About French ‘Leasebacks’ and Frequently Asked Questions

Deriving much of its Gross National Product from tourism, the French government has devised an investment strategy that will enhance the development of serviced apartment-buildings, aimed at meeting the needs of an ever-increasing tourist accommodation demand. The French government has given tax breaks to developers in order to encourage them to build ‘Residence du Tourisme’ developments. This VAT refund (which is currently 19.6%) is passed on to purchasers to act as an incentive to get them involved in the scheme.

Leaseback works on the principle that you buy a freehold property, furnish it and lease it back to either the developer or a property management firm for a minimum of 9 years. For the duration of the lease, the property and its grounds are maintained and aside from basic wear and tear, the property is returned to the owner in immaculate condition at the end of the lease period. The purchaser pays the asking price for an apartment, and in return for a lease-back contract, the buyer gets major tax breaks from the French administration (19.6% VAT is refunded).

All leaseback companies are required by law to have professional indemnity insurance. Therefore the property owner is protected in the event of the leaseback company going out of business or into liquidation.

Frequently Asked Questions

LEASEBACKS – GENERAL?

What is a leaseback property?

This lease-back investment enables you to buy a freehold property, saving French VAT of 19.6%. This investment opportunity works on the principle that you buy a freehold apartment, furnish it and lease it back to Home Business for a lease term of 11 years, 3 months. For the duration of the lease, the property is maintained and aside from normal wear and tear, the property is returned to the owner in good condition at the end of the lease period.

Is leaseback (Residence de Tourisme) a permanent scheme?

No. The French Government will close this opportunity when the supply of short-term tourist residences has fulfilled the demand. It is not possible to predict when this will end.

How many leaseback properties can I invest in?

There is no limit on the amount of leaseback properties you can purchase.

Is the income guaranteed?

A rental yield of 4.5% is guaranteed throughout the duration of the lease and is paid every 3 months in arrears. The rent is guaranteed by Home Business and not by the French Government.

What happens at the end of the Leaseback period?

At the end of the leaseback agreement, Home Business might be interested in extending the lease. The length of the second lease is flexible and negotiable.

What if I don’t want to extend the lease on my property?

At least six months before the end of the initial lease the owner can send a registered letter to say they do not wish to renew the lease.

What happens if I have to sell the property before the end of the Leaseback term?

Having freehold title to 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.

Who is responsible for paying all the utility bills during the Leaseback period?

All the ongoing bills are paid for by Home Business who is also responsible for the upkeep and general maintenance of the property during the term.

Will I have to pay anything each year?

Yes, you will have to pay a €220 fee for a local accountant to do a French income tax return. Land tax of approx €350 for a studio apartment and €500 for a one bed is payable in year 3; and management services fees of approx €100.

Who will look after my property during the Leaseback period?

Home Business will manage your property and, because of the high standards required, all properties and their grounds are maintained during the lease period. Home Business is part of the MMV (Mer Montagne Vacances) group which is one of the leaders in the tourism industry in France.

Would I get a higher rental return if I bought a similar property outright?

Possibly, 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% (or more) of all your rental income. Thirdly, you would be responsible for all advertising costs, maintenance bills, cleaning, changeover costs and arrangements with the property between rentals and dealing with emergencies associated with the property.

OWNER OCCUPATION

When I book my preferred week, will I be able to stay in my own property?

As long as you have booked on time, (the October prior to your proposed visit) you will usually be able to live in your own property. If you are late booking, it may have to be another similar property.

The owner is entitled to two whole weeks from Saturday 5pm to Saturday 9am. To take advantage of this possibility, the owner will inform Home Business each year, in writing and by October 15th of the year preceding his or her stay and of his or her preferred dates. On condition that these dates are available, confirmation of the chosen dates will be issued. No reimbursement may be granted for the week if it is not used.

What happens if I do not use my allocated weeks?

There is no compensation for not using your annual entitlement.

What happens if I wish to use more than my allocated weeks?

You would get a discounted rate of 20% on any extra weeks required.

FURNITURE ?

Do I have to buy the property furnished?

Yes, Home Business: apartments are sold fully furnished and equipped ready for letting.

Do I own the furniture at the end of the lease?

Yes

Do I have to renew or decorate the property during the lease?

No, during the period of the lease, Homes Business will take full responsibility for the replacement/repair of furnishings and the upkeep of the décor.

Do I have to attend the completion formalities in person?

No, we can arrange for you to sign a Power of Attorney (procuration) in your country of residence so that the formalities can be completed without you having to travel to France to sign in person.