Too good to be true leaseback in France ?

Re: ..

Tim

At the end of the initial lease, the owner can re-negotiate a new lease, lease to a new tenant, retain for personal use or sell. However, it is important to remember the following points.

The lease entered into by the owner and the head tenant (i.e. management company) is a commercial lease which under French law entitles the tenant to a renewal of the lease after the initial period (i.e. usually nine years). If the owner doesn't offer the tenant a new lease then the management company is entitled to compensation. However, the legal advice I received and that has been reiterated by others suggests that there is no appetite to enforce the above laws. Anecdotal evidence suggests that some owners were asked by management companies of a few developments to pay compensation for non-renewal and did so. Again, the legal advice I received suggested that such compensation should not be paid by the owner as the above laws would be difficult to enforce.

So what happens after nine years? I have not owned a leaseback property long enough to experience the end of a lease. However, having communicated with some people that have, the consensus is that they renegotiate the lease with the existing management company but based on average rental yields for the given type of property in the given location at the time of the negotiations.

There is a minority of people selling the properties after the initial lease. This is because most buyers are using the properties to create additional incomes rather than speculating on price increases. Therefore, it is extremely difficult to find ex-leaseback properties for sale. If you do a search on google you may find a few of them - if not let me know and I will try to track down a few for you.

Of course it is the prerogative of the management company not to seek a renewal but again I have not heard of any such cases and it would be unlikely.

Regards,
Paidi

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Thanks Paidi

It seems then that there's a conflict between the rights of the tenant to renew the lease and the ability of the owner to do "whatever they like" after the expiry of the 9 year lease.

I accept that most people buying these properties do so a means of future income, but if the holiday company, as tenant, effectively has the freedom to stay for as long as they feel like it, there's limited appeal for those who, at some point in the future, might wish to live in the property or cash in on their appreciating investment.

Or am I reading this wrongly?

Re: ///

Hi Tim

Just like many countries (including our own), France has laws that aren't enforced. I'm not a French legal expert, but I have been told by my legal advisor that one such law (which is effectively unenforcable) is that around the 'rights' of the tenant to a renewal of a commercial lease governing a leaseback. Also some people will tell you that it isn't in the interests of the management companies to 'force' a renewal as they largely depend on the goodwill of investors to fund their growth. Bad press would damage this 'goodwill'. However, even if the tenant attempts to force a renewal, the owner has the right to refuse but 'legally' may need to pay compensation (for 'loss of earnings'). When I enquired as to the extent of the compensation, I was told by my legal advisor that there should be no need to pay as effectively it couldn't be enforced. I previously heard of some people paying compensation of a few months rent (I think it was about 2000 euro).

The above advice was sufficient for my peace of mind but everyone is different. If you're not so sure then perhaps a property without a commercial lease but with a guaranteed rental yield would be a better option.

Regards,
Paidi

Re: Mortgage in France

On reading through the previous posts in this thread I came across the discussion about whether or not it is possible (in practice) to 'get a mortgage in Ireland and set the interest payments against overseas rental income' when calculating your French tax liability. Has anyone succeeded in doing this? If you have then I would be interested in knowing how as it could give investors an extra and attractive option when buying in France. Appreciate any info.

Regards,
Paidi

Re: Mortgage in France

Paidi, I have asked for confirmation about a similar topic (writing off interest of released equity on a PPR used in purchasing a property abroad) here.



Regards,
Sport

Re: Has anyone actually bught a leaseback in Paris?

I was considering buying a leaseback in France but I'm very concerned about selling the property 20 years down the line. Almost all of them seem to be in holiday resorts which might make them difficult to sell. Why would someone buy a second hand one when they could buy a new one with all the tax breaks etc? If you could get one of these lease backs in a city center location it would be ideal.

Re: Has anyone actually bught a leaseback in Paris?

If you could get one of these lease backs in a city center location it would be ideal.

Click to expand...

You can!

Re: Has anyone actually bught a leaseback in Paris?

Yes - they're about the same size as a phone box and just marginally more appealing as a place to live long term.

I think that in looking at the long-term aspect, you've identified the major potential downside. Investment in property is speculative at the best of times, but no-one seems able to make a reasoned call on how these properties will fare in the future.

The nature of their size and structure is such that they're only ever suitable as a temporary residence. Apparently the scheme has been in place for the last 20 years within France meaning that there should have been plenty on the market by now but it's been very difficult to establish whether anyone selling them has seen an appreication in value.

Re: Has anyone actually bught a leaseback in Paris?

Hi

Many of the studios found in Paris are the same size as these leaseback studio units. Perhaps it explains why many Parisians treat their local cafe as their living room. Despite the fact that many leasebacks are located in areas of natural beauty, I would agree with Biggles that most Irish people would find it difficult to live in studio leaseback units longterm due to their size. It is possible to find some developments where the units are larger but the yields may not be so great. I have also heard of people buying a 2-bed unit with the intention of converting it to a 1-bed later in their lives and using it for their private use. This may not be a bad idea as at the end of the mortgage you should have an asset that (with a moderate deposit) has bought itself and generated some cash. But make sure that the walls in question are partitions rather than structural!

>> 'Investment in property is speculative at the best of times, but no-one seems able to make a reasoned call on how these properties will fare in the future'.

I think this issue has been dealt with previously on this forum.

Regards,
Paidi

Finance for French Leaseback

Just paid a deposit on two French Studio Apertments with a combined total income of €10,000 per annum.

Should I arrange the finance in Ireland or France. Has anyone got experience of dealing with Franch Mortgage providers? are the application costs excessive?

Re: Finance for French Leaseback

Eh wouldn't it make sense to get your finance sorted before you put down a deposit?

Finance for French Leaseback

Here is an excerpt of an email I received from a company in Dublin who will arrange a French mortgage.

"All contracts in France are subject to finance, if you do not achieve the level of funding that you require you are entitled to a return of your deposit."

This being the case, is it no fair to say that your deposit is guaranteed to be returned if you do not get approval.

Re: Finance for French Leaseback

Thanks for the reply. Can you give me the name of the Company in Dublin who is in this business.

Re: Finance for French Leaseback

I don't know whether giving the name here would be classed as an advertisement so I sent you an email

Re: Finance for French Leaseback

Hi

It is usual to make the preliminary contract subject to loan approval. You provide details of your proposed loan, which are noted in the contract. If the contract doesn't contain such information then I believe if you can't close due to not being able to raise the loan then you can lose the deposit.

Regards,
Paidi

Re: Finance for French Leaseback

dconwho
I would also be interested in the name of the finance company. Can you E-mail it to me.

Thanks
lakeside

Re: Finance for French Leaseback

I don't think it would be constituted as advertising as long as you had no proprietorial connection to the company.

Can you post it here?

Re: French Mortgage from Dublin Company

Would greatly appreciate the name of the Dublin Company. Didn't manage to get the name via the email

Re: French Mortgage from Dublin Company

I believe the company in question is

First Hibernian /foreign mortgages
68 Dame street
Dublin 2
+ 353 1635 1695

Contact name: Harry Saul

I got this contact via ask about money but I have not contacted them personally. I cannot comment on the company nad have no connection with them

Lakeside

Re: leaseback

Thanks for the name of the company. I will let you know how i fare with them.