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FAQs and Leaseback Checklist
The leaseback plan is an investment plan, we stress that this is not a way to get a self-financing home. I most cases you can select some weeks each year for your own use.
1. What is the advantage of a leaseback? 2. Is this "gift" from the French government mine to keep? 3. Why does the French government give back the VAT? 4. Is a leaseback similar to a timeshare? 5. Is a leaseback a leasehold property? 6. Can I buy a leaseback property direct from the developer? 7. Is there a guarantee of the rental occupancy? 8. How long has France had this leaseback plan? 9. Is it a permanent scheme? 10. How many leaseback properties can I invest in? 11. Can the leaseback company go out of business or into liquidation? 12. Do I pay French income tax? 13. Are there management charges? 14. Are there any other monthly or annual charges? 15. Do the management renew the lease automatically? 16. Is the lease always for 9 years? 17. Do I have to give notice before the end of the lease? 18. At the end of the leaseback period can I live in my home permanently? 19. Do I have to buy the property furnished? 20. Do I own the furniture at the end of the lease? 21. Do I have to renew or decorate the property during the lease? 22. If furnishings have to be replaced before the end of the leaseback who is responsible? 23. Are leasebacks always new developments? 24. Are the charges the same if the development is not new. 25. Is there an advantage in buying a renovation or refurbishment? 26. How much will I earn on my investment? 27. Who pays this and when? 28. How do I calculate the R.O.I.? 29. What is the best R.O.I? 30. Can I get a loan to buy a leaseback property? 31. How much can I borrow? 32. What are the other fees in a purchase? 33. Can I borrow from the development company? 34. How do I get back the VAT on the property? 35. Do I have to apply to get back the VAT? 36. Do I have to pay Capital Gains Tax if I resell? 37. When the mortgage is paid, if I renew the lease how much income do I keep? 38. When the lease is ended, are there any management charges for the property? 39. Is there a catch? 1. What is the advantage of a leaseback? The big advantage is that the French government give you back the VAT normally paid on a new development, this is 19.6% of the price. That is, you are given back a present of almost one fifth of the purchase price. 2. Is this "gift" from the French government mine to keep? Yes, but, if you resell your property you may have to repay some of the VAT. This will depend on how long you have owned the property. The amount that may be reclaimed is zero after 20 years and reduces over that time. Any repayment you make is passed on to your purchaser 3. Why does the French government give back the VAT? To encourage investment in these developments which are mostly related to tourism. For the government it is a long term investment and gives employment as well as encouraging visitors to France. 4. Is a leaseback similar to a timeshare? No, it is completely different. You own the freehold, it is your property. 5. Is a leaseback a leasehold property? No, you are the freeholder. Leasehold properties are very rare in France. 6. Can I buy a leaseback property direct from the developer? Yes, but the price you pay will be exactly the same as that from an agent. Importantly however, many of these ptojets, and certainly most of the succesful ones,will be fully sold before building is started and you will miss your chance to invest. 7. Is there a guarantee of the rental occupancy? You are guarenteed a fixed income. The occupany rate of the property is the problem of the managing company. Your income is guaranteed even if the property in empty. Your income is usually index linked to the cost of living. Checklist. 8. How long has France had this leaseback plan? More than 20 years. 9. Is it a permanent scheme? No. The French Government will close this opportunity when they consider it has met the needs for this type of residence. It is impossible to know when this will end. 10. How many leaseback properties can I invest in? As many as you wish to. You do not have to be a French resident, or even live in Europe. 11. Can the leaseback management company go out of business or into liquidation? All leaseback companies are required by law to have professional indemnity insurance. This will protect you. Checklist 12. Do I pay French income tax? No, the leaseback company usually arrange this so that you do not pay income tax Checklist 13. Are there management charges? All costs of management, maintenance, repairs and services such as electricity and water are paid by the leaseback company. Checklist. 14. Are there any other monthly or annual charges? You usually pay only the local rates (Taxe Fonciere). There are exceptions for two years for a new building. Checklist. 15. Do the management renew the lease automatically? No, unless you have agreed in the contract to do this. Checklist 16. Is the lease always for 9 years? No, leaseback companies can ask for any period from nine years,which is the minimum period. Nine years is common, some are 11 and even 15 years. Checklist 17. Do I have to give notice before the end of the lease? Yes, this is usual the period should be 6 months but this will be clearly stated in your contract. Checklist 18. At the end of the leaseback period can I live in my home permanently? You must assume that the answer is no, the leaseback plans are designed to attract and serve tourist investment. These plans are always in groups or complexes. If the overall Plan ceases to be as originally designated than you may have to repay taxes. Checklist. 19. Do I have to buy the property furnished? Yes leaseback properties are sold fully furnished and equipped ready for letting. 20. Do I own the furniture at the end of the lease? Yes. 21. Do I have to renew or decorate the property during the lease? No, at the end of the lease you can do what you wish to the property. During the period of the lease you have no worries or responsibility for the furnishings. 22. If furnishings and fittings have to be replaced before the end of the leaseback who is responsible? All leaseback companies will want you to be happy so that they can hope to continue business with you. Your property will not be able to be rented if it has deteriorated so they are certain to ensure it is well maintaned. At the end of the leaseback they must leave your property in a reasonable condition which will take into account a reasonable amount of "fair wear and tear" which would be considered normal. 23. Are leasebacks always new developments? No some are renovations or refurbishments 24. Are the charges the same if the development is not new. No, the fees for the Notaire will be up to 5% higher. The amount of VAT you can get back is lower, usually 10% 25. Is there an advantage in buying a renovation or refurbishment? It depends on the location. If it is in a prime position then the capital gain may well be much better than a new development in a more remote area. 26. How much will I earn on my investment? The Return On Investment - R.O.I. - is usually around 5% - some times a little less, it can be more. This is the income from the company. On top of this you have the capital appreciation of the property. 27. Who pays this and when? The management company pays this to you, the terms of payment vary from quarterly to annual payments in arreas. Checklist. 28. How do I calculate the R.O.I.? It is on the price you pay - the price after you get back the VAT. 29. What is the best R.O.I? You must take into account the capital growth as well as the income. This will depend on the period you keep the property for. At the end of the leaseback period, a property in the sea front is likely to have appreciated more than a more remote development. 30. Can I get a loan to buy a leaseback property? Yes, it is the same as any other property, you buy the freehold. 31. How much can I borrow? If you live in France and are a French taxpayer it is possible to borrow 110% of the total price. A non resident can usually borrow 70%, but up to 80% if you are accepted. However, you receive back the VAT of 19.6%. So in fact you can borrow nearly 100% of the purchase price even if you are a non resident. 32. What are the other fees in a purchase? Notaires fees are 2.5% for a new property, up to 7.5% on refurbished. 33. Can I borrow from the development company? Not usually. We can suggest sources of loans and finance. 34. How do I get back the VAT on the property? This will depend on the leaseback management company. Some will absorb the cost, charge you less and get the refund, others can take up to a year or longer. Checklist 35. Do I have to apply to get back the VAT? No usually the leaseback company will do this for you. Checklist 36. Do I have to pay Capital Gains Tax if I resell? Yes unless you keep the property for 22 years. CGT starts at 25% for residents and 33% for non-residents. It reduces after 2 years until it is zero after 22 years. Tax is payable on the gain less Notaire a fees and costs of major work carried out. 37. When the mortgage is paid, if I renew the lease how much income do I keep? All the rental income is then yours. 38. When the lease is ended, are there any management charges for the property? Yes, the same as for any shared facilities and for any otehr proeprty. These charges are controlled and have to be audited. 39. Is there a catch? No, the French government wants to increase the number of visitors to France. This is a scheme which heps that and benefits the investor. 
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