The leaseback scheme was set up by the French government in 1986 to encourage investment into tourist destinations in France such as the French Alps, South of France and some major cities. The idea is to create a constant churn of ‘hot beds’ in these regions to keep the local economies strong and because of this, the government offer buyers a number of incentives to attract this kind of investment.
The leaseback works over a period of 20 years, with most commercial leases being split into two terms. The first term is usually 9 years, which can then be renewed for a further 11 years on different terms if you wish.
The leaseback scheme is not for everyone, but is aimed at those who would like to have the hassle of managing their own property from abroad taken out of their hands, whilst still using the property for a number of weeks a year and receiving a guaranteed return on their investment. You are always the freeholder of your property, you simply have a commercial lease attached to it for a finite period. After the leaseback period expires the property will revert to a standard (classic) freehold property with no obligations to a Management Company – though, in our experience, people usually stay on with the Management Company on a rolling lease.
The incentives for investing in a leaseback development are as follows:
VAT savings of 20% on the price of the property - developers reclaim the VAT on your behalf directly from the French Government to facilitate your cash-flow.
Income tax free annual rent (in many cases for the entire duration of the lease), offset by the costs incurred in purchasing the property and running it, including the Notary fees, the cost of furniture, interest on a mortgage and service charge.
Property looked after and managed for you in your absence all year round. There is a management fee for this which varies between developments. This fee covers:
- All maintenance of your apartment, the building and communal areas
- Water & electricity costs
- Building insurance, inside and outside
- Upkeep of communal areas (swimming pool, spa, lounge & reception)
- Reception and building staff
- Administration costs
- Replacement of furniture if tired or broken (fridge, TV etc.)
- Taxe d’habitation (council tax)
- Marketing of the residence to optimise occupancy
Absolutely everything involved in running the building is included in this annual fee. The only other cost you will incur is the “taxe foncière” (land tax), that all property owners pay in France whether leaseback or classic freehold. The cost of this is usually around €10-€15 per sqm.
In short, Managed/Leaseback properties are a hassle free, tax efficient way of owning a ski property in France. Please contact us for further information and advice.