The big advantage is that the French government give you back the VAT which is paid on a new development, this is 19.6% of the price. But do your sums correctly, if the selling price is 100,000 euro then the price on which the VAT was calculated is 83,600 euro. You will get back 16,400 euro which is 16.4% of the price you paid. In other words you get back about one sixth of the total VAT inclusive price not one fifth. In some cases the price you are quoted is with the tax already recovered by the contractor.
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.
No, it is completely different. You own the freehold, it is your property. With a time-share all you get are very specific dates which you can use within certain locations in a fixed number of years. Once this term ends you are left with nothing. With a Leaseback scheme you are the freehold owner and have only entered into a lease for a contracted period, usually 9 years. At the end of this time the property is entirely yours.
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 projects, and certainly most of the successful ones, will be fully sold before building is started and you will miss your chance to invest.
You are guaranteed a fixed income. The occupancy 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.
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.
11. Can the leaseback company go out of business or into liquidation?
Leaseback companies are generally well capitalized companies and no to our knowledge there has notbeen a case of investors losing money because of a liquidation.
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 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.
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.
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.
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.
37. When the lease is ended, are there any management charges for the property? Yes, the same as for any shared facilities and for any other property. These charges are controlled and have to be audited.
39. Can I sell the property before the end of the Leaseback term?
Yes you can sell your property at any time, you are the freeholder of the property. However you must take into consideration that you would be selling the property with some time remaining on the lease and this will be reflected in the sale price. In addition, and most importantly, a proportion of the VAT you were repaid must be refunded to the Government, 5% of the VAT you received is paid back for each year before 20 years have expired.
This depends on the agreement with the leaseback company. Usually you can but you have to do this privately and you will have to do the advertising yourself. Checklist
