* Capital growth in 2004 was 16%
The property management company will maintain the property at their expense throughout the term of the lease. When the lease expires (after 9 or 11 years), you can either live in the property, renew the lease contract or sell it.
Most leaseback properties not only offer accommodation, but also a la carte services such as different sports facilities, reception desk, pools, catering, linen, day nursery, cleaning, etc. Leasebacks are industry ranked from 1 to 4 stars, depending on the level of services provided. A higher ranking means more extra services offered in the resort. The leasebacks or Residences de Tourisme are neither hotels nor clubs, they are composed of a homogenious development of self catered apartments or studios laid out in groups of units offering extra services and flexibility or clients.
How many Leaseback properties can I own? Are there restriction?
You can buy and own as many leasebacks as you wish. You do not have to be French or an EU resident to purchase a leaseback property. Anyone can acquire.
Where are the most popular locations for the leaseback?
Leaseback properties are popular in many parts of France including Paris, Normandy, Brittany, Aquitaine, the Alps, Riviera. Atlantic Coast, Provence and Languedoc areas with emphasis on ski, beach, family holiday and golf facilities.
What happens if I sell the property before the end of the Leaseback period?
You can sell the property at any time but a leaseback property is a long term investment. If you sell the property before the end of the lease you would need to refund to the government the relevant fraction of VAT* and you also need to sell the property with the remainder of the Lease term still applicable.
* If the property is sold within 5 years of acquisition the full VAT must be repaid. After that it will be on a sliding scale.
Who pays for all the bills during the Leaseback period?
The management company that is responsible for the maintenance of the property is also responsible for paying all the utility bills. You may be responsible for a share of the cost but it depends how long you have used your property.
What type of finance is available?
Leaseback property purchases are normally financed on a repayment mortgage basis rather than interest-only over either 15 or 20 years. As an approved non-resident you could expect to qualify for 60% - 80% LTV.
How long are the leases?
The leases are generally between 9 and 11 years.
What are the costs?
Throughout the term of the lease the management company will pay most of the rates (except Taxe Foncière which you is always paid by the owner) and utility bills like water, electricity and service charges, and the costs of insurance, maintenance, repairs and (if it belongs to you) furniture replacement. There is one tax on property that the owner has to pay once a year in October: the Tax Fonciere. The newly built properties are exempted for the two first years following the completion of the property.
There are also the notary’s fees: in France the purchase process is a regulated process. The Notary fees vary between 2 and 4 % for the purchase of a new property whereas it is usually between 6-8% for a resale property.
What are the other fees in a purchase?
All fees to take title of the property will amount to approximately 4-5½ % of the purchase price of a newly built property. (the fees depend on where the mortage is arranged. France tends to be more expensive due to higher bank fees.
Is my rental income guaranteed?
Yes, your rental income is guaranteed during the lease period and is usually paid quarterly in arrears. The rental companies who pay the rent are usually large holiday companies who work with major international tour operators.
These rental returns are index-linked to construction costs (the INSEE Index of Construction Costs, www.insee.fr). It means that as construction costs increase, your rental income should increase also.
What happens at the end of the Lease?
The lease will not be automatically renewed at the end of the lease unless it is explicitly written on the contract. According to French law, either you choose to sell the property, or live in it. Most common practice is to renew the lease with the same management company as you still don’t have the hassles to let your property yourself. If you decided to sell the property, keep in mind that this may result in you having to pay some of your VAT refund back to the government, if it is less than 20 years since your original purchase of the property.