Leaseback

France receives more visitors than any other country in the world and the French themselves often rent properties for their holiday's.

In order to increase the number of rental properties available , and to boost the French tourist industry, the government gives incentives to those prepared to invest in quality rental properties (Residence de Tourisme).

This idea was launched in the 1970's to develop winter sports resorts. These developments have grown in number and many exist today throughout the whole of France.

Benefits can indeed be inciting although not to suit every taste. They benefit from a full VAT refund on the investment and also a contractually guaranteed income from the management company in charge of the lettings , hence the term "  Leaseback ".You own the property and can enjoy use of your home a few weeks per year (usually up to six) , with the management company looking after all the upkeep and they will be required to return it in good condition at the end of the lease (minimum 9 years).

The purchasing process is the same as to any off-plan acquisition in France. You will pay a reservation deposit of 5% into an escrow account with the notary dealing with the development and then pay the balance in stage payments. Normally  the first payment will be demanded once the foundations have been laid, with the signature of the final contract of around 30% and then following payments such as:

15%   first floor
20%   water tight ( roof level )
10%   air tight   ( windows fitted )
5%     all work finished
5%     key handover

We have had enormous demands about Leaseback Developments and we sell a lot , because we believe that they are a good investment and that leaseback can suit a good number of overseas buyers, but as said above, leaseback does not suit every taste and  we like our clients to know exactly what they are buying.
We have some clients coming to see us , who have been mislaid , or have not understood the idea of Leaseback schemes , and so here are some facts and advice on Leaseback.

On Leaseback schemes , there is a full VAT refund of 19.6%, which is very interesting, but you must understand that to benefit totally from this , you must keep the property a minimum of twenty years . You have acquired a freehold property, and therefore can resell it when you want . For example , if you resell the property after 10 years, you will be due to pay what corresponds to 1% per year over the 20 years ie: you will be due to pay back to the government approx 10% of the VAT refund that was accorded .This point is important to know, but most buyers intend to keep their property at least twenty years, this being a good investment.

You will buy the property furnished , which is usually sold to you under the form of a furniture pack delivered by the developer. You then sign a lease with the management company for a fixed period, which is usually 9, 10 or 11 years.
Due to the fact that the management company is subletting the property and offering hotel services such as breakfast , this is considered as a commercial lease and therefore the management company is subject to VAT.
Therefore as you are being paid rent on a French property ,you will be obliged to fill in an annual French tax form. Some of the developers will do this for you during the first year, but we advise you to use an English speaking accountant to make this hassle free. We can introduce you to accountants in the Region.

We often hear that there are no maintenance or management fees , but remember that you have acquired a freehold property, and therefore, you are liable to pay annual building taxes in France ( tax foncier).

The rent is index linked and usually on the lease contract renewed every three years.

We advise you to acquire a leaseback property using a French loan , which usually means that you will have no annual taxes to pay. Rates are low in France at the moment , and we can introduce you to French , English speaking banks who finance up to 80% on leaseback properties.

Lastly , we make a high importance of our clients being happy with what they have acquired, and therefore we carefully choose the leaseback developments that we sell , with developers and management companies having good track records .Sometimes the guaranteed returns are slightly lower than unrealistic projects , but you are able to buy in peace of mind knowing that in a few years time you will still be recovering rent.

We hope that this information has answered some of you questions.