A Leaseback can be forever
This email exchange was published in my blog on Coast and Country, but I am posting it here because it raises a lot of important points about sales and leasebacks in France.
Many thousands of people have been sold a leaseback property in France thinking that they can take over the property themselves at the end of the lease. In most cases this is certainly not possible.
Importantly, in French law a person or company who is leasing a property is entitled to compensation for loss of business and profits if the lease is terminated by the owner (you the person who has purchased the leaseback property) or not renewed. This is inherent in French law and does not have to be stated on any agreement or lease (and never is, I have not seen any leaseback agreement where this is explained).
So many thousands of people who have bought a property through a leaseback scheme are very likely to be disappointed when the lease comes to an end and they hoped to be able to use the property for retirement - also the lease option will blight the reseale value and therefore the capital gains which may have been hoped for.
Leasebacks are designed for French taxpayers who will gain tax benefits for investing in properties designated for specific commercial areas such as tourism or low-cost housing.
Leaseback sales can be a good investment as they can give guaranteed returns and are (in France) tax deductable. They should be considered as a bond, giving a fixed return and tax benefits, not a super wheeze to get a free house (there aint no such thing).
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Hello Tony,
I am thinking of buying a property in the south of France as I have a son who studies in Sophia Antipolis and I think he may want to stay there longer than after finishing business school.
I would like to purchase the property initially as a investment and later on to give to my son for him to keep, sell, upgrade or whatever he deems fit. Would it be better to get a leaseback property or an apartment and then have it rented out? I don’t live anywhere near France or Europe so looking after the property would be difficult for me.
What would you suggest?
Regards, MCL
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Hi MCL
This seems a simple question, but in fact it opens a lot of very important points and needs several answers. I will try to outline some of these but if you would like to email me to give me more details I can tailor a more personal response.
A leaseback is not really something you should buy if you are planning to use it yourself - I know a lot are sold as a good way to have a self financing holiday home - but this is not what the plans are designed for and many people have bought leasebacks unaware of severe limitations there may be in French law which are not shown on the agreements and leases.
Buying investment property in France is certainly a good idea, but like all investments, you need knowledge or expert guidance.
Inheritance laws in France are precise and cannot be overruled by a will.
It may be wise to buy a property in a company specially designed for this, a SCI, and give you son shares, you can transfer more shares over time without incurring any (or much) tax. There are annual options for donations like this free of tax in France - if you simply give your son a property there will be tax due.
Buying an apartment and then renting it needs local management. Depending on where you are buying we may be able to help and advise. We have a lot of expertise around Cannes and Sophia Antipolis.
Do get in touch with me directly, with more information, budget, timing etc and I can give more relevant advice
Tony
buying investment property, coast and country, Diary, french law, inheritance laws in france, laws in france, Leasebacks, leasebacks in france, leaseback property, local management, property in the south of france, south of france
