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Leaseback development with 3.80% 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, fully fitted kitchen and parking
space 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 Lagrange. This agreement is for a minimum
of 9 or 11 years depending upon the rental contract
you choose.
The rent
Three lease options are available to the purchasers
with the possibility of personal occupancy at
discounted rates.
- The Pack Invest lease offers a guaranteed income
with a 3.80% return (excl. Vat) on your investment,
calculated on the property purchase price exclusive
of Vat, garage and furniture. Personal occupancy is
only possible if unlet
periods and at public discounted rates (- 20%). The
first lease period is for 9 years.
- The Pack Serenissime
lease offers a guaranteed income based on the rented
weeks and an additional financial benefit for the
owner in the form of 8 weeks personal occupancy
spread across the peak, high, medium and low seasons.
This benefit in kind amounts to 80% of the weekly
public rates excl. Vat. The first lease period is for
9 years.
- The Pack Preference lease runs for a first period
of 11 years and offers an immediate reduction of 33%
on the purchase price of the property. This price
reduction amounts to the prepayment of the first 11
years rental income and the refund of the 19.69% on
the purchase price. In addition 6 weeks of
personal occupancy are available.
The weekly rent reflects the sleeping capacity of the
property.
Rents are index linked and revised every three years.
Rents are paid quarterly in March, June, September,
December.
The rental season starts at the time of the delivery
of the properties, currently scheduled for December
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.
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 (except during periods of maintenance).
You and your family will be able to use it during the
periods stated in the lease formula which you would
have chosen at the time of purchasing the property.
If periods of personal occupancy are available in
addition to the free periods included in your lease,
these are discounted
and preferential rates usually 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 Lagrange.
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. 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 or 11 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 or 11 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 11 years.
If you do not continue to rent the property after 9
or 11 years, please bear in mind that
11/20 or 9/20th of the VAT has to be repaid. After 9
or 11 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
letting potential year round. It is also close to
Toulon and Marseille airports for easy access.
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