English
FrançaisCan somebody advise me please? we have a nine year
leaseback non guarantee rental scheme in the Vendee. The
lease stated very clearly that if we decided to withdraw
from the leaseback, the management company would not
require us to pay compensation. The management company
was bought by another company within the first nine years
of the lease. This new company now state that we must
compensate them if we do not renew our lease. The nine
years expires in December 2011. We would be interested in
any views in relation to their claim for compensation. We
would also like to know that if we renewed the lease for
another nine years, will we have to pay compensation to
the management company at that the end of the new lease?
don't forget if you don't renew the lease, you may have to pay back 11/20th of the TVA as this is a 20 year agreement.
French law will probably find in favour of the management company, the law is always loaded in their favour. In addition, if they break the law the french legal system does nothing except give them indefinite time frames to drag their heels whilst you pay your mortgage and have no access to your property. In case you think the French legal system is fair just read through many of the threads in this forum.
This is a really important issue as we have been paying off our mortgage on an apartment in St. Maxime to coincide with the conclusion of the 1st lease (which of course has no mention of penalties for non-renewal). This was to give us the option of using the property for personal use or renting it out privately. If however we need to take out another mortgage to pay non-renewal penalties this might not be an attractive option!
Given how long leasebacks have been running there must be people out there who have gone through this process. Do management companies seek compensation for non-renewal and if so how much? My feeling is that it might be worth the cost just to get rid of them as a non-leased property is likely to be more valuable than one with a lease (particularly with management companies squeezing rents).
Chris
Chris, I have read somewhere that they may charge up to three years rental income (not rent they pay to you) and you can bet your bottom dollar that the French legal system will enforce this
Juan Azur - thanks for your post although given that Eurogroup rent our apartment for about €1,500 a week in the summer it is not good news and would require us to take out another mortgage to buy them out!
Given this scenario we might have to renew the lease for another 10 years. This would have the benefit of removing the need to repay VAT but the question at the end of that lease would still be - can we (ever) escape Eurogroup? Our only hope might be that the french government do something to stop this abuse as I can't believe many people ventured into the leaseback system thinking that the management company would be running their property in perpetuity.
Chris
You have hit the nail on the head. Despite being fooled into the fact that you have bought a 'freehold' property, this is not the case. For example, my residence de tourisme building is designated for that purpose only and I cannot take it over myself. The French have successfully pulled the wool over many of our eyes with this scheme. The horror of what you have invested in only emerges over time through bitter experience. The French have a lot to answer for. Most of us have invested in an investment package, with no guaranteed income, with little or no regulation and many of these crooks are being supported by the French legal system. The strange thing is that people are still buying these leasebacks.
Leasebacks are deeply miss understood. They are typically used by the French as a pension investment similar to that of buying shares and taking the divi every year, the returns being very similar of that around 3 to 6%.
Therefore if you have purchased a property with a guarenteed yield index linked and after 10 years somebody tells you they want it for another 10 years, heh presto life is good.
Most people on here think they have bought a holiday property to be paid for by the management company who rent it out for them. Same thing but different principles.
When I bought my properties I did not particularly want to stay in them or even visit them. They were a hands off investment to diversify a portfolio. That much I did understand.
So when a management company wants your property for another 10 years your supposed to be happy and if you look at the yields being offered and then look at annuity rates you will see they are all pretty much alike. Remember most of these properties should have been bought with a pension lump sum with no mortgage or very little so it is annuity rates the yields should be compared with and not necessarily anything else.
My advice is buy a hefty portfolio of UK shares, stick them in an ISA and get your 6% divi yield every year (with growth) and retain your capital in something fluid that can be sold quickly!
Something else worth mentioning, how many of you bought you properties in your own name and how many of you bought them in a company name?
Mutley - Not just a dog.
Hi Mutley,
What are the advantages of buying in a company name?
Regards
Sheridan
Hi Mutley,
Where is the website you promised us?
A lot of agents are now suggesting buying through a limited company
being that if you want to sell you sell the shares in that company
rather than the property itself and just change the directors name on
the register. Be very careful who and where the company is set up.
Hope that helps.
Juan, very very busy at moment. Have some meetings scheduled in
France for 080711 so will keep in touch.
Mutley
Thanks Mutley, keep up the good work.
Thanks very much Mutley - still don't fully understand how it works.
Presumably there is some tax advantage?
Regards
Sheridan