Buying French property via a leaseback scheme:

What Is A Leaseback?

The Leaseback scheme was introduced by the French government to stimulate tourism in France by increasing the quantity of quality holiday accommodation available in areas capable of attracting more tourists. Leaseback is extremely popular with French investors who account for the majority of all purchases.

Properties will commonly be apartments or townhouses and will range from studio apartments to two bedrooms. Larger properties such as villas with pool tend to be rare.

Leaseback developments are usually sold ‘off-plan’ - a feature of the French property market – by which buyers consult detailed plans, drawings and specifications to help them understand what the development prior to purchase. These documents subsequently form a part of the legal contract. The properties come fully equipped, however purchasers will typically not have a choice of the finishes as they are generally all equipped and decorated to the same standard throughout the residence.

Leaseback properties are usually located in a ‘Residence de Tourisme’ (Tourist Residence) which offers short term holiday accommodation and provides a variety of guest services including reception, breakfast, laundry and linen services, swimming pool, restaurant, kids club etc.

Under the scheme the purchaser buys a freehold property which is then ‘leased back’ to a management company for a period of either 9 or 11 years. In return, the management company guarantees a rental income from the property, which it secures by letting the property to tourists on a short-term basis. The management company also looks after all maintenance – inside and out – during the leaseback period.

Under the Leaseback scheme the French government agrees to reimburse the VAT on the purchase – an effective discount of 19.6 %. This VAT rebate must be claimed back from the Government. If you choose to buy a property, the company will claim this VAT back for you. When the rebate is received by the developer it is offset against your next payment instalment.

The owner thus benefits from owning a freehold property with a guaranteed income, without the hassle and uncertainty that goes with letting and maintaining the property. The guaranteed rental income tends to range between 2.5% and 4.5% per annum depending on the location, the property and the amount of personal use required by the owner.

Owners can also usually use the property for a certain amount of time each year. The amount of time varies by development - some developments will offer owners discounted use (usually ranging between 10-20%), others a number of weeks per annum, some no usage at all.

It is important to note that leaseback is not timeshare. Whilst owners are leasing back their property and may only have use of it at specified times of the year, the owner is the Freeholder of the property at all times.