A bankruptcy or embezzlement can occur within a trustee’s office, and the funds paid by the co-owners are gone! Each quarter, the trustees call for funds to pay the building’s suppliers and finance the work. “The sums involved can be very significant, particularly in the case of energy renovation work”recalls Pierre-Edouard Lagraulet, lawyer at the Paris bar, partner in the Lagraulet-De Plater firm.
This type of event can therefore cause significant damage. The two major federations representing trustees, the National Real Estate Federation and the Union of Real Estate Unions, assure that this remains exceptional, but do not provide figures in this area. “Even if few in number, these situations can lead to catastrophic situations for the co-owners”is alarmed by Emile Hagège, general director of the Association of Condominium Managers.
Latest example, the liquidation of the firm L’Immeuble, in Toulouse, specialized in real estate investment, but also manager of co-ownerships. Occurring in early 2024, this bankruptcy would affect 650 creditors, according to an insurance expert close to the matter and who wishes to remain anonymous. “Please note, a co-ownership as a whole is considered as a single creditor. So it concerns many more people in reality”, specifies the expert. The Association of owners and co-owners of Haute-Garonne indicates, for its part, that the trustee activity has not yet been officially liquidated, but does not know if the latter is still functioning.
Monitor several times a year
In theory, co-owners are protected against this type of risk. To practice their profession, the Hoguet law of January 1970, which governs the profession, requires real estate professionals, including trustees, to take out professional civil liability insurance to cover errors in their management. They must also take out insurance which guarantees the funds deposited by the co-owners in the event of misappropriation. Volunteer trustees are not subject to this type of obligation, but they must be co-owners so that their real estate serves as guarantee.
There are three main guarantee funds for professional trustees: Galian, the European Guarantees and Sureties Company (CEGC, BPCE group) and Socaf. “Other insurance companies can intervene occasionally, but this is not their core business”, indicates Alain Ledemay, general manager of Galian, which notably insures the largest property manager, Foncia. However, in the event of a problem, for the guarantee fund to intervene, the debt must be “certain, liquid and payable”.
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