To be absolutely clear before reading the below. You are the freeholder of your property and can sell it whenever you wish, the only difference with leaseback properties, is that you agree for a Management Company to let and look after the property on your behalf for a finite period. For this you will receive a guaranteed annual return and a number of weeks use per year.
The leaseback scheme was set up by the French government to encourage investment in tourist destinations throughout France, and there are a number of incentives to attract this kind of investment. The leaseback works over a maximum period of 20 years only, with most 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 – more or less usage for a lower or higher yield.
The leaseback scheme is not for everyone, but is aimed at those who would like to have the hassle of owning their own property 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, it is just that you have a 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 and you can rent it through a local agent – most people usually stay on with the Management Company on a rolling lease though.
The incentives for investing in a leaseback development are as follows:
- VAT savings of 20% on the price of the property - VAT paid by developer and reclaimed from the French government.
- Income tax free annual rent, 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 €10 - €20 per sqm and includes:
- 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)
Absolutely everything involved in running the building is included in this annual fee. The only other cost you will incur is the taxe fonciere (land tax), that all property owners pay in France whether leaseback or classic freehold, 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.