English
FrançaisI am considering purchasing french lease back at Evian Les Bains ,south side of Lake Geneva . I found the development through
Pat Creevy,Managing Director,Charles Oliver Ltdwww.charlesoliver.co.uk
I have very little understanding of the Lease back system, and non of the site, other that the information availiable on the net .
I intend visiting the site, and would very much appreciate any advice relating to this development or the agent. Many thanks in anticipation , kind regards, John
Dear John,
The most important is the quality of the management company, here you havent the right to any mistake. Contact ma and I will give you my opinion as we have quotes for any of them. We do not sell leaseback so feel free.
Then answer the question: what do you need? capital gains, regular income? leaseback is not the right property investment for capital gains but good for regular income if the management company is a first rank one.
If answers are yes to above questions, so visit the site, the quality of construction, the potential to rent it (is it far from everything?) and then take a good accountant/tax advisor instead of the accountant proposed or imposed by the seller!
bertrand@clvproperties.com
John,
It won't matter what management company you have because the onerous clauses i.e.Exit penalties,3,6,9 year break clauses are enshrined in French commercial law!
Odalys ( No.2 largest) have recently been delaying rent payment.Resihotel(No.3 largest) are not paying at all!
Read the forums!
And save yourself hassle and a lot of money!
regards
John
Bertrand,
I think your assesment of leasebacks is muddled!
I wouldn't advise anyone to buy a leaseback now because of the risks involved.
The risk the management company won't or cant pay the rent!
The risk the management company may exercise there right to withdraw using the 3 year break clause!(this has just happened to irishgolfer on another thread on this forum).
The risk that there might be a hefty exit penalty if you try to opt out after your first period!
But if you actually did manage to get through these risks unscathed,i think the capital gains could be substantial!
The 20 year vat period would have expired,no French capital gains after 15 years,and most likley mortgage paid off!
We are suffering now the ups and downs of the property market but in each 20 year period there has been substantial growth!.So without the constraints of a commercial lease a would expect the same!
How can a leaseback be good for income?You would have to put down 40-50% deposit from day one to make it cash flow positive!
If you include co.op fees,taxes, accountantcy fees you are heavily subsidising this investment for many years.
Personally i think the only bright spot for my leasebacks is in the personal useage that i get!
Regards
John
Hi John,
Main risk is the management company you are right, so go for P&V, Nemea, Goelia... but few in fact.
Exit opportunity after 3 years: I disagree here, if your lease is a firm lease (no opportunity of any exit) you have no risk here. But has to be a firm lease. You should check here.
Exit penalty: you can avoid it but why do you want to exit here? If you wish to exit that means that leaseback was not the right property for you.
I agree, leaseback is good to enjoy it plus small regular return. Personnally I would prefer temporary "nu-propriété" for capital gains or classic property under "mandat de gestion" for return and capital gains.
Hi C'est La Vie,
Thanks for taking time to share your experience and advice, the lesse for the develoment is Sarl Cela Evian , represented by SAS GT VACANCES (CELA GROUP) . I need to research them .
My summary understanding of your advice , is to take professional advice re the lease, and to treat French Lease back , even if it is guaranteed by the French Government ,with caution .
A further potential problem with the lease for Evain is that although it guarantees 4.5% inflation related rent , the lease is very vague about the deductions for own usage.I am given to understand it is given in points ,and that the cost will be equivalent to at least 1%age point of the annual rent per non peak holiday week .
Dear John,
The leaseback scheme is not
guaranteed at all by French Government, it is purely contractual between owner
and tenant. The way it is done implies that you are eligible to VAT and can get
VAT refund on purchase.
Cela is a very small company, no profit. A different company is created for each resort so I would avoid it. Annual accounts when they are available do not show a strong financial situation. In my opinion they are not in a strong position to cope with economic difficulties.
Regarding the expenses: you should ask for: what is the annual co-ownership expenses for owner? amount of land tax, I am sure they cannot answer so ...
Regards
Bertrand
Bertrand,
Exit opportunity after 3 years:I think you have misunderstood what i said.I wasn't looking to exit after 3 years.It was the management companies right to exit after each 3 year period by giving 6 months notice!Leaving you high and dry with your mortgage repayments!
Exit penalty:How can you avoid it?
In normal circumstances a 9-11 year period would be enough to acheive capital growth and you would have the option of renewing for a further period depending on your circumstances at the time!Bearing in mind that the value of the property is dependant on the rental yeild!
But alas i have a 22% increase in the Insee due Jan 09 with Eurogroup(200 + sites) which they refuse to honour!
John,
The French government guarantee nothing!
Regards
John
John,
No I refer to the right for the management company to exit: if it is a firm lease the management company cannot exit. I suppose your lease was not firm. That is the reason why it is important to check a commercial lease.
Exit penalty: why do you think it exists? to compensate the loss of turnover made by the tenant. 70% of the management company do not ask for it. If they ask for it, they have to prove the turnover made with your unit or you to prove that there is no damage for the tenant.
Regards
Bertrand
I find it difficult to believe that 70% of companies will not ask for compensation if they are legally entitled to it. The reason for being in business is to make money and to avail of all the facilities provided to in law e.g. tax avoidance and other entitlements. What is the source of this magical 70%? If it's from the management companies then it is to be ignored as inaccurate propaganda
Bertrand,
Now i am confused!
Are you saying that there are two types of commercial lease?One without break clauses and one with!How does that work?
Exit penalties: I dont beleive this 70% figure!Even if i did,why should 30% of management companies impose penalties?I would have thought 9-11 years was enough time for them to make a profit!Then after this time you should be free to decide to use it youself,rent it yourself or sell it!These were the options available to me when i bought.Its called mis-selling!
Apparently even the French Minister of Tourism believes that they shouldn't be able to impose penalties.
regards
John
Bertrand,
I note that you don't include Odalys in your list of recommended management agents - are they in financial difficulties?
Regards
Sheridan