Main story: Leaseback – the basics

The Leaseback system was introduced in France in 1967 by the French government in an effort to increase the supply of quality accommodation for tourists in regions with high tourism potential.

A key concession granted by the French authorities for leaseback properties was to repay the VAT charged at 20% on all new build property in France.

This refund has helped leaseback become a very popular way to buy and invest in French property.

A leaseback property in France is classed as a tourism residence for lettings, usually on a weekly basis. Such properties offer a variety of extra ‘hotel’ services such as a staffed reception, cleaning, bed and kitchen linens. An indoor or outdoor swimming pool, sauna, jacuzzi, games rooms and tennis courts, often complete the package of facilities offered.

The leaseback system enables purchasers to buy a property with full ownership on a lease which normally runs for a period from nine to twelve years, and the lease can be renewed at the end of each term.


At purchase, the property is handed over to a management company that sub-lets the units. The management company then pays the buyer a predefined and guaranteed income per annum, usually once a year.

The advantages for a buyer of a leaseback property in France are:

Rental income – Investors receive an index-linked guaranteed annual income. On average a yield ranging from 2.5 per cent to 5 per cent, guaranteed income normally paid once a year whether the property is occupied or not, net of maintenance. The income is index-linked to the IRL in France (= rent increase rate). Each year, the yield should actually increase, making it easier for you to repay your mortgage. Buyers are not exposed to fluctuations in the tourist market as returns are guaranteed irrespective of occupancy.

VAT refund - Purchasers are entitled to a refund of 20 per cent French VAT (for a new property) on the purchase price. If the purchaser pays the VAT, the rebate can take place over 20 years after the transaction. Instead of claiming the VAT rebate from the tax authorities over a 20-year period, leaseback companies pre-finance it for you, thus reducing the amount of capital necessary to buy your property. This results in a significant savings on the purchase price.

Management and maintenance – The property is fully managed and maintained by the management company, inside and outside.

Holidays – You can take holiday stays in your property (not necessarily the one you purchased). P&V offer holidays at one of its 200 other resorts in France, Spain, Sicily, Martinique or Grenada at preferential rates. In general, the longer the holiday period required by the buyer, the lower the index-linked guaranteed annual income will be.

Furnishings - The property is either acquired furnished, or unfurnished and buyers are offered a furniture package by the management company which will not include, for example, a choice of tiling for the walls.

Capital Gains Tax – After 15 years of ownership, the buyer is exempt from French Capital Gains Tax.

How leasebck schemes work

In today’s current financial climate, people looking for a long term and secure way to invest might want to consider a leaseback property because buyers receive an index-linked, guaranteed annual return of up to 5 per cent.

Buyers looking at leaseback properties should research the management company fully.

For example, does the company pay the investor a regular annual rental income and when is it paid, are there any reports that the company hasn’t paid the rental income, how long has the company been operating and how many leaseback developments does it manage?

The buyer of a leaseback property owns the freehold and the property is
leased back to a management company for a minimum period of nine years which is renewable at the end of the term.

The buyer receives a guaranteed annual rental income from the management company once a year, whether the property is full or vacant. The company fully manages and maintains the property and any outside communal gardens and finds the tenants to stay in the accommodation.

There are relatively low up-front costs and there is no ongoing maintenance or running charges.

Different property

An important note for buyers of leaseback properties is that the property, or ‘unit’, purchased will be one of several similar properties in a holiday resort or tourist development.

This means the buyer can holiday there but cannot personalise the property or leave personal possessions in it for a next holiday stay. In some cases it will be a different property each time but within the same development.

The interiors of leaseback properties in each development or resort will be similar in design and layout and the same fixtures and fittings and furniture will be used throughout but with slightly different colour schemes.

Buyers who wish to use their leaseback property for holiday stays can choose ‘a formula’ i.e. one week in low season and one week in high season that best suits when they normally like to take a holiday during the year.

The amount of time allowed can vary considerably from between developments and can differ from one week to eighteen weeks stay per annum.

A main point to remember is that the longer the stay, the less rental income the owner receives.

A leaseback property in France can be an ideal way of investing in bricks and mortar in France because the property is fully taken care of when the owner is away for long periods and unable to deal with emergencies such as water leaking etc., and it’s an investment that pays you rent without all the worries private rentals can bring.

However, if investors are looking for a holiday home in France they can decorate and furnish to their own tastes and stay whenever they want to as well as let it out privately to family and friends (with or without charging them!) then a leaseback property may not be for this type of buyer.

See also:

‘Why I bought a leaseback flat in France’

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