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<CONSUMER RIGHTS PACKAGE: Real Estate Aspects

Extracts from Secretariat analysis

Consumer Rights Package - Real Estate Aspects

Consumer policy is a component of the Internal Market. Freedom to do business throughout the Union has to be balanced by EU consumer protection law. Major events like the diesel affair or widespread use of unfair contract terms by mortgage banks highlight the need for EU law to address 'mass harm situations' affecting large numbers of EU citizens. On 11 April the Commission released a package of legislative proposals which all build on existing legislation but which in at least one case (collective injunction and redress) means far greater EU regulation.

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PROPOSAL FOR A DIRECTIVE ON BETTER ENFORCEMENT AND MODERNISATION OF EU CONSUMER PROTECTION RULES

Amendment of the Unfair Contract Terms Directive (Better Enforcement Proposal Article 3)

  • Only one amendment (Art. 8b) concerning fines for infringement, for which the provision is now much more detailed and prescriptive. We cannot judge whether the provision has particular impacts for landlords. Is the 4% of turnover fine well adapted to the property rental business?

Amendment of the Unfair Commercial Practices Directive (Better Enforcement Proposal Article 1)

  • Same amendment concerning fines (Art. 13) and same question concerning rental property.

  • Harmed consumers will be able to unilaterally terminate the contract (Art.11a(2)) and there will be compensation for damages (Art.11a(3))

PROPOSAL FOR A DIRECTIVE ON REPRESENTATIVE ACTIONS FOR THE PROTECTION OF COLLECTIVE INTERESTS OF CONSUMERS (wide scope. No exclusions, so property sellers or landlords included)

The existing Directive concerns only injunctions. This one covers redress as well.

The Proposal stops short of enabling U.S.-style class actions, but nonetheless gives power to any collective interest ('qualified entity') that is properly constituted under a member state's law, has a legitimate interest and is non-profit (Art. 4(1)(a)(b)(c)).

The scope is much broader. From a real estate angle, the existing Injunctions Directive only covers acts contrary to the Unfair Contract Terms Directive, Unfair Commercial Practices Directive and Timeshare Directive. The new Directive would cover much of the real estate spectrum: on top of the previous three, there are also the Directives on UCITS, Solvency II, EPBD*, EED, Alternative Investment Fund Managers, Mortgage Credit and European Long-term Investment Funds. Note also the Commission's intention to amend this Directive in the future by adding the European Accessibility Act (EAA) to its scope as soon as the Act gets through Parliament and Council (p. 6, par. 3). We have seen that for the moment the EAA doesn't cover EPF-type buildings (only transport service buildings, banks, customer services centres, telephony shops; see epf17-78 of 19.09.2017), but when that list expands in successive EAA revisions, as it surely will under political pressure from the 'silver' demographic, it will automatically fall under this Representative Actions for Collective Interests Directive.

  • Imagine, for example, a property development company that sold housing nationally or in several member states that does not correspond to the EPBD's requirements for near-zero energy new buildings. A national or European home owners' association could be a qualified entity seeking redress from the developer.

The European scale of collective interest representation is greatly reinforced:

  • Member states can designate as qualified entities consumer organisations* that represent members from more than one member state (Art. 4(3)).

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  • Any qualified entity may apply to the courts or administrative authorities of another member state (Art. 16(1)).
  • Where the infringement affects or is likely to affect consumers from different member states, the action may be brought by several qualified entities from different member states, acting jointly or represented by a single qualified entity (Art. 16(2)).

Note also the Directive's obligation on member states to provide legal aid or public funding to qualified entities that are too poor to exercise their rights under the Directive (Art. 15(1)).

Great freedom of action to qualified entities in seeking injunction orders: "In order to seek injunction orders, qualified entities shall not have to obtain the mandate of the individual consumers concerned or provide proof of actual loss or damage on the part of the consumers concerned or of intention or negligence on the part of the trader." (Art. 5(2), 2nd par.)

For redress orders, a member state may require the mandate of the individual consumers concerned, (Art. 6(1)) but the qualified entity can recover the cost of doing so from the trader if the action is successful (Art. 15(2)).

Note that when the rules of the recently revised Consumer Protection Cooperation Regulation apply (17 January 2020) there will be a minimum set of powers for the national authorities, a new procedure to address widespread(1) and Union-wide(2) violations of consumer law and a better surveillance system. The Commission will have a stronger coordination role and will be able to prompt coordinated enforcement investigations in the event of Union wide infringements.

  1. at least three member states
  2. 2/3 of MS amounting to 2/3 of the EU population

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Full report under epf18-25 of 16.04.208