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Considerations when Buying a Leaseback in a French Ski Resort 17th August 2018

Considerations when Buying a Leaseback in a French Ski Resort

Buying a ski property in France as a leaseback

What is a leaseback?

A leaseback is the purchase of a fully-furnished freehold apartment in a serviced residential building. Upon purchase, the owner leases the apartment to a management company for at least 9 years, in exchange for several weeks use a year, a complete VAT (20%) rebate and a fixed annual return of around 2 – 5% of the property’s value. Typical in French holiday destinations to encourage investment in popular tourist areas, popular examples of leasebacks are properties managed by property giants Pierre et Vacances and Erna Low.

The Lease Agreement

When signing the deed of purchase (Acte de Vente), the buyer must also sign a commercial lease agreement with a management company (usually the seller themselves). The main characteristics of the lease agreement are:

  • It is for a minimum of 9 years.
  • The management company can renew the lease unless the owner informs the company in advance (at least 6 months before the term ends)
  • The management company has the right to renew the lease or be compensated at the end of the lease if the purchaser refuses to renew
  • Rental incomes will be subject to VAT (10%) and owners should check whether the rental figure stated in the lease agreement is inclusive or exclusive of VAT
  • The buyer has the right to use the property for a period each year, usually between 2 and 6 weeks, and the period and dates of occupancy must be clearly stated in the lease agreement
  • The property must be sold fully furnished, and whilst damages are the responsibility of the management company, wear and tear is the responsibility of the owner
  • Maintenance costs can be allocated between the two parties, but in the absence of specific clauses the management company is responsible for the maintenance costs and running charges. Owners will sometimes have to pay a contribution
  • The management company must have professional insurance to cover the property against fire, third parties and other risks linked to its commercial activity
  • The properties MUST maintain their tourist classification to retain their tax advantages. This means they must provide hotel services such as breakfast, laundering, cleaning and a reception at the very least.

The Tax Regime

A leaseback is a long-term investment, and the French Tax Code imposes a duration of 20 years for commercial lease contracts to recoup the full 20% VAT. If the lease contract is terminated before this time, VAT will need to be repaid to the French authorities at approximately 1/20th per year for each year forfeited. For example, if an owner decides not to renew their lease after 11 years, they will have to pay back 9/20ths of the VAT initially reimbursed to them.

If you decide to sell your leaseback property before the end of the 20 years, you will not have to pay back the VAT providing the new owner carries on with the leaseback agreement.

When reclaiming the VAT on the purchase, the developers will suggest an accountancy firm to reclaim the VAT of the purchase price on the buyer’s behalf as well as carry out their annual declarations.

The French tax system significantly reduces (or even cancels out) the leaseback owners tax liability. Providing that 1) Less than 50% of total income comes from a furnished property and 2) Owners are not registered as a professional lender; leaseback owners have the status of Non-Professional Lessor of Furnished Property and have two different tax regimes to choose from.

  1. Micro BIC (bénéfices industriels et commerciaux): Where rental incomes are less than €32,900. No expenses are deducted, but the net rental income is calculated after applying a 50% reduction to gross income.
  2. Regime Simplifé d’Imposition: Which gives the right to deduct actual expenses incurred in over the year (such as mortgage interest, council taxes, insurance and repair works), as well as a depreciation allowance on the cost of the property and furniture.

What are the Main Benefits of Buying A Leaseback?

  • Ownership of a brand new (or recently renovated) apartment in a sought-after location
  • 20% VAT saving on the total price of the property
  • A management company to care for the property so you don’t have to
  • A fully-furnished property finished to a high standard
  • Guaranteed annual rental returns
  • Land tax exemptions for first 2 years from delivery of property
  • Reduced running costs

Top Tips for Buying a French Leaseback


Buying in a premium ski resort with proven visitor numbers will likely reduce the risk of not receiving rental income, and will enhance your chances of finding a buyer if you choose to sell.

Research the Management Company

Do they have a good reputation in the rental market?


Don’t rely solely on the annual rental income to pay your mortgage as your apartment may not be rented out enough to cover it. Also, rental incomes will be subject to VAT (10%) and owners should check whether the rental figure stated in the lease agreement is inclusive or exclusive of VAT

Think twice!

A leaseback is a long-term investment with limited self-use of the property. Selling has more set-backs than a regular freehold if you sell within 20 years as the new owner will have to take on the leaseback agreement (assuming you don’t want to pay it out). 

Do Your Due Diligence!

Although the leaseback scheme is generally problem-free, you should beware of developers offering high annual returns (e.g. 6 or 7%), as there is no guarantee that these will be maintained in the long term or, indeed, achieved at all.

To Become the Owner of a Ski Property

Click here to start your search for your dream alpine property today! 

Find out how to get a mortgage in the French, Swiss, Austrian or Italian Alps.

Read more about the best ski resort for your ski property purchase.

Get some tips on how to get the most out of your currency exchange.

Know what lies ahead with the purchase process our buying guides to property in Switzerland, France, Austria & Italy

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