It is a process whereby a UK buyer can purchase an OFF-PLAN ski chalet or apartment and then lease it back to a Managing Agent in return for a fixed guaranteed yearly rental income.
When you purchase a French leaseback property you own the freehold of the property from Day One. The title deeds you receive are exactly the same as if you purchased the property without a lease, what we term as "pure freehold property". You are simply signing a rental agreement for your property to be professionally managed.
Apartment A14: Luxurious 2 bedroom apartment, ski-in-ski-out, Private Spa facilities, underground parking, South & piste facing views with 310km of linked high altitude skiing.
The Apartment costs 261,828 euros gross (a market value today of GBP 180,000)
But you can buy the apartment off-plan with a leaseback contract today for 228,953 euros. Just GBP 157,000.
http://www.ukoverseas.com/propertylist.aspx?area_pid=133583
The French government will give you this discount of 32,875 euros if you allow a major tour operator to manage the property on your behalf. Because this will attract tourists to France which is their Number One income generator. It is that simple. The managing agent will furnish the apartment for you included in the price, provide a luxury Spa retreat facilities, and pay most of your running costs.
And most importantly - you now have the right to re-sell your apartment on completion or later at the original gross market value price (nearly 20% higher) plus any capital appreciation during the construction process (normally one year). Even if you hold your apartment for the longer term - on expiry of the lease (9-11 years) you are the pure freehold owner, able to use your property as you choose.
Now all of this, of course, also depends on getting the basic re-sale guideline principles correct i.e location, location, location and buying a quality construction project. This ultimately is where we can provide support and guidance, and source for you the very best apartments on the market in ski resorts / areas where there is genuine capital upside potential.
The Apartment A14 in our example above is a classic example of how to invest safely and profitably in a prime location. It has a perfect position, all of the re-sale attractions that a future client will look for (location, views, quality finish & facilities). And you get a 20% head-start on the property market today. You even only have to provide a mortgage for the net price, which we can also find for you.
To receive further details on this apartment please complete an Enquiry Form or if you have any questions in general on the leaseback procedure.
This new French law change - no VAT repayment at all - is a stroke of genius. Previously you had to own the property for 20 years before you were entitled to the full refund! And a great opportunity to buy prime located ski property at an instant price discount.
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Leasebacks - FAQ’s
1. What are the guaranteed return/occupancy options for these properties?
You are guaranteed a fixed income as specified in your sales contract. This income is guaranteed whether the leaseback company successfully sub let your property or not. You have a legally binding contract to that effect. Your personal occupancy will depend on what you choose at the outset, and which can usually be changed during the course of the lease, if desired.
2. Is the income we receive net of all charges?
The leaseback company pays all management costs, repairs, maintenance charges, taxe d’habitation, electricity, water etc.
Are there any other charges we are liable for on a monthly/annual basis?
Normally, only the “Taxe Fonciere” (rates). Though some companies do put in a small annual charge of about 100 Euro. Always best to check on this point. The Taxe Fonciere is payable at the end of each year (in arrears). Typically, for a 100,000 Euro property, expect to pay around 300 Euro per annum. Usually you are exempt for the first two years if it’s a new build.
3. Is the Management Company entitled to automatically renew the lease after the allotted period (e.g. 9 years)?
Not unless a clause is inserted in the contract that specifically states that condition. Incidentally, the lease is not always 9 years. Leaseback companies choose the duration they want. We know of one company that imposes a 15-year lease. This is important to check.
Do we have to include a waiver in the lease agreement to prevent this?
Just be sure from your notary or legal counsel that you are safe on this point. Be sure also whether or not you need to give notice six months before the termination of the lease.
4. Are there any restrictions to living permanently in the property after the expiration of the lease?
Not usually, but worth checking.
5. a) Are the properties delivered furnished?
b) At the end of the lease are we owners of the furniture?
c) Can we change the furniture if we want, or make interior alterations to our property?
a) Yes. Including cutlery and crockery.
b) Yes.
c) Only at the end of the lease.
6. What services do you provide and what are your fees?
We assist you in selecting a property, and are available for any assistance you may need up to the acquisition, and beyond.
Funding the purchase and reselling are other areas where we can help.
The leaseback company pays our fee.
We make no charge on our clients.
7) Who are UK Overseas Limited?
We are a real estate marketing company, registered and incorporated in the UK. We act directly with many of France's leading Promoters and Constructors. We are experts in the field of leaseback purchase and where necessary only work with fully licensed Immobilier.
8) What’s to stop me going to a site and buying a leaseback direct?
Nothing at all, except:
a) The prices we quote are the same, as you will be quoted on site. You will then have to deal direct in French, with no English translation.
b) Many leaseback programs are sold out before construction has even started, in which case there’s no site office.
9) The ROI - can you tell me how this is calculated, i.e. % of purchase price?
Also how is it paid - in arrears, annually, monthly?
The Return on Investment (R.O.I.) is calculated on the ex-VAT price. (Which is normal, as you are not paying the VAT).
Some companies pay this quarterly, others annually, always in arrears.
10) Is the leaseback offering the highest R.O.I, the best investment?
Not necessarily. You must not forget that this is a real estate investment that one-day you may want to sell. Usual Real Estate rules apply: location, location, location.
It may be better to invest in a 150,000 Euro apartment in say PARADISKI on the piste offering a 3.0% R.O.I, than to put your money into a 100,000 Euro apartment in a less established ski resort that no one has ever heard of that is offering say 4.5%. These are factors that we can help advise you on, and analyise the risk and rewards.
11) Leaseback sounds very similar to “timeshare”, is it?
Not at all. There are certain similarities in the way they are managed, ie: you can swap weeks with other residences managed by the same company, but there all semblance ends. The fundamental difference is that as a leaseback owner YOU OWN A 100% FREEHOLD PROPERTY FROM DAY ONE. (Even during the lease period).
12) Leaseback sounds a bit like “leasehold”, is it?
Not at all. Leasehold is hardly existent in France. 99.99% of properties are FREEHOLD.
All properties proposed by us are freehold.
13) What finance do the leaseback companies offer?
None. It’s up to you to apply to a bank for a loan. We can assist you with this.
14) How can I finance my leaseback purchase? Please explain.
110% is available for a French resident only. Not necessarily a French national – anyone who lives and pays income tax in France.
As a non-French resident banks offer you 70%.
However, if they like your financial profile they can be pushed to provide 80% of the property & furniture cost, on the VAT included price.
This is still a very high loan to value proposal. For example:
Say you but a property that is for sale at 100,000 Euro including furniture and VAT.
You could get an 80,000 Euro mortgage.(80%)
You fund 20,000 Euro plus the notary fee (2.5% on new build) Total: 22,500 Euro to pay on the day of final signature.
BUT. You get the VAT back. In this example 19,600 Euro.
Therefore your real initial outlay is only 2900 Euro including the acquisition legal costs!
15) When do I get the VAT back?
It depends on the leaseback company. They each have there own rules. One major company doesn’t even charge, they absorb the cost and apply for the refund themselves, so when you sign the title deed you only pay the ex VAT price. Another company takes six months, and yet another a year or more. This point should be verified before signing a contract.
16) Do I have to apply myself to get the VAT back?
No, normally the leaseback company does this on your behalf, but do verify this point.
16) Why does the government give back the VAT?
To encourage investment in this type of scheme. They lose on day one, but reel it back in many times over the lease period, (but thankfully not from you).
They encourage buildings to be constructed often in areas of high unemployment. These buildings require employees. The leaseback company pays social charges and taxes. Then all the tourists who come to stay during the lease period spend their money, and everything they buy has 19.6% VAT on it!
So over nine years or more the government does very nicely out of the deal.
17) This scheme sounds too good to be true, what’s the catch?
No catch. This is a genuine opportunity sponsored by the French government, who simply want to increase the number of beds available for its N°1 industry: Tourism.
If you help them, they will reward you.
18) How long has the scheme existed?
Over 20 years.
19) Is it established indefinitely?
No. It’s a window of opportunity the French government are leaving open until they feel they have reached saturation point for this style of residence. Then they will close the window.
20) Can I buy as many as I want, even if I am not French and living outside of Europe?
Yes.
21) Must I pay French Income Tax?
Normally, no. The leaseback company structure the acquisition so that you are not liable.
22) Capital Gains Tax?
Yes. As a non-resident you pay 16% of the net profit when you sell. (25% for permanent french residents).
However, you can deduct your acquisition cost (Notary fee), selling cost (agency fee), and the cost of any major improvements made to the property. There is an erosion of monitory value facture applied to allow for inflation, which reduces the figure further. Finally, after the first two years, each year you hold the property there is 5% reduction of CGT liability. Therefore at some point in the future you will be totally exempt of CGT.
23) What’s the 20 year rule regarding VAT?
The government reimburses you the VAT on the basis you remain owner for 20 years. If you sell before, they may require that you repay a proportion of the sum back in proportion to the number of years you have owned the property. I.e.:
You received 20,000 Euro VAT refund 15 years ago and now you want to sell. You should pay back 5000 Euro, and the government will then pass this on to your purchaser. However, new fiscal laws have recently been passed, and provided the new purchaser takes over your lease contract obligations, there is now no vat to repay at all. This is very advantageous for leaseback first time and second time purchasers. We recommend that you take legal advice on this matter prior to purchasing.
