french leaseback property
News Posted On: 22 April 2009
What is a Leaseback?
'Leaseback Property’ is a real estate scenario where a freehold property is “leased back” to a Property Management Company, for a fixed tenure, which in turn, manages or commercially exploits it without interfering with its ownership. Normally, the Company lets the premises on rent and gives certain percentage of rental income to the actual owner.
What is French Leaseback Property?
Loue Meuble Non-Professionel (LMNP) or the French Leaseback Property System was introduced by the French government in early 1980s to increase the quantity of holiday accommodation available in the country.
This was a measure to offset the growth of required holiday accommodation sites in the country, as a result of burgeoning tourism industry in the country.
Under the LMNP, the investors who purchased the property had to lease it back to a pre-determined Property Management Company for a fixed period of time (generally, between 9 to 11 years, extendable up to 18 years). During this period, the task of the Management Company is to furnish, equip and let the property for a guaranteed net return.
The return on property tends to range between 2.5% and 6% per year depending on the factors, like the Property Management Company, nature of property, its location, and whether or not you will be enjoying the property for holidays.
The French Leaseback Property Scheme is a runaway hit with most leaseback developments taking place on the Mediterranean and northern coasts, the Alps and in Paris. The Ski stations like Val d Isere in the Savoie region of France are just about ideal investment for a Leaseback property. Similarly the ski resorts in the Three Valleys area (Trois Vallees), like Meribel, Les Menuries, Courchevel and Val Thorens also attract tremendous Leaseback investment.
Some other hot locations for Leaseback Property investment in France include Les Arcs 1950, the French Riviera the Languedoc Roussillon area along the Cote Vermeille between Perpignan and Banyuls-sur-Mer, Pyrenees ski resorts like La Mongie and Font Romeu, Biarritz, Capbreton and Arcachon, Brittany, Normandy, and Nord Pas de Calais.
Advantages of French Leaseback Property
The best part in owning a French Leaseback Property is that the owner avoids paying French VAT on new property, which amounts to about 19.6% that would normally apply.
Additionally, the owner also avoids paying any tax on the Capital Gains if he keeps the property for 15 years.
In a recent clarification by the French government, it has been resolved that upon the sale of a leaseback property, the owners are not required to repay the VAT pro rate temporis as long as the new buyer continues with the lease agreement. Therefore, the new buyer also does not require to pay VAT either.
Leaseback arrangement ensures regular annual rental income. However, if you plan to occupy the premises for some time of the year, the rental income will accordingly decrease. The rule is ‘the less you use your property the higher your yield will be’.
With a number of Property Management Companies to choose from, the investors have choices in plenty. The allurements include flexible packages, including renegotiating the number of weeks’ access to the property each year at a price.
Legalities and Cautions
The experts advise the potential French Leaseback Investors to go thoroughly with their contract. Every clause of the contract must be carefully vetted with the help of a local lawyer. Due to the technicalities involved, it’s better to be safe than sorry.
At the expiry of the initial fixed term and depending on the peculiar terms and conditions of the contract, you can either exit the lease or renew it with the Management Company. In either scenario, make sure that that you negotiate your rents upwards. For such an advantage, it is pertinent to check the initial contract and ensure that upward revision of rent is an integral and indispensable part of the contract.
However, you must remember that while capital appreciation is incidental, leaseback is principally meant to ensure a guaranteed rental income.
To view our Leaseback property for sale in France simply click on the link
Back to news articles for this country
Latest Related News Articles in France
French Developers Expect to Benefit from UK Retirees
2012-01-11
The number of people reaching retirement age in the UK is due to increase by 22% this year compared .....
Alpine Property Sales Up as Resorts Increase Year Round Appeal
2011-11-04
Alpine property is increasingly being seen as a good investment opportunity with solid year round re.....
French Property Still Most Popular With Brits Says Conti
2011-09-22
According to Conti, the overseas mortgage specialist, France is still the most popular country as fa.....
France still No1 for Brits buying abroad
2011-09-19
Contin Financial reveals its overseas hotspots for mortgage enquiries over the past year......
French Tax Reforms Boost the Property Market
2011-09-15
According to new data French property prices grew 3.3% quarter on quarter in Q2. The rise is being p.....
Continued Stability Increasing Popularity of French Property
2011-09-09
The French National Association of Immobiliers -- the French estate agent trade body -- have forecas.....
French Developer Announces Strong Half Yearly Results
2011-08-02
The French developer and house builder, Nexity, has just announced its half yearly results which sho.....
French Resort Meribel Attracts the Summer Crowd
2011-07-18
If you mention the French resort of Meribel to anyone it's likely they will think of skiing, as it i.....
French Government Drops Plans for Second Home Tax
2011-06-21
The French government has dropped plans to impose a new tax on second home owners, even though they .....
French Property Tax May not be So Bad
2011-06-07
It’s now thought that the French property tax on second homeowners may not be as bad as previously f.....