2006 – Paris; the roof leaks and we sell our apartment

Posted by on Dec 31, 2006 in France, Paris | No Comments

2006

Every apartment building in Paris (by charter and law) is required to hire the services of a “Syndics de copropriétés”, a management company that works on behalf of the co-proprietors of the building from city issues, building codes and building reparations, insurance claims and the general maintenance of the building. The Syndic is hired by the building co-proprietors but there is no long term contract. You have the ability to change your Syndic by a majority vote that would occur during the annual meeting of the co-proprietors. By charter, we must all meet once a year to discuss what the building needs and how we would pay for it. Since no on in either of our buildings want’t to pay for any reparations, nothing happens. The meeting is basically the tenants complaining about the other tenants and in the end no new work is approved and the Syndic carries on doing their menial tasks of a weekly cleaning of the stairwells, elevator and lobby floors, and moving the garbage cans from the courtyard to the front of the building and back again.

We paid the “Syndic” about €1900 euros a year. The other apartments in all the building on the property paid around the same amount. Our building had 6 flats, of which we owned two of them. The building across the courtyard, facing Boulevard Beaumarchais, had another (maybe) 12 apartments. In other words, the Syndic was making a butt-load of euros. Not a bad business.

When we first moved into 62 rue des Tournelles, the co-propriété had employed the Syndic for many years and there was a comfort level with them, but recently, the owner died and the company was sold to another Syndic. The big item on the annual meeting of the co-propriété was whether to keep the the Syndic who inherited our buildings through the sale or find a new one. No-one wanted to do anything. They didn’t even want to show up for the meeting.

Beatrice, one of the tenants on the upper floor of the building that connected 62 rue des Tournelles to the building on Blvd Beaumarchais was trying to sell the rest of us on her “Syndic”. Beatrice’s main residence was a few blocks away but she kept a small studio apartment on the top floor that was once reserved for the live in help who serviced the apartments at the end of the 19th century. It was very authentic up there; plaster walls falling down, holes in the floor, bathroom down the hall. The rent was cheap but Beatrice liked to point out that from the small window she could make out the top of the Eiffel Tower.

Anyway, Beatrice wanted a Syndic that would address her problems with the top floor, However, dealing with her issues meant everyone else in the building had to chip in to pay for them and consequently she was resoundingly defeated and we continued to pay gobs of money for someone to clean the floors and move the garbage cans.

After a while, Beatrice became more vocal. The old plaster walls really did need attention. The floor were dangerous. Then she started in with the leaking roof. She wouldn’t let up. Most of the co-proprietors in the 2 buildings wanted to do nothing. It was their typical response, the classic French Shrug, upward palms extended outward, elbows linked the body, a slight lift of the shoulders, a small turn of the head and a puzzled expression on the face. I think they master this pose at a very early age.

Finally Beatrice took her case to the Maire’s (Mayor’s) office and eventually someone came over for an inspection. The news wasn’t very good. Apparently the roof needed a lot of work. The installation of the elevator, sometime back in the 1970’s, was done incorrectly. It was probably one of those jobs that went to the lowest bidder. The elevator company needed  access to the roof so they cut a big hole in it and never repaired it properly. The rains of over 30 years had soaked through the roof and soaked through the ceiling of Beatrice’s apartment.

Our cost was 14,010 euros. It hurt. The work also took over 6 months and hurt our rental business. When it was over, the city came back for more.

Paris has a city building code ordanence where every 10 years the building face must have a “ravalment“, a face lift.  Stones are repointed, bricks are sand blasted, walls are scrapped and patched, windows are repainted and reglazed. Anything that looks old and gritty must be renewed. In theory it’s a good rule. Paris takes great pride in keeping it’s streets looking beautiful and has a good partnership with the city residents. The city looks after the parks, the streets and other public buildings and the residents take car of their own buildings. In theory it sounds great. In practice, most people hide from the expense. We’ve learned that our neighbors will pay money for anything except the upkeep on their home. As Peter told us one day, there is no French word for “house-proud”.

In the years we lived at rue des Tournelles, the subject of a ravalment came up a few times but it never sat on the table too long. The building was overdue for the grand ravalment. the last one might have been the same year the elevator was installed, sometime in the 1970’s. The city officials only enforce the law when the transgression is brought directly to their attention, like when they send someone over to inspect the roof.

We knew this would eventually happen but we didn’t think we’d get dinged for the roof and the réveilment in the same year.

We started 2006 with a great outlook. By November 2005, most of our rental dates for the new year were booked. We took any extra money we had and put it back into the apartment. We brought over more stuff from the US, lots of more stuff. We resealed and painted the bathroom wall in the studio against noise and moisture. We replaced the dishwasher in the kitchen of the first floor flat. We bled and cleaned all the radiators and when we had a problem with the hot water heater (chaudiere) we were told we needed two clicksons which were devices that clicked on the heat inside the unit. We couldn’t figure out if this was a real part or if the guy made it up. The chaudiere repairman (who did not speak a word of English) explaining to us that all three clicksons were bad and each one cost 350 euros to replace. We knew we were being robbed but we were leaving town the next day and had to get the thing fixed before the renters arrived the next day. At first we told him, we’d let him know. He immediately knew we were brushing him off so he made a phone call to his boss to get a better price. We also knew there was no one at the other end of the phone call but he did reduce his price to 350 euros for two clicksons and told us the third one was OK. We paid him and within an hour everything worked perfectly.

After a few more sani-broyeur incidents we decided to replace the 2 year old toilet disposal with a super deluxe sani-broyeur, the best one money could buy, 998 euros worth of toilet. We even had Josie install a trap door in the wall between the back of the toilet and the living room, kind of a ‘poop chute’. It was very discreet, painted to look like the rest of the wall and hidden behind the television stand. It was also very convenient in case we needed to clean out the broyeur. We knew no matter how expensive and powerful the mechanism was, our renters would break it. It was just a matter of time. We were correct.

The little annoyances of the rental business began to grow. If the phone would ring late at night in our home in San Francisco we were afraid it was one of the renters. One of them once called us  to complain that the garbage cans made too much noise and why did the city need to collect garbage every day. There was a renter who insisted the washer/dryer turned her favorite blouse green. I told her I never knew it had that function. There were quite a few people who complained it was raining. Someone was smoking cigarettes in the studio (we had a non smoking policy) and the next renter couldn’t move in because they were allergic to smoke. The water was turned off and no-one knew the location of the valve. When a student and her boyfriend moved into the studio for a month they cooked canned spaghetti on the stovetop every night leaving tomato sauce stains everywhere. One guest pulled the blackout drapes too hard and they pulled away from the wall. One guest complained the oven didn’t work and it ruined his thanksgiving day meal. By the way, the oven worked perfectly and if he read the apartment tips we left for him, he would have had no problem. The renters complained about the noise of the building and the tenants of the building complained about the noise of the renters. It was beginning to be no fun anymore.

With the cost of the roof repair behind us and the cost of the very extensive ravalment ahead of us, we made the decision to get out while the getting out was good. We had a good business. The apartments were in great shape and everything worked perfectly. As of November 2006, most of 2007 was already booked. We would sell the both apartments, furnishings and rentals, everything included, even Brigitte.

Selling an apartment turned out to be more difficult than buying them. Once they get you in they make it really hard to get out.

It all seemed pretty straight forward. The French property tax laws were on a sliding scale. If you owned a property for 15 years, you would pay no property tax when you sold it. From 10-15 years, you would pay a 15% property tax, 5-10 years included a 25% tax and less than 5 years was 33%. We were classified in the less than 5 year category.

For paying the bank back the entire loan earlier than it was due, we were fined €2000 euros. The fee to have an authorized accountant from  “SARF” (Société Accréditée de Représentation Fiscal) file the taxes it cost us €5,200 euros. We had to pay €1200 euros for someone to come in and measure the exact square meters and energy diagnostic of the apartments. We also paid out €21,000 euros to the real estate agent who sold the flat. Then there was the discussion of the sales tax. Our selling price included all furnishings, for which we had all receipts. The price also included all work completed during the renovations.

The French add a VAT (value added tax) to all parts and services. It adds on around 23% to anything you would buy without the VAT. In many countries in Europe the mode of business is still under the table. It keep the worker from declaring too much income and it saves the buyer over 20%. We spent over €100,000 euros on the renovation and another €51,000 euros on furnishings, appliances, art, sheets and towels. We had receipts for all of the furnishings. Some of the renovation costs were paid under the table but most of it was well above the line. Upon completion of a job, the client (being us) is supposed to receive a Facteur (receipt of services) from the contractor. Part of the receipt shows how much was paid in VAT. This is all computed into the capital gains tax in the final cost/profit allocations to give us a tax credit.  We never got it. All we received from the contractor was an estimate. By the time we went back to him for the Facteur, he had declared bankruptcy and was now doing business as another company. All debts were wiped out and we had no legal feet to stand on. We lost all deductions for all the labor costs, rejected because it now appeared that the labor was done under the table. Maybe it was. Most likely the contractor never paid the VAT to the French Tax Board.

We sold the two apartments to two different people. The papers for the studio were signed in late December 2006. The first floor apartment took a little longer but by March 2007 we were no longer apartment owners in Paris.

Because the euro increased in value by close to 40% from when we bought the apartment, we actually made a little on the adventure. It wasn’t much but we did have all trips to Europe between 2004 and 2006 were paid for by the apartment income and the euro kept on going up in value. We just kept in all in a French bank till it hit €1 = $1.55. Then we cashed in.

Post Script: Our tax returns had been prepared by the same person since 1990. When this accountant left his company we stayed with him. He wasn’t the most reliable person to get things done in a timely manner but with extensions and excuses he finally got the job done. In 2009 he once again disappeared and didn’t respond to phone calls or emails. We finally reached the point of total frustration and went to another accountant. That was when we discovered our good friend and accountant of so many years had made a “grande booboo” on our apartment business. We tried to keep everything above board. We paid taxes in France on the income and declared income and expenses back hom in the US. Unfortunately our accountant listed the 20% downpayment of the apartment cost and the entire cost of the real estate. We needed to refile all tax returns from 2003 through 2007. We also got hit with a whopping capital gains tax.

And so, we basically broke even on the project. It was a great experience and we’re really glad we did it. We have a lot of memories of Paris, some good, some not so good.