French Leaseback confusion – does it need a new name?8th October 2012
Around the world there are many types of property ownership. When dealing with international property investors on a daily basis, this variety can sometimes throw up a few hurdles, particularly with the understanding of Leaseback property ownership.
The most universally popular way of owning a property is unsurprisinglyfreehold thanks to the unequivocal nature of the title, shortly defined as; “ownership of land and the buildings on such land”. This can be compared to the quirky UK concept of leasehold ownership, which is defined as; “a form of or property tenure where one party buys the right to occupy land or a building only for a given length of time and reverts to the owner after that time”.
Buyer sentiments over title classifications differs depending on their origin. Property investors in China prefer the rare freehold property opportunities available there, compared to the 50 or 70-year leasehold properties currently proposed by their government. This is because what happens to the title of these leasehold properties after this time frame is uncertain.
In France, all property is sold freehold (the concept of leasehold does not exist). Even leaseback property is freehold and this remains a popular way to invest in fully managed buy-to-let properties in key tourist areas. Still today, leaseback often gets confused with the Anglo-Saxon leasehold concept – although they are quite different.
A leaseback is as it says (and a concept also known in commercial property as sale and leaseback); a property owned freehold – which is then leased back to a management company and in this case in return for a guaranteed rental yield and rental management services.
Maybe the French government should think of a new name for leaseback property to increase appetite of international investors? The term buy-to-let still works in the UK, especially with overseas buyers, but then with French leaseback you can use the property as well. The search for a new name continues….
Nicholas Leach, Athena Advisors