French leaseback gets boost

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The French property leaseback scheme has been a staple of the property investor's basket for a long time. The basic formula is simple - you buy a property (generally newly built) and lease it back to an approved management company. A guaranteed income stream thereby enables the property owner to budget accurately as he/she will receive regular fixed rentals throughout the term of the leaseback (typically 9 to 20 years).

The rentals receivable during the peak summer months tend to be lower than achieveable on the open market but, in compensation, the owner of the property can rely upon rent payments during the otherwise slower periods of winter and autumn.

Complicated VAT exemption rules abolished

It has always been a feature of these schemes that the VAT due on the purchase of the property - up to 19.6% - was not payable unless the freehold was sold on within the term of the leaseback agreement. There was a sliding scale for VAT due depending on how early the freehold was sold (e.g. if sold after 9 years the VAT payable would be 11/20 of the total representing the 11 years of the 20-year term still to run).

No VAT now

A new law which came into force last year now means that no VAT has to be repaid no matter how soon into the term of the leaseback you sell the freehold. Although this only currently applies in respect of new-build properties it is bound to encourage more interest in the French real estate market from investors.

See our French Leaseback scheme properties.