The French government started leaseback in 1976 and the aim was to encourage French people to secure their pensions in property and also to encourage the development of tourism, build low cost housing, protect historic monuments and bring investment to under-developed areas. There are a number of plans within the leaseback scheme the most popular of which is the RT scheme (Residence Tourisme) which caters for short term lets and provides a variety of services to include reception, breakfast (by prior arrangement), laundry and linen services, swimming pool, Jacuzzi, sauna, steam room etc. All the leaseback properties on FrenchLeaseback belong to this scheme.

This unique plan enables anyone to buy their dream holiday home or overseas investment property and cover a lot or all of the mortgage costs with a guaranteed rental income (typically 3 to 7%). The rental income is guaranteed by a large management company that rents the property on your behalf for typically 9 years. Furthermore, the rents are revised each year and increase according to the construction cost index (INSEE). The French government agrees to offset the payable VAT (TVA) on the purchase price against that charged to the short let customers of the rental management company. This means that you will receive back a sum equivalent to the VAT on the property at the rate of 19.6 % on new build property (renovated or refurbished properties do not normally qualify for a 19.6% VAT rebate but they still do have a VAT rebate element). This refund represents a 16.4% discount on market value.

All leaseback deals are different, in terms of rental yields and personal use. Most offer personal use, generally up to 6 weeks (although some deals may allow you to use it for even more), but note that some offer no personal use. There are also the added benefits of purchasing the property fully furnished and fitted with kitchen and bathroom appliances, knowing that your property is not left empty and unattended for weeks or months at a time, and that the maintenance and upkeep is paid for by the management company.

As only government-approved companies are able to operate the leaseback scheme, this provides additional security to the investor. The companies are also required by law to have professional indemnity insurance, protecting you if they go out of business. Also, being government backed, leaseback properties often benefit from top locations, sometimes on government land not normally available.

THE SMALL PRINT

If you resell your property you may have to repay some of the VAT, depending on how long you have owned it (it reduces by 5% each year, reaching to zero after 20 years). Any repayment is passed on to your purchaser.

Leaseback properties are purchased with a commercial lease, which has certain repercussions in French law. After the initial lease period (typically 9 years), the investor (who is usually the owner of the freehold of the property) can usually renegotiate the lease with the management company or make other letting arrangements, but the owner cannot use the property for their main residence until the 21 years of the government agreement has expired, without repaying a proportion of the VAT rebate. In some cases the owner will never be permitted to use the property for their main residence. The contractual terms of the original purchase contract and of the original lease may also have prohibitive clauses whereby the owner may never be able to fully use the property, or even sell the property, without paying the developer or the management company a substantial premium. Note that contracts such as these are very much in the minority.

You must pay the "taxe fonciere". This is a land tax. The size of the property determines how much is paid and owners of new properties are exempt for the first two years. The tax is paid by the person owning the property on 1 January of each year with payment due in the final quarter of the year. However, if the property ownership changes then the purchasers must usually reimburse the sellers for their share.

IN MY OPINION

I believe leaseback is an excellent investment. But some leasebacks are better than others. So do your homework.

• Choose your location well.
• Choose a developer and management firm with good track records.
• Check your paperwork thoroughly. We will give you a general English translation of these.
• If you require finance then borrow in Euros from a French bank.

In addition you should apply all the usual considerations to the investment property that you would apply to any investment property.

• Is the development close to other amenities, shops and services or is it isolated?
• Will these areas still be as popular in 20 years' time?

Bon chance!