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Acting as surety : Don’t take it lightly
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Let’s say that a friend is asking the bank for a loan or is renting a flat. The bank or building owner agrees to the transaction, on the condition that your friend provide a surety. In such a case, you may be asked to render what seems a simple service. It’s a common situation. But before you accept, you need to consider the matter and learn more about the extent of your friend’s obligations. There are numerous complex legal requirements to keep in mind.
A surety assumes the liabilities of the debtor (the person who must pay) in the event that the debtor fails to make good on his or her debt. The surety must make monthly payments on behalf of the borrower, or must pay the monthly rent on behalf of the tenant. The creditor (the person to be paid) can take legal action against the surety and even cause his or her assets to be sold. This system, known as “personal surety” (cautionnement personnel), is very effective and even harsh in some cases. In effect, if the document you signed states that you are the “joint surety” (caution solidaire), the creditor may solicit payment from you directly without having to contact the borrower or tenant first. You are said to have renounced your “benefit of discussion”. On the other hand, if you are an “individual surety” (caution simple), the bank or owner must first apply to the borrower or tenant.
If others are also sureties for the same borrower or tenant, your situation will vary depending on the circumstances. One surety may sometimes take action against the others. If your commitment includes a waiver of the “benefit of division”, you could be forced to pay the entire debt. Otherwise, the borrower’s or tenant’s debt will be divided among the various sureties and you will pay only a portion. Nonetheless, if the amount owed is significant, even a portion of the debt could wipe out all your assets. That is why, in addition to the “personal surety”, there is “collateral surety” (or mortgage), in which just one of your assets, a house or a flat, is used as a guarantee. The surety may also, for example, pledge a portfolio of stocks and shares for use as a security.
Finally, your obligation as a surety may continue for as long as the debt, or it may be for a shorter period of time.
Don’t enter into such a commitment lightly. Find out more from your notaire. As a specialist in family law and contracts, a notaire can recommend an appropriate solution and provide information on the extent of your obligations. Likewise, if you are looking for a surety, you should contact your notaire as well. It may prove difficult to obtain a surety, and your security could go up in smoke ! |
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Real Estate
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Alice has lived with Timothée for the last five years.
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Renting furnished accommodations
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Furnished tenancy is governed by different legal and tax regulations from those that apply to
unfurnished accommodations. You need to know more before making the investment.
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How to purchase
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When an English person purchases a real estate in France, he worries about what will happen to it after his death.
Considering, French as well as English private international inheritance laws, the real estates are submitted to the law of the location of the property.
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