Buying Guides - A new breed of leasebacks in France

The English-language market is now fairly familiar with the concept of a French leaseback. Some people are manipulating the benefits of the scheme to even better advantage by using their SIPPs (Self-Investment Personal Pension) to purchase them or transferring their already owned leaseback property into their existing SIPP. The benefits of this are that your money is locked away securely and capital gains tax is reduced.

But even with new and innovative ways to purchase a leaseback – plus the evident advantages such as being able to own a property in France for a reduced price per square metre than other properties in the same region, to be guaranteed an annual income, have no maintenance or furnishing worries, and to usually have the option to use the property – doubters still exist.

Pitfalls?
So what puts people off? The VAT rebate situation often puts a brake on potential purchasers’ plans. Either they don’t understand fully what this is, or are not comfortable with or cannot finance the initial VAT payment in order to wait for its reimbursement, usually about six months after completion.

However, many banks will now take the VAT repayment into consideration when structuring your loan. Either you will have a separate loan, like a bridging loan, for the VAT sum, which you pay off as soon as you receive your refund, or you can promise to pay the rebate back into the loan itself, reducing your capital owing and therefore repayments.

There is still the extra paperwork to consider on the French side – the demand for repayment of the VAT, and the authorisation to your accountant to recuperate this on your behalf and to pay it to the notaire in charge of the operation, who pays it to you.

The good news is that French developers and promoters are beginning to cater for this reticence to commit to a leaseback purchase because of the fact that the VAT has to be paid up front and reclaimed later. Pierre et Vacances has always had the market power to be able to offer its leaseback properties as an initial VAT-free purchase. If you buy one, you pay the staged payments as normal, including the VAT, except at the end, when the sum equivalent to the VAT is subtracted from the total taxinclusive price and you stop your payments there.

Other developers are following suit. They are starting to see that to encourage sales they must not only offer an excellent service to agents in order for them to be able to transfer accurate and helpful information to their clients, but also to compete at the direct customer service level too.

I’ve been working in the leaseback property market for nearly five years and, after being frustrated at the lack of English documentation and availability of comprehensive information about residences, as well as the poor response to emails and telephone calls, one of the developers with whom we work is starting to rise above the rest: Lagrange Patrimoine (established in the 1960s and offering a wide range of sun and ski leasebacks)

As they are autonomous throughout the chain from developing to promoting and managing their properties, they have the knowledge and means to offer add-on services to their customers. They provide VATfree purchases on all of their leaseback properties, and also cater to their increasingly important English-language market – all their paperwork is available in English, from brochures to furniture lists to the all-important reservation and lease contracts.

In addition to this, they promote ‘Cinq Points Forts’ – five strong points:

1) The right to change the pack chosen in your lease contract every three years. If you opt for personal use and then find you don’t have time to visit your property, you can upgrade to an investment pack and benefit from extra percentage points (i.e. cash!) on your annual rental income. Or vice versa, you may decide you want to come out more often from a no-use or low-use option.

2) The right to return unused weeks of occupancy. If you opted for personal use and know in advance that you won’t be using all the allocated weeks, you can give these back to the management company, who will pay you 50% of the brochure price for any of these weeks subsequently let out. This can be done annually, so it’s a practical alternative to no 1.

3) Personal welcome Household linen is provided free of charge and, if your residence has the facilities, you are entitled to use the sauna or hammam free of charge.

4) Take a break and pay less Almost all of their brochure is available to Lagrange property owners to book for a lastminute three-day weekend break for the all-in price of just €40.

5) Freedom With an exchange market in place on 156 residences covering more than 100 resorts in France and the West Indies, you can exchange your weeks of use in any of these Lagrange resorts. Plus, outside of your personal allocation of weeks, you can benefit from a discount of 20% on any Lagrange holiday and 10% on any of their partner’s holidays in their catalogue.

Nicole Hammond www.moving-to-france.com

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