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France Leaseback Property »
Frequently Asked Questions
 These
are general questions regarding Leasebacks and the answers will vary slightly
between each individual scheme.
View
our list of France leaseback properties for investment - (Assetz France Site)
Download the Complete Guide to Buying French Leaseback Property - Free to all our members.
Q. What's the difference between a Leaseback
scheme and a time-share?
A. When you purchase a time-share, all you are
getting are specific periods of time which you can use within certain locations
over a set number of years. Once the term comes to an end, you are left with nothing.
With a Leaseback scheme, you are the actual freehold owner of the property and
have simply entered into a 9-year or so lease agreement. After this agreement
ends, the property is still yours to do with as you wish within certain rules.
The only thing in common with both schemes is that you only have specific times
you can use the property during the 9 years.
Q. What happens if I have to sell the property
before the end of the Leaseback term?
A. As the freeholder of the property, you can
sell it at any time. However, you would have to take into consideration that you
would be selling the property with the residue of the Lease term in place for
the new buyer, and whatever period was remaining on the lease would have to be
reflected in the sale price and also a proportion of the VAT discount would have
to be refunded to the Government (1/20th of the vat for every year before 20 years
have expired)
Q. Who will look after my property during
the Leaseback period?
A. The management company manage all of the
properties on the development and, because of the high standards required, all
properties and their grounds are maintained in perfect order during the 9 year
period.
Q. Who is responsible for paying all the
bills during the Leaseback period?
A. All the utility bills are paid for by the
management company who are also responsible for the upkeep and general maintenance
of the property during the term. The local 'Taxe foncière' (local rates)
would be the responsibility of you, the owner. For a 2-bed apartment in the South
of France this may be say €300 pa. No 'Taxe foncière' is due on new
properties for the first 2 years.
Q. Why is there a discount on the purchase
price?
A. The French government has given tax breaks
to developers in order to encourage them to build 'Residence de Tourisme' developments.
This discount or VAT refund is passed on to purchasers to act as an incentive
to get them involved in the scheme. There is a great shortage of holiday accommodation
in the summer and France earns a lot of its’ Gross National Product from
tourism.
Q. When I book my preferred week, will I
be able to live in my own property?
A. As long as you have booked on time, you will
usually be able to live in your own property. If you are late in booking, it may
have to be another similar property.
Q. What happens if I can't use all my allocated
weeks?
A. Owners often arrange to sub-let the property,
although you would have to do this privately. Some Leases restrict this.
Q. What happens if I wish to use more than
my allocated weeks?
A. Generally you would get a discounted rate
on any extra weeks you required over and above those allocated to you.
Q. Can I use the property during the off-seasons?
A. Yes, but a small administration fee will
be charged or a discount given on the list price from the rentals company.
Q. With the lease with rental income option,
is the income guaranteed?
A. The rental income is guaranteed throughout
the period and is usually paid every 3 months in arrears. The rental companies
who pay the rent are usually large holiday companies with substantial numbers
of clients and assets. The rental is not guaranteed by the French Government,
contrary to what some web sites state.
Q. What happens at the end of the Leaseback
period?
A. At the end of the 9 year or so leaseback
agreement you need to make a decision about what to do with the property. The
common answer and easiest solution is often to sign a new commercial lease term
with the holiday company. Alternatively you can sell it, rent it out privately
(subject to agreement from the management company), or live in it bearing in mind
our comments regarding the sale of the property in less than 20 years above and
that the VAT refund assumes that you are making the property available for the
rental market. In addition not providing suitable notice and getting agreement
for the ending of the lease to the holiday company may result in penalties, typically
of one years rent, although we are yet to hear of a case like this in the 10+
years that leaseback has been operating in France.
Q. Would I get a higher rental return if
I bought the property outright?
A. Generally yes, but there are three points
to consider. Firstly, your annual rental income would not be guaranteed, secondly,
should you wish to use a managing agent, you will find that they will charge up
to 25% of all your rentals and thirdly, you would be responsible for all advertising
costs, maintenance bills, pool cleaning, gardening, apartment cleaning, changeover
costs and arrangements with the property between lets and dealing with emergencies
associated with the property. Plus old property has costs of purchase of about
10% including stamp duty, legal fees, mortgage fees etc, whereas leaseback costs
of purchase are only around 4-5%. Furthermore old property may need renovation
before rental and the furnishings are provided in leasebacks but not in old property.
Q. How much cash would I need to buy
a leaseback versus an older property.
A. A leaseback would cost 20-30% deposit and
4% cost of acquisition (legals etc), a total of 24-34% of the advertised purchase
price or 8-18% if the vat is refunded later rather than being taken off at time
of purchase.
An older property (eg apartment) would cost 15-30% deposit, 10% cost of acquisition,
5-15% refurbishment costs (kitchen, bathroom etc) and 5-10% for furnishings –
a total of 35-65% of the advertised purchase price.
Q. Do I pay interest on a mortgage on
a leaseback as stage payments are made ?
A. As leaseback properties are
usually bought off plan 12-24 months before they are complete, do I have to pay
the mortgage repayments while it's being built - before I receive any income ?
There are french mortgage companies who offer a grace period called "franchise"
during the construction of the property. This arrangement lets you defer the full
mortgage repayments during the build , you only pay the life insurance and a very
small percentage of interest on the amount of money which has not yet been transferred
to the developer. This usually works out at around € 40 - € 100 per
month depending on the purchase price.
It is easy to see that for investments or investments with holiday use the
leaseback scheme is a very appealing choice.
View
our list of France leaseback properties for investment - (Assetz France Site)
If you have any other general questions then please contact us. For legal advice
please consult your solicitor.- [ Click
Here to E-mail Us ].
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