French leaseback scheme in details


French Leaseback Scheme - Q & A

 

What is a Leaseback Scheme?

Who can purchase a Leaseback property?

Is it possible to secure a mortgage on a Leaseback?

How much of a cash deposit do I need to put down on the Leaseback?

When will I own the property?

Is there a 'cooling off period' for the buyer once the 'Compromis de Vente' has been signed?

Who will look after my property during the Leaseback period?

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

Can I use the property during the rental term?

Can I sell the property before the end of the lease period?

What happens at the end of the Leaseback period?

Is the Leaseback a permanent scheme in France?

Can the 'leaseback company' go out of business or into liquidation?

How do I know that my deposit and other monies paid are safe?

How long does it take for a typical development to complete?

Do I have to complete before the development is finished, and if so do I have to start paying back the loan before I start earning rental income?

Do I have to pay Capital Gains Tax if I resell the property?

 

What is a Leaseback Scheme?

A 'Leaseback Scheme' is a property investment structure that allows the owner to leaseback a newly acquired property to a 'management company' for a period of either 9 or 11 years at a guaranteed rental income over the period. The 'management company' thereafter rent the apartment to tenants and pay the owner between 4 – 5% in rental income per annum.

Who can purchase a Leaseback property?

Anyone can purchase a 'leaseback property' provided they have the means to do so; there are therefore no restrictions for non-residents of France.

Is it possible to secure a mortgage on a Leaseback?

France Invset Holding SASU can arrange financing on your behalf of up to 80% of the mortgage value on most leasebacks thanks t its wide network of financial partners.

How much of a cash deposit do I need to put down on the Leaseback?

A down payment of circa 5 – 10% is generally required up front. These fees include a reservation deposit of 5% or more depending on the level of advancement of the construction work.

When will I own the property?

The buyer becomes the owner of the property from the 'day of purchase'. Thereafter the buyer enters a leasing agreement with a 'management company' for a period of either 9 or 11 years wherein someone else rents their property over the leasing period.

Is there a ‘cooling off period’ for the buyer once the ‘Compromis de Vente’ has been signed?

The law provides for fourteen-day period of reflection for private individuals buying residential property in France. During this period the buyer can withdraw from the acquisition of a residential property without incurring any financial penalty.

Who will look after my property during the Leaseback period?

A designated 'management company' is responsible for the management of all properties on the development. They are under obligation to ensure that all properties and their grounds are maintained in perfect order during the 9-year lease period.

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

All utility bills are paid by the 'management company'; they are also responsible for the upkeep and general maintenance of the property during the lease term. The 'taxe foncière' (local rates tax) are the responsibility of the owner of the leased property along with co-ownership charges through the "syndic de co-propriété"

Can I use the property during the rental term?

In most developments it is possible to have personal use of the apartment (or similar in size to the one you bought) from one to three weeks (sometimes more). However, the guaranteed rental income will decrease in proportion to the usage.

Can I sell the property before the end of the lease period?

As the owner of the property, it is possible to sell at the end of lease. Be aware that to be entitled of the fiscal advantages of the VAT refund, you need to let your property to the management company for 20 years, otherwise you may incurr so fiscal penalties.

What happens at the end of the Leaseback period? (take a basis of 20 years)

At the end of the 'Leaseback period' the property reverts back to the buyer to do with as he/she wishes. The buyer can sell the property, rent it out privately, live in it oneself, or in some cases negotiate a new lease with the 'management company'. You can resell your property within the lease period as well upon rserve you sell your property to an individual who will take over the lease agreed with the management company.

Is the Leaseback a permanent scheme in France?

The Leaseback Scheme is not an 'open-ended' affair. The French Government is likely to close this opportunity whenever they consider that it has fulfilled the state's need for this type of residential construction.

Can the ‘leaseback company’ go out of business or into liquidation?

Only government-approved companies are permitted to operate the leaseback scheme. All 'leaseback companies' are required by law to have professional indemnity insurance. This insurance is designed to protect the property investor.

How do I know that my deposit and other monies paid are safe?

Each payment that is made in relation to the property will be lodged with a Public Notary. Notaires are French public officials that enjoy respected status in society. They are the equivalent of 'property solicitors' and as such prepare title deeds etc. They do not act for any one party and are obliged to conduct transactions strictly within the confines of the law.

How long does it take for a typical development to complete?

A typical timeframe for the completion of a property development is 1 - 2 years.

Do I have to complete before the development is finished, and if so do I have to start paying back the loan before I start earning rental income?

All 'Leaseback Schemes' are sold 'off plan'; such properties generally sell within a few weeks of being released on to the market. Therefore, in order to reserve a property, the investor is obliged to pay the deposit and complete the full purchase within a 3 - 4 month period.

Do I have to pay Capital Gains Tax if I resell the property?

Capital gains tax (CGT) is eligible to be paid on the sale of the property. However, if the property is held for a period of 30 years the investor is exempt from capital gains tax.

Visit our French leaseback properties available by the Sea or Mountain to the following link:

 Leaseback property for sale for holidays