A step-by-step guide to leasebacks
Published 25/09/2016 | 02:30
The buyer, as freehold owner, enters into a lease agreement with a management company, who is the tenant, for a nine- to 20-year period. The tenant is responsible for letting, upkeep and maintenance.
The mortgage, if required, will be effected in France, and subject to the lending conditions there. French banks are extremely diligent at following up missed or unpaid loans.
You will need to engage the services of a local solicitor to complete the sale.
Additional costs, particularly of estate agents, are much higher than they are in Ireland - 7-10pc is not uncommon.
The property must be used for holiday/tourist accommodation over a minimum of 20 years.
The purchaser receives a guaranteed rental income (usually 3-5pc), with some private use (mainly off season). The French government waives the VAT of 19.6pc applicable to new builds. This is clawed back on a pro rata basis if the lease is broken in 20 years. If the property is sold net of VAT, as happened in many cases, the owner remains responsible upon sale.
The lease is generally renewed automatically after the first nine years unless you adhere to a very specific format in devolving yourself from the lease. A solicitor must draft the legal 'get out' document and up to 12 months' notice may be required.
You are responsible for taxe fonciere (annual property tax), insurance and admin charges along with necessary repairs and furnishings. Tax is payable each quarter via the CA12 declaration with some offsets.
Make sure you join the syndicat de coproprietaires. This is the legal structure which exists in a development of this nature to govern the common areas. The managers of the scheme should circulate contact details for all owners to allow the syndicat to be formed. If not, don't trust the scheme.
Capital Gains Tax may be payable upon sale of the property.