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Asset Managers: Don't Forget the Hoguet Law!

11 July 2013

The Hoguet law is a French law pursuant to which individuals or legal entities that on a regular basis deal with or assist in transactions involving real estate assets owned by others – relating for instance to the sale, purchase, or letting of said assets – must hold a licence (carte professionnelle). Hence, this law applies to property managers, among others.

Failure to comply with its requirements, which include holding a licence and being granted a proper mandate from the asset owner, may lead to criminal (for instance, payment of a fine) and/or civil sanctions (for instance, being deprived of collecting any commission, and of the right to sue any potential purchaser or tenant for abusive breakdown of negotiations – as detailed in a decision of the Court of Appeal of Versailles, 12th chamber, section 1, 17 February 2011, against which an appeal request (pourvoi) was dismissed).

From a practical perspective, activities falling within the scope of the Hoguet law include, for instance, negotiating rental agreements, advising the owner in negotiating the terms of sale with potential purchasers, providing continuous assistance to the owner during the sales process, etcetera.

There has been a tendency to entrust asset managers with certain of the above-mentioned activities (as part of their assisting or supervising of property managers in their daily management of a building, and/or assisting or supervising of real estate agents in the course of marketing a building); any so-entrusted asset managers would therefore be well advised to ensure that they act in compliance with the Hoguet law requirements.

Consequently, hotel operators which carry out asset management activities should ensure that no such activities can be considered as property management activities.

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