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Goldberg Global -> RE: Freehold property (dont buy leasebacks!) (10/2/2008 6:23:04 PM)
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Get good legal advice
You might not be able to sell for the term of contract.
The tenant may not leave.
SALE AND LEASEBACK TRANSACTIONS
These are known under various names such as "nouvelle propriété", "propriété allégée" (sale and leaseback) etc. These should not be confused with timeshares and are usually of new property and generally follow the system of sales off plan referred to above.
Properties sold subject to the leaseback scheme are often marketed as being sold with a "discount". Great care needs to be exercised as there is no "discount". There is, however, an immediate leaseback to the developer or to an associated company of the developer under a French commercial lease thereby making it possible to clawback TVA at 19.6% of the purchase price that would otherwise have been payable.
This clawback of TVA is therefore the greater part of any "discount" offered. In consideration of the commercial leaseback, the developer will often furnish the property, insure it, pay the outgoings, etc., and will permit the owner to use the property for say six weeks during each calendar year (such weeks being reserved in advance). Some schemes sometimes also offer an additional "discount" in the shape of a single rolled up rental payment for the full period of the lease (usually 9 or 11 years); other schemes offer a guaranteed percentage return on rental or some other formula.
These leaseback schemes are complicated and during the period when the commercial lease is running (9 or 11 years), it can be very difficult, for complicated legal and economic reasons, to resell a property purchased under this system. Furthermore, under the French system of commercial leases, there is no absolute guarantee that the tenant will relinquish the property at the end of the lease without an indemnity being payable by the landlord/owner.
You must obtain detailed and specific legal advice if you are considering one of these products.
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