French Leaseback properties in France

How a French leaseback actually works

By signing a French leaseback scheme, you become the freehold owner of a furnished property. The term usually runs nine to eleven years, renewable, with a fixed rent linked to inflation — every year it rises according to an index published by INSEE (the ICC, IRL or ILC). The rent is paid by the management company whether the property is occupied or not, which is why it is capped at up to around 5% of the cost of the property. Managing the letting yourself could bring an average 8% return, but with no guarantee of full occupancy, and with the repairs, refurbishment, bills and taxes falling to you.

A property management company takes care of the home and handles all the maintenance and hassle — bills included — and typically guarantees up to a 5% net return. You have no extra costs: refurbishment and the like are paid by the operator for the length of the leaseback, since keeping the property in good order is in their own interest too.

You can enter a leaseback two ways — buying new or off-plan directly from a developer, or buying an existing leaseback unit as a resale from its current owner. The letting itself works the same way either time; the VAT treatment does not, which is why the two are set out separately below.

The 20-year commitment

Whichever way you buy in, the same twenty-year clock runs underneath the property, starting from the date the original VAT was deducted — not from the date of your own purchase. To keep that deduction, the unit needs to stay let under a qualifying commercial lease, to an operator providing the required services, for the whole of that period. Each year is worth one-twentieth of the original VAT amount; fall short and the years still outstanding can become repayable, at one-twentieth per year short.

On a resale, this is the figure that actually matters — how many of the twenty years are already used up, not any fresh refund. A unit first let ten years ago, for example, has ten years of the commitment behind it and ten still to run; the exact number is specific to that unit’s own history, so ask the seller and the managing operator for it rather than assuming it resets with the sale.

Interrupting the arrangement — ending the commercial lease, or letting the qualifying use lapse — before the twenty years are up is what can trigger a repayment. Sales are often structured so the lease and the letting continue without a break, which normally avoids that outcome, but the mechanics are genuinely technical and depend on how a given sale is arranged. Check the position on a specific property with us and with a notaire before relying on it.

This twenty-year VAT commitment is a general mechanism, not advice on a specific property — the exact remaining duration, and who would be responsible for any repayment, depend on that unit’s own history and on how a given sale is structured. Confirm the details with us and with a notaire before you rely on them.

Financing the investment

Two methods are commonly used: an interest-only mortgage, or a classic monthly-repayment loan. Both are usually illustrated on a 40% deposit — a larger deposit means you will not need to add money each month to cover the mortgage.

An interest-only mortgage keeps your monthly cost to a minimum and lets you start earning from the first year — illustratively, on a €125,000 investment with a 5% return and a 2% mortgage rate. After fifteen years you can sell and take the profit, since the property is likely to have appreciated by then. A monthly-repayment loan suits you better if you want income sooner: once it is paid off — after fifteen years, say — the rent becomes income in your pocket, or you can sell and keep the full proceeds.

On that basis, the capital gains tax rate on a property that is not your main residence is 34.5% for French residents and 19% for non-residents living in Europe. These figures are carried over from the previous version of this page and have not been re-verified against a current source — check with us before relying on them.

Income tax

You are required to declare this income in France. A tax treaty between France and the UK means you are not taxed twice on the same income.

Depending on how the letting is structured, allowable deductions — including depreciation under the LMNP régime réel — can significantly reduce the taxable profit on the rent, though not eliminate the tax due outright. See our guide to income tax on a French rental investment for how the mechanism actually works, or talk to us directly.

What it costs through us

We do not charge any commission on our off-plan or new-build service — we are paid by the French developers, so the price you are quoted matches the developer’s own. For resale leasebacks, a French estate agency commission applies, already included in the advertised price (FAI). Sextant France, part of the Sextant group, runs a resale facility and markets French resale leasebacks on both the international and French markets.