
The owner of our apartment provided us with a letter stating the amount that she wanted the caution to be. It was 10 months of rent. All went well, the contract was generated and the bank representatives signed it, as did I and the real estate agency. I asked the bank expert if I would, indeed, get all of the caution back. He told me, yes, I would get it all back (the law required it, he said). Subsequently I asked our real estate agent when I could get the caution returned and he told me only when we vacated the apartment. I was also told, at the bank, that the caution had nothing to do with possible damage claims by the owner and was only for paying unpaid rent.
One question the bank representatives asked me was if I wanted the caution money invested. I told them no, do not invest the money. The contract stated (they showed me where) that the money would not be invested.
About a week after the contract was signed I received a letter from our bank stating that, without asking me if they could do this, they had taken additional funds from my checking account to apply toward the caution. What they took without asking me was around 3,500 euros! I went to the bank and talked with the caution expert and asked him why the bank had taken this money. He told me he did not know but he would inquire and get back to me. A day or two later he called and said it was to cover possible changes in the rent. I asked him if I would get all of these funds back, too, and he said yes.
We had the caution for the four years we lived in that apartment. I had spoken with people who told me that a caution should be returned within three years and they had never heard of cautions lasting for the entire time one lived in an apartment. We met Americans who had received their cautions back from one to three years after they had rented. One woman whose rent (and caution) were relatively large had told her bank to go ahead and invest the money and at the end of three years her bank contacted her and returned the caution with the investment return of around 20,000 euros! Her bank was not our bank.
After four years we were evicted when the owner decided to sell the apartment. I went and talked with our bank representative about when we would get our caution back after we vacated our apartment. This was a different bank person than the expert, who had moved on to another location. I received a letter (it may have been an email) from the bank stating that we would get our caution back when the real estate agent provided me with the paperwork stating that the apartment had been vacated. The amount the bank was going to return to me, the contact said, was an amount that I noted was about 1,300 euros LESS than what I had given the bank, in total, for the caution.
In my attempts to discover what happened to my money I finally went and spoke to our new (to me) bank representative with a friend who spoke fluent French. My friend and the bank representative had a long conversation in French. The bank person told my friend that although the bank and the contract had told me that my caution funds would not be invested, they in fact were invested. The bank person told my friend that NO MATTER WHAT THE BANK SAID OR WHAT THE CONTRACT SAID, THE BANK ALWAYS INVESTS THE CAUTION MONEY! The investment lost money. The bank person told us that while the bank was required to return all of the caution funds it was clear that the bank was not going to do that. The bank person told my friend that, yes, you were being cheated and she was sorry but there was little that I could do about it, nor could she. And that is what happened. Our bank cheated us. That is our caution experience and my French bank experience.
Our present owner did not want a caution, or a lease. He is an accountant; he has been an excellent landlord and we, of course, are excellent tenants. When I told him about our caution experience with a French bank, our new owner said, Jim, always remember this fact: WHEN IT COMES TO MONEY, NEVER TRUST THE FRENCH! I suspect that it is good advice.
Now our present owner must sell this apartment so we must find a new place to live and, of course, owners who deal through the real estate agencies always want a caution. I had an opportunity a few years ago to talk with a woman who had once been a real estate broker here in Paris. She told me that the original purpose of the caution, to protect owners, was a good thing but it had degenerated into a racket complete with bank kickbacks to the agents. Considering that our previous bank essentially stole some of my money (and the fact that our agent did everything he could, for no apparent reason, to delay our getting the caution returned to us and we finally had to contact the owner, who kindly told the agent to release the caution immediately), I am left with little choice but to believe that the caution is, indeed, a racket.
Thank you for your message. I could answer your first question, Why do some owners want a twelve-month caution when renting through a real-estate agency? , with just one line: It takes now about three years to evict a non-paying tenant.
I prefer to address the real situation concerning the two issues that you have raised in such a passionate way.
1. The first one deals with the fact that the landlord is faced with a very expensive risk because the tenant has the right to stay for so long.
2. The second one deals with the definition of investing, specifically whether the assumption that it means the stock exchange is correct. This should lead to an explanation of the French banking system.
1. WHY CAN IT TAKE MORE THAN THREE YEARS TO EVICT A NON-PAYING TENANT?
This alone amply explains why it is so difficult to rent an unfurnished property in France, especially in Paris and its immediate suburbs.
As has often been explained, almost all leases state that the contract is void as soon as two payments have been missed. In order to claim the right to terminate the lease, a bailiff (huissier) must serve a summons to pay, which gives the tenant two months to pay in full. Therefore there is, at the absolute minimum, a period of four months before the case can be submitted to a court. Of course, in most cases, there is a further small delay since the bailiff needs to receive the request and schedule the serving of the summons.
With this procedure, the provision is then fully documented. Even though it appears to be quite similar to what exists in the other countries, the time it takes is already much longer than in most countries. Now, on top of this comes the compounding effect of the delay in getting a hearing in the small claims court (Tribunal d Instance) and the fact that a good lawyer can get the first request submitted by the landlord to be refused. All it takes is proposing a plausible schedule of payment for the past rent owed. Keep in mind that both the law and the court system are lenient toward tenants. Getting a hearing date takes about four months. Thus it is possible for a year to go by before the court declares the lease null and void, since the judge can accept the proposal of a schedule of payments more than once. In the court decision, the judge must specify the time given to the tenant to move out before an eviction is to be carried out. This cannot be less than two months after the decision is served. It also assumes that the tenant has not appealed, and therefore the court decision is final.
There is another step that is needed before the case goes to court, since this is a procedure where people can lose their home and most rights and obligations in France are linked to one s having secured an address, which is called the domicile. In short, if you do not have a postal address, you cannot exercise any rights. Therefore, every effort is made to ensure that even a non-paying tenant does not lose the right to a domicile, and therefore stays a subject of the law. This means that after the huissier serves the summon to pay the back rent, he must inform the pr fecture that the procedure has been launched, so that social workers can try to help find a solution, either to pay the rent and the debt or to find a more suitable (i.e., cheaper) place. This step does not automatically slow down the procedure, but that sure can happen whenever a request for aid has been filed and an H.L.M. request is being reviewed. The equivalent of H.L.M. is low-income housing project, although the French projects are almost always better than their American counterparts.
Now here comes the second part of the procedure: the tenant can file with a higher court, a Tribunal de Grande Instance, to ask for a delay on the eviction. Since this is not a case submitted on a legal ground, all the reasons can be reviewed and the most obvious is how scarce affordable housing is in Paris, which of course makes it very difficult to find a suitable place for a reasonable price. The maximum this court can grant a delay is another twelve months. This delay is also given so that the social services can have the time to exhaust all possible solutions. One must also take into consideration the fact that there is a delay of several months before the case is heard: in Paris, it could be six months or more.
Then, and only then, comes the eviction procedure. Only when the final court order is issued does the case go to the pr fecture. The eviction requires a locksmith, a huissier and a police officer. But there may be another barrier: the season. No one can be evicted between November 1st and March 15th. French law provides for this winter truce (tr ve hivernale) to protect the tenant from any risk of dying from the cold. Also the prefecture is 100% controlled by the government, and at this step of the procedure there may be political decisions made to slow down the rate of eviction procedures. This can happen at certain times (such as around elections), but there are many other reasons.
Adding it all up, and the procedure can far exceed three years. This explains in a very pertinent way why French landlords are so scared to take a new tenant, and make sure they gather as much guarantees as possible to limit the financial loss and non-paying tenant creates.
2. WHAT SERVICE DOES THE BANK OFFER THE TENANT AND THE LANDLORD, AND WHAT DOES INVESTED MEAN?
This alone amply explains why it is so difficult to rent an unfurnished property in France, especially in Paris and its immediate suburbs.
The most obvious service that the bank offers is for the landlord, who gets a portion of the potential loss guaranteed, so that at least one third of the possible rent lost is secured. This gives some meaningful reassurance to the landlord. At one time it was common to ask for a sum equal to two years worth of rent, which made it a lot closer to the real potential financial loss, considering how long it now takes to get the apartment back. Also keep in mind that this is the last solution the landlord is willing to consider, since there are more efficient ways to secure the payment of the rent. Indeed, the system is such that if you are an employee, you can have access to a public guarantor. If you have family living in France, your parents or siblings can be your guarantors. In short, bank guarantee requests are very rare for French people or for people who grew up here and work here, while foreigners who do not work in France are immediately faced with such a request because they do not have any other way to supply a guarantor.
In short, when you are a foreigner with no family ties to France and you are not a long-term French employee, the only way to secure the rental is a bank guarantee.
About what you wrote regarding the French banking industry and French people in general, allow me not to comment. I truly believe that neither the French population in general nor the French banking industry deserves such a harsh and definitive condemnation. I also believe that there is no systematic collusion between banks and the real estate agents or the large real estate owners or managers. I am even sure that there is no possible collusion as you describe it for numerous reasons. On the other hand, some explanation and giving some definitions should show what happened, and should allow you to avoid making the same mistake, so that in the future you can reach a very safe bank guarantee.
The thing to remember about the French banking industry is that French banks are also brokerage firms on the stock market, portfolio managers, mutual fund creators and managers, and insurance companies. You might find that this is a way to mislead you, since they are not upfront with you as to the extent of the business they can carry out. As far as they are concerned, they believe that everybody knows this and they are not hiding anything.
Now I would like to describe precisely what are the issues raised by requesting a bank guarantee. For one thing, it is nothing more than a lien on an asset and the landlord is the beneficiary of it. Therefore there is a need for an asset that can easily be liquidated upon proper request. This means that annuities, life insurance policies and retirement schemes cannot be used. In short, the choice is between a savings account or more if there is a maximum amount cap for specific accounts, investing the money into some mutual funds, and creating a portfolio managed professionally. As far as a French banker is concerned, only this last option can strictly be defined as investing. Everything else is putting money into an account. This is where most of the misunderstanding came from. To you, anything other than a savings account with the bank was investing including ALL the mutual funds, no matter what they are made up of.
Of course the bank also needs to think about the client i.e., the tenant and this is the dilemma. The creation and maintenance of the bank guarantee is a service and therefore it has a cost. The money should be kept in such a way that it produces some income, first to offset this bank cost and also so that you do not completely lose the value linked to investing this money.
In short, if the money is kept in some sort of money market, the return could be less than the cost of the service. You will then lose money for sure by not investing your money. Now, if you invest in such a way that you get a higher return on investment, such as a more active mutual fund on the bond and/or stock market, you take a higher risk but could get some return even after the bank fees. So it is clear that it is not the fact that your money goes into a mutual fund that is the issue but has a lot more to do with how you want your money to be handled so that you do not lose any.
So you are faced with a decision of the type that is very common in the USA when one chooses how retirement money or college funds should be invested. Some people prefer investing very long term and are ready to take some serious risks on the stock market, and diversify their portfolio even if it is entirely made up of mutual funds. Others prefer very safe investments and see a little growth added to the principal every year.
I am absolutely convinced that if the situation had been explained this way and you had understood all the ins and outs, you would not have made the same statements you made today. It is also very possible that you would not have made the same choices. I truly hope that you will reconsider your evaluation of the French banking system, knowing that France is not great in customer service but strives to deliver a professional service as a technician as much as possible.
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.