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Leaseback development with 4.17% to 4.43%
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 and fully fitted kitchen. Parking
is available within the grounds.
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 Resid’Hotel. This
agreement is for a minimum of 9 ½ 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 4.17% and 4.43% of the VAT exclusive
property purchase price.
Rents are index linked and revised every three years.
They are set in the lease contract (Bail).
Rents are paid quarterly on: 1st March,
1st June, 1st September, 1st December.
The rental season starts at the time of the delivery
of the properties, currently scheduled for May 2009.
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. Payment for the furniture package is made
in two stages: 50% at the time of signing the Deeds
and the balance on delivery of the property.
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 this 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%-30%.
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 in
January of the coming season.
As a property owner you will also benefit from
preferential rates for stays in other leaseback
developments managed by Resid’Hotel.
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 and shared facilities)
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,
building and fire property insurance). The owner is
also responsible for dealing with the structural
repairs which come under the 10 year building
warranty.
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. There is a fee to pay
for their services which is approximately € 250
per annum. This covers the preparation of the VAT on
rental repayments and of your annual 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.
Selling a leaseback property
If you wish, or have to sell the property before the
end of the 9 ½ 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 ½ 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 or 9 ½ 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
Location is the key to successful leaseback schemes
and this project is ideally situated to ensure good
dual letting potential. Additionally it has extremely
competitive launch prices with capital appreciation
prospects.
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