Guaranteed rental income properties
Leaseback schemes were introduced by the French government
twenty five years ago to enhance the tourist industry in different
parts of France. Leaseback enables people to be able to afford to
buy their holiday home or overseas investment property in France
and to cover a lot or all of the mortgage costs with a guaranteed
rental income (typically 4-5%) from a large Management company
who will rent out your property on your behalf for 9 years !
You will also have free weeks of personal use of the property per
How it works?
You acquire a newly built property, fully furbished and equipped ready to be
let. You sign a rental agreement with a property management company for a
minimum period of 9 years.
In return you receive a guaranteed rental income between 4% and 6 % of
your initial investment for 9 years. The French government allows you to
benefit from a VAT concession, which means a saving of 19.6 %* on the
initial property price. In most cases you receive the VAT back from the
government within 8-10 months after the purchase of the property.
You can either occupy the property yourself free of charge (frequently 4
weeks) each year spread over high, mid and low seasons; or allow member
of your family to occupy the property in your place; or give in your right of
occupation in return for a higher payment from the management company.
Some Property Management Company will allow you to occupy the other
residences there are in charge of throughout France for free.
The property management company will return the property to you in good
condition when the lease expires.
When the lease expires, you can either live in the property, renew the lease
contract or sell it. Most of the time it will be renewed for 3, 6 or 9 years.
(*the refund represents a 16.4% discount off the quoted market selling price)
Leaseback: Properties with
Most of the leasebacks high quality services and are ranked from
one to four stars – the higher rank the better the services offered in
The leaseback properties not only offer accomodation but also “a la
carte” services, with sports facilities, reception desk, pools,
breakfast, linen, day nursery, cleaning, etc...
The leasebacks or “Residence de Tourisme” are neither hotels nor
clubs, they are composed of a homogenate development of
apartments or studios laid out in groups of units and offer services
and flexibility for the clients.
Why choose a leaseback property?
To have a holiday home in Europe
To have a property sold furnished and maintained in excellent condition by
a management company while you are not there
Acquire a strong asset with a minimum investment
To receive a guaranteed income from your property for 9 years minimum
To be financed by a European Bank at up to 70-80% of the purchase price
of the property, with attractive interests rates
For Tax advantages and pay no VAT
Lower deposit than for a resale property (5% instead of 10%)
To have an Investments Property located in growth potential tourist areas
along the Mediterranean Coast, the Atlantic coast and the Alps, in a steady
political and economical environment country which is nearby UK, Spain
Who are interested in the leaseback
The leaseback properties attract:
Either clients who want to have a property abroad and only intend to
spend a few weeks per year in it. It is an ideal scheme for foreigners
who get advantage of having a property furnished and maintained
by someone else and also receive a guaranteed rental income.
Investors who want to diversify their property portfolio and want to
have assets in the euro zone.
How many Leaseback properties can I own? Is there a restriction for the
non- European buyer?
You can buy as many leasebacks as you wish. You do not have to be
French or an EU resident to purchase a leaseback property
Where are the most popular locations for the leaseback?
Leaseback properties are popular in many parts of France including
Paris, Normandy, Brittany, the Alps, Riviera. Atlantic Coast, Provence
and Languedoc area. Similar schemes are occasionally available in
Spain and other countries.
The types of locations where leaseback properties are available vary,
but often they are built around alpine/skiing, coastal or golf/sporting
Are Leaseback properties always newly built property?
Not always. The VAT is only paid back by the government if the
property is less than 5 years old. However some leaseback scheme are
renovations and in that case as most of the building will be rebuilt a
share of the VAT is paid back by the government.
What happens if I sell the property before the end of the Leaseback period?
You can sell the property at any time but a leaseback property is a long term
investment. If you sell the property before the end of the lease you would
need to refund to the government the relevant fraction of VAT and you also
need to sell the property with the remainder of the Lease term still
Who pays for all the bills during the Leaseback period?
The management company that is responsible for the maintenance of the
property is also responsible for paying all the utility bills. You may be
responsible for a share of the cost but it depends how long you have used
What are the costs?
Throughout the term of the lease the management company will pay
most of the rates (except Taxe Foncière which you is always paid by the
owner) and utility bills like water, electricity and service charges, and the
costs of insurance, maintenance, repairs and (if it belongs to you)
furniture replacement. There is one tax on property that the owner has
to pay once a year : “the Tax Fonciere”. The newly built properties are
exempted for the two first years following the completion of the property.
There are also the notary’s fees: in France the purchase process is a
regulated process. Notary’s fees (the notary in France is a very highly
trained lawyer specialized in Real Estate law and Inheritance taxes law)
vary between 3 and 4 % for the purchase of a new property whereas it
is usually between 6-8% for a resale property.
Finally sometimes you have also the service charge to pay which is
variable from one development to another.
It is also strongly recommend to have an accountant who will be your
fiscal representative and fill in your tax return France every year. It is
about 360 euros per year.
What type of finance is available?
Leaseback property purchases are normally financed on a “repayment”
mortgage basis rather than “interest-only” over either 15 or 20 years. As
a non-resident if you are in a good financial position you could expect to
qualify for 70% - 80% LTV.
Is my rental income guaranteed?
Yes, your rental income is guaranteed during the lease period and is
usually paid quarterly in arrears. The rental companies who pay the rent
are usually large holiday companies, which work with tour operator.
These rentals are index-linked to construction costs (the INSEE Index of
Construction Costs, www.insee.fr). It means that as construction costs
increase, your rental income should increase also.
How long are the leases?
The leases are generally between 9 and 11 years.
How do I get back the VAT on the property?
It is either the promoter who advances the VAT or you claim it back
through an accountant in France from the French Government upon
the signing of the deed. In the latter case a French Accountant will
usually do this for you. It would cost you about 300 €/ year to have
an annual statement of account together with a completed French
What happens at the end of the Lease?
Sometimes, the lease will not be automatically renewed at the end
of the lease unless it is explicitly written on the contract.
According to French law, either you choose to sell the property, or
live in it. Most common practice is to renew the lease with the same
management company as you still don’t have the hassles to let your
property yourself. If you decided to sell the property, keep in mind
that this may result in you having to pay some of your VAT refund
back to the government, if it is less than 20 years since your original
purchase of the property.