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leaseback; too good to be true.


Bob2

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I intend buying a property in the charente department in the near future for holidays and investment purposes,and during my research at exibitions and speaking to agents,leaseback was being promoted as a straight forward and relativley risk free proposition. The property has to be leased back to the developer for a minimum of 9 years to qualify for the 19.6% VAT discount and an index linked guaranteed income. What concerns me is that after the 9 years are up and you decided not to renew the lease, would you have to pay back a pro-rata amount of VAT.Could a problem arise between yourself and the developer because by not renewing the lease you would be taking income away from his management company.
I would be very interested to hear your views or experiences,good or bad about leaseback.

Regards,

Bob
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You can get some good info from www.headdonconsulting.com eg the following:
Re: Leaseback Property: It would be possible to sell before the expiry of the commercial lease. The lease would, however, continue with it being automatically assigned to the new owner. As for the VAT position, the VAT recouped on the initial purchase would be returned to the tax authority in proportion to the amount of time that the property was owned for. Note that should the property be sold up to 20 years after the original purchase, part of the VAT originally refunded can be recouped.


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The leaseback scheme is a government initiative to encourage investment in designated tourist areas to provide rented accommodation for vacations.They do not charge TVA on the schemes to help,this automatically reduces the cost by 19.5%.The developer manages the complex as a 'Holiday complex' with a quaranteed return,which looks to almost cover a mortgage.
I think the biggest downside is that after the 9-11 years leaseback many people will renew the lease and if you wanted to use the property fulltime you could end up living in a 'holiday village'ie dead off season,english lager louts in season,fighting the germans for sun loungers etc etc
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