French LEASEBACKS IMPORTANT INFO

[Lynda Saxton]

leaseback

Hi again Paddy,
Your statement that no property purchase is risk free is incorrect, if you buy a property at the right price and in a safe country that has proper checks and balances for buyers, like France, your property purchase is risk free, it is if you try to get into get rich quick schemes, and it is not the leaseback purchaser that will get rich, the idea of buying a property, is to be able to do
with it,as you wish, when you wish, so that if your circumstances change, you are free to liquidate your asset as your need dictates, with a leaseback
there are so many restrictions and hypotheticals, you are stuck.
Also not everybody on this site is a sales agent, broker,or commission agent,
I have nothing to do with "property deals", but I have had friends burned by such deals and I hate to see it continue to happen to unsuspecting people.
Some property sales are straight forward and uncomlicated, but anywhere
that gives you the HARD SELL in my view, should put up red flags, the only person that makes out in those deals is the salesman, not the purchaser.

 

[geordie]

Linda,

I have to disagree with you and believe Paddy G is correct when he says no property investment is risk free because it is not and nor can it be. Property investment and particularly overseas property investment is by its nature is a risky type of investment. The overseas property market is not regulated and it involves investors investing large amounts of money often in a country that they have very little knowledge of. The market is completely open to exploitation by unscrupulous agents who make claims that can often be very far from the truth. This happens in the more mature markets such as France and the UK as often as it does in more riskier emerging markets. Even when one does a great deal of research and due diligence, shops around, and uses a independent local solicitor or good property sourcer, there are still risks and you cannot remove all risks no matter how much care you take. Of course you can reduced risks and it is very important to do this but nobody has a crystal ball and you cannot predict the market or be absolutely sure at what stage in the cycle one has bought, so it is just a possible to lose money in France as anywhere else.

Geord

 

[PaddyG]

Morning all,

As I said everyone has different priorities, unusually my driver isn't to make money per se but to find something more interesting to do with my money than leave it in a building society but I don't want to take big risks with it and the risks in Leaseback are, I think, manageable. In the case of the one I have chosen the developer is also the service provider so there's an incentive to build well and take a long term view.
I have no worries about voids, leaking pipes, out of control gardens and I have a choice of attractive places to spend 6 to 8 weeks a year, which I can increase to 12 if I so wish.
It has been very useful to have some of the pitfalls pointed out and I'm grateful for that and will ensure I am well advised and am clear about the risks and can accept them.
PaddyG

 

[davidbrett]

Nice information here

Thanks
david

 

[ChrisParry]

Mis-Sold Leasebacks

There seems to be a lot of discussion about Leasebacks at the moment, and it seems to stem from bad agents jumping on the bandwagon of Leasebacks, making an easy sale without fully explaining to the customer how the concept works and how it may be of benefit or not.

Some of the quotes I have seen from people slowly realising what they have invested in is totally different from their expectations is frightening.

Leasebacks can be a good investment. There are 3 types of leaseback;
1. Residence de Tourism
2. Residence d'Etudiant
3. Residence D'Affaire

Most people in these discussions have been referring to Residence de Tourism, in glamorous places, with offers of 2 weeks usage sometime more. This type of Leaseback is the one which has been truly mis-sold. Most people I have spoken to think that when they buy into one of these, their property will grow in value in the same way a classic property might.

This can't be true, as the true value of the Leaseback is its ability to rent out and the yield / revenue stream offered. Looking at the resell market????? There isn't one. You are advised to HOLD onto to your leaseback FOREVER. This is the only way you'll realise any true benefits.

If you decide to resell, who can you sell to. NOT owner occupiers as Leasebacks were never designed for this, that only leaves INVESTORS. Why would an investor want a secondhand leaseback, after the majority of the VAT refund has been taken, and if you try and sell it above its true value, it will reduce the yields!!!

Therefore the other main point is that there ISN'T really any capital growth. The growth is linked to the rental amounts, i.e. if the rental amount your leaseback can generate increases by 1.5% or 2.5% per year then so will your property value.

The VAT refund and occupation is a smoke screen. Forget about using a leaseback, don't buy it because its in a place that you like otherwise you'll start making decisions based on your heart and not your head. Leasebacks are investments that should be made with the head not the heart - your ideal holiday home is more about making a decision with your heart and less with your head.

In summary the basic concept behind a leaseback is getting someone else (through the commercial lease) to pay off your mortgage, leaving you with a debt free asset which is a revenue stream in later life for you or for the children - leasebacks can be passed onto family members.

Look at Residence D'Etudiant or Residence D'Affaire - here the demand for this type of residence is REAL - no glamour just real demand. No usage in these, but the demand makes the longevity of your investment Low Risk.

 

[PaddyG]

Chris, the VAT rebate is depreciated over a 20 year period, since 2006 the unexpired portion of the rebate is available to a subsequent purchaser who continues with the lease agreement. A buyer for a second hand leaseback property will make that choice for the same reasons that attract initial buyers, i.e. that they have a hassle free investment which almost certainly won't experience the fluctuations in value of a traditional holiday home or buy-to-let property. I was being advised a couple of years ago to invest in a buy-to-let apartment in the north of England. Some of these are now being sold at discounts of up to 40% (yesterdays Daily Telegraph) by investors desperate to cut their losses. Similar experiences are occurring in Spain and soon will in Eastern Europe, independent of the crashing market in the States or that grinding to a halt in the UK. Leaseback in certainly not one for someone hoping to make a fast buck from an over hyped property market but it should never have been so and the media have their hands deep in the blood by encouraging the fast buck mentality and exploiting the greed that's within us all. Property is a long term investment and sure lots of people have made money but that shouldn't blind anyone to the risks and in my admittedly inexpert view the property bubble is deflating fast but people will still want to have holidays in nice locations.

 

[DC]

Chris, you say there are 3 types of leaseback
Tourist
Student
Residence d'affair - which is what.

Do these leasebacks ever convert back to Freehold residential stock.
Yearly yield pays between 3 to 6%, why are these a good investment, you would get more money from the bank? in a high interest account. Plus you have to pay the upkeep charges, taxes, account charges etc.

Please explain why these are such a good investment, with a limited resale market?

 

[CECIM]

Good to see u here chris

 

[sextant]

French Leaseback

I agree with Chris, French Leaseback are very good if you are looking to make a long term safe investment. It is ideal if you want to build your own pension because most stte pensions are not very sure nowadays or they will pay very low. So it is better to capitalise like that.
I work as property consultant and offer French leasebacks in France so if you have any question do not hesitate to PM me.

Mat

 

[DC]

But there are different products.
1. Leasebacks
2. Buy to Let
3. Holiday home products.

Each have different characteristics and are different. They are different investment products. I go with consensus, but agree it is good to hear all sides to things.

 

[DC]

A Place In The Sun - December 2007 - French Leasebacks
Posted on Friday, 21 December 2007 09:42AM
Question: I have read your article on Leaseback on page 43 of the October issue. I am considering buying a
house in France soon and have heard of a French government sponsored scheme called Para-Hotelerie. What
are the main provisions of this scheme and how does it differ from Leaseback. Where could I get a copy of
the full provisions of this scheme. Perhaps your readers may be interested in this subject as I have never
seen it described in magazine articles. THANKS
Answer: Leaseback is not a French government sponsored scheme. The management company which is
applying for the authorisation to run a Leaseback is not approved by the French government as a sound
company. In order to get the label of leaseback and the authorisation to run a tourist activity in the building,
the company has to prove to the Prefecture that a minimum of apartments in the building are leased out to
them and that a certain amount of commercial services are provided to tourists. A leaseback can be either a
Residence de Tourisme or a Regime para-hotelier. Therefore a para hotellerie is a form of leaseback. The
difference between the two different types of leaseback is the services provided to tourist renting out the
properties (for example, the provision of breakfast facilities, room booking service, presence or not of a
restaurant etc…)
The International Law Partnership LLP
Solicitors & International Lawyers
The Vaults
193-197 High Holborn
London
WC1V 7BD
Tel: 020 7061 6700
Fax: 020 7061 6701
Email: [email protected]
Internet: Home - - The International Law Partnership LLP,

 

[DC]

Get good legal advice
You might not be able to sell for the term of contract.
The tenant may not leave.

SALE AND LEASEBACK TRANSACTIONS
These are known under various names such as "nouvelle propriété", "propriété allégée" (sale and leaseback) etc. These should not be confused with timeshares and are usually of new property and generally follow the system of sales off plan referred to above.
Properties sold subject to the leaseback scheme are often marketed as being sold with a "discount". Great care needs to be exercised as there is no "discount". There is, however, an immediate leaseback to the developer or to an associated company of the developer under a French commercial lease thereby making it possible to clawback TVA at 19.6% of the purchase price that would otherwise have been payable.
This clawback of TVA is therefore the greater part of any "discount" offered. In consideration of the commercial leaseback, the developer will often furnish the property, insure it, pay the outgoings, etc., and will permit the owner to use the property for say six weeks during each calendar year (such weeks being reserved in advance). Some schemes sometimes also offer an additional "discount" in the shape of a single rolled up rental payment for the full period of the lease (usually 9 or 11 years); other schemes offer a guaranteed percentage return on rental or some other formula.
These leaseback schemes are complicated and during the period when the commercial lease is running (9 or 11 years),it can be very difficult, for complicated legal and economic reasons, to resell a property purchased under this system. Furthermore, under the French system of commercial leases, there is no absolute guarantee that the tenant will relinquish the property at the end of the lease without an indemnity being payable by the landlord/owner.
You must obtain detailed and specific legal advice if you are considering one of these products.

 

[PaddyG]

The difference is that the money in a bank account never increases in value (assuming you take the income). The value of a leaseback property increases in line with building price inflation of say 2% per annum. This provides some hedge against inflation, which otherwise diminishes the value of a cash deposit. The income can, of course, be used as such or invested elsewhere.

 

[wayneaustin]

This week, I had a very enlightening conversation which I wish to share with people.

Many Leasebacks are sold to overseas people . The way in which they are sold may be not be as they were actually are.

What do I implie.

These properties you can never live in - the buildings are licensed residence de tourism.

There could be repercussions in the further in the future with resales, as this are not like normal Free hold properties. This is starting to come to the light and could have major repurcussions for people who brought into Leasebacks at the end of the 9 or 11 year tenure. They may not be able to be sold and the management company may demand another 9 or 11 years rental.

There are different tax and legal rules for the French, but for overseas clients. A time bomb is potentially ticking. ie. they may have brought something they can not get out of, they may have renew the contracts for a further 9 or 11 years, and if they opt out and sell, if they can then they could be liable to pay back some of the tax they were offered in the first instance. Basically a nightmare situation is potentially brewing.

I have been different opinions from different people deriding this *they make they living out of this eg. Lawyers etc that were pretty rude, but I have a good insight that this information is stable and correct.

If you are not in the leaseback market, in my opinion do not enter, if you are in, maybe look at what you have brought seriously and look at your consequences, your time bomb will maybe start on renewal or if you try to sell on and then you have to pay back taxes etc.

All is not what it seems with LEASEBACK. - the illusion is shattered.

Kindest Regards Darren

I have just logged onto this website following a dispute over the Leaseback I purchased sometime ago and was hoping others may have experienced the same problem as I and may be able to offer feedback.

I have recently found out,not been informed by the management company that my rental hasnt been paid since last August due to a dispute over the property registration.(Im already lost here)

I have also just found out that the management company in question have suspended all future rents until further notice.(Great)

I am now at a loss who to persue being all French agents and the mangement company seem to have gone silent.

Has anybody else suffered in this way?

Wayne

 

[wayneaustin]

have just logged onto this website following a dispute over the Leaseback I purchased sometime ago and was hoping others may have experienced the same problem as I and may be able to offer feedback.

I have recently found out,not been informed by the management company that my rental hasnt been paid since last August due to a dispute over the property registration.(Im already lost here)

I have also just found out that the management company in question have suspended all future rents until further notice.(Great)

I am now at a loss who to persue being all French agents and the mangement company seem to have gone silent.

Has anybody else suffered in this way?

Wayne

 

[svrunner]

hello I am new to this forum and I just wanted to say that there are many problems with the leaseback property in France. Some crooks are managing the residences and have decided to reduce the rents to be paid to the owners or to ask them to pay some extra costs (charges) or not to pay them any rent...
A group of owners has been created -- groups google --Invest-RT --, I am part of it, and we are trying to act for all of us (the owners of such leaseback programs with problems). We do not charge any one, we are volunteers and we live in different part of France or Europe... but all invested in a Residence de Tourisme and most of us have troubles with the property.
Several real issues have been flagged out. We are fighting for a good cause: our flat and our money. A good cleansing need to be done. Several meetings have been hold with the French government. The first proper step from the government is to extend the delay granted to the owner to find out a new managment company when the first one did not do the job properly or dissappeared: from one month to twelve months.
Second step will come in a couple of months.

In the mean time, if you are already on the leaseback property market, and you do have any kind of problems, please freely contact the group, try to post request on the web/forum, find other owners in your Residence de Tourisme ... seek advices
Don't stay alone.
If you are not on the leaseback property market, escape for the moment...
We also create an online petition (131007)
Please sign the petition it is important, it will be handed to the government.

 

[wayneaustin]

Thats really good,can you share the specific web address and Ill put on the forum for my development and maybe get some more interest

Wayne

 

[svrunner]

I'd like too but I am not yet "allowed" to post url / website on this forum
try on google groups / Invest-RT
and for the petition, try petitiononline follow by com and then just add / followed by the code given above

 

[DC]

That sounds real bad for you guys. svrunner and wayne.

It is worth definately checking out the credibility of the management company. Ideally they are one of the big four players in the market.

 

[frj]

you are still LUCKY you are in EU, think if you face this in some Asian, fareast, middle east , any way GREAT JOB by SVRUNNER, can any body sine petition?

Basically it is "BIG fish ,,, small fish" game i saw some reports about UK also BY BC,,,