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Leaseback development with 4.20% to 4.60%
guaranteed annual income
We have compiled the following information to help
you understand the workings of the leaseback scheme
and to outline the financial benefits of buying a
property on a leaseback development.
We will assist you throughout the buying procedure
free of charge. If you have any question at this
stage, please do not hesitate to come back to us.
The purchase
The properties are purchased Freehold, inclusive of a
furniture package. Parking provided on site.
Refund of the French TVA
The French VAT (TVA) which is currently 19.6% is paid
and reclaimed by the developer. The purchase price
you pay is the price excluding VAT which provides an
immediate saving.
To benefit from the refund of the French VAT (on the
property and furniture) you have to sign a rental
agreement with an appointed professional holiday
management company, in this case French letting
specialists Geolia. This
agreement is for a minimum of 9 years.
The rent
The rent is guaranteed by the holiday rental company
whether the property is rented or not.
It reflects the sleeping capacity of the property and
varies between 4.20% and 4.60% of the VAT inclusive
total purchase price.
Rents are index linked and revised every three years.
They are set in the lease contract (Bail).
Rents are paid quarterly in advance on the following
dates: 31st March, 30th June,
30th September, 31st December.
The rental season starts at the time of the delivery
of the properties, currently scheduled for June 2010.
The first rent will be paid on 30th September 2010.
Legal fees
French conveyancing fees,
which are an additional cost, are payable to the
French Notaire at the
time of the signature of the Deeds. As the purchase
is of a new property, these fees are much lower than
for an older property and only amount to 2.5%-3.5%
approximately.
If you are raising a mortgage, mortgage registration
fees are due, based on a percentage of the borrowed
amount.
Furniture package
The property is furnished and equipped in accordance
with the holiday management company’s
requirements. The price of the furniture package is
included in the property purchase price and furniture
will be in place at the time of the handing over of
the keys.
Property maintenance
For the duration of the rental agreement, the holiday
management company is responsible for the property
maintenance and for replacing any contents damaged by
tenants during their stay. It is in the holiday
company’s interest to do so to ensure continued
rental and gives the property owner total peace of mind.
Deposit and property payments
To reserve a property you will pay a 5% deposit and
sign a reservation contract and lease. Payments
towards the property are then made in stages as
construction progresses. After the signing of the
reservation contract the next payment is made at the
time of the completion of the foundations and amounts
to 25%.
Personal occupancy
The property will be made available for rental all
year round.
You and your family will be able to use it at
preferential rates. These offer a 20% discount on the
public rates. The weeks you wish to reserve for your
personal occupancy need to be notified in advance.
As a property owner you will also benefit from
preferential rates (minus 10%) for stays in other
leaseback developments managed by Geolia.
Running costs
The rental company is responsible for:
- insuring the property and its contents for rental
- the payment of water, electricity and part of the
co-ownership charges
(communal lighting,
maintenance of pool and of communal areas)
You are responsible for the payment of the Taxe
Fonciere (Land tax), which is
reduced for the first two years of ownership, and the
payment of some of the co-ownership charges
(management company fees).
Taxable income
You will be liable for tax on the rent which you will
receive in France and must therefore have tax
representation in France. At the time of signing the
Deeds, a Tax Firm is appointed by the developer to
manage your annual tax return. In this case the firm
is Price Waterhouse Cooper. There is a fee to pay for
their services (approximately € 179* per annum
for the VAT repayments and € 195* per annum for
preparing your tax return). There is a double
taxation treaty between France and the UK, which
means that tax is only paid once, normally in the UK
(* VAT inc.)
Selling a leaseback property
If you wish, or have to sell the property before the
end of the 9 year rental agreement period, your buyer
must take on the agreement that you signed with the
holiday management company for the duration of the
remaining period.
At the end of the 9 year rental agreement, you have
the option to enter into a newly negotiated agreement
or to take the property back for your own private
use. You have to inform the rental company of your
decision, by recorded delivery letter, six months
prior to the end of the existing rental agreement.
If you decide to keep the property for personal use,
you will have to reimburse the French Tax
Administration for a portion of the VAT which was
refunded to you at the time of purchase. To explain
further, Leaseback schemes are a French Government
incentive to promote quality holiday accommodation.
In order to benefit from tax exemptions such as the
refund of VAT on the purchase price, buyers have to
commit the property to holiday rental for an overall
period of 20 years. Most leaseback rental schemes
have an initial duration of 9 years.
If you do not continue to rent the property after 9
years, please bear in mind that 11/20th of the VAT
has to be repaid. After 9 years, and taking inflation
into account, this repayment will be comparatively
low.
Our opinion
Good location is the key to successful leaseback
schemes and this project is ideally situated, in an
established holiday region of France, close to all
amenities.
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