Number 92 - June 30 2004

France Voila, the newsletter and weblog from Rentals France and the French Property Digest. You will only receive it if we have been given your email from one of our websites and asked for more information. If you do not wish to get this regular magazine, please unsubscribe by using this link.Unsubscribe

In this issue...

1. Last Minute Bookings - Special Offers
2. Cost of building in France - Comparisons with other countries
3. The right to work in France - continued.
4. Leaseback - Is it right for me?

=======

1. Last Minute Bookings - Special Offers

Some owners have cancellations and are offering good prices for July and August...

Tony

We have just had a cancellation for the dates of 3rd July - 10th July. I know it's a bit short notice, but do you know of anybody looking for a week in Dordogne for those dates. The normal price is £480.00, but we've reduced it to £360.00 on the site.

http://rentalsfrance.com/dordogne/MAIN-702/index.html
Belle Buges

===

Hi tony, Our house is available from 21st august at special rate of 998 sterling instead of 1200 / week.

http://www.rentalsfrance.com/languedoc/MAIN-720/index.html
Anna Livia

===

Look through our RentalsFrance website - many properties have special offers.

=======

2.Cost of building in France - Comparisons with other countries

Building costs in France are very slightly lower than in the UK so you can get a fair idea from a reference book like Spons A and B from your reference library. French builders have similar reference books for costing work and usually quote from one a couple of years old.

UK Building Costs

For a comparison of building costs in Europe (and the world) there is a useful chart on this page

Comparison Chart Bonne Chance

Tony

I recently wrote about the right to work in France, a reader asked about "employing" friends...

Hello Tony
On your article re Right to work in France.

If I am renovating a property and a member of my family/friends is say a plumber - can he do the work if I don't pay him for it.

Thanks for your help

Carol

===

Hello Carol

Strictly speaking, no, as there is bound to be some "consideration" a bottle of beer or a sandwich, but no one will do anything about it as evading tax and fighting the authorities is a way of life in France.

However, trades such as plumbing and electricity are completely different in France to those in the UK or the USA. Just about nothing is the same, for example, the water pressure in France is much higher than the UK (up to 6 bar for hot and cold systems) so pipes should be oxy-acetylene brazed and not soldered. Any problem and you may not be insured. Electricity is much the same, no ring main but radial wiring and anything related to water heating or washing machines etc has to have an isolated circuit on a differential breaker. Break the rules and you may not ne able to claim in the event of an incident or accident. The person doing the work would be liable for damages, hence the huge insurances paid by tradesmen.

For all work in your property you really need a certified bill from an approved company or tradesman in France. Without this you have no compensation in the event of subsequential damages or loss and you cannot offset any of the costs against capital gains tax in France.

Hope this helps

Tony

=======

3. The right to work in France - continued.

I recently wrote about working in France. I recommended that if you get someone to do work on your property that you must insist that they have a Numero Siret and are registered tradespeople. This is sound advice and if you pay anyone "incorrectly" then you are committing an offence.

If you have a bank account in France then you can get a "cheque emploi service" from your bank to pay for small jobs around the house. You can then legally and safely have work done like painting, cleaning or gardening. When the worker cashes the cheque, you bank will also deduct the social charges from your account.

If you are a tax payer in France then you can deduct a percentage of the total costs from your income and gain a tax benefit. The aim of the French governement is to encourage unemployed and low income people to get extra work and to discourage illegal undeclared workers.

You can also directly employ a person and pay their social charges. For more information contact your local URSSAF office.

For skilled trades including eletricity and plumbing, only use registered trades people. The risks are too great to use anyone untrained and illegal.

More information can be seen at this site http://www.ces.urssaf.fr/

=======

4. Leaseback - Is it right for me?

Hi Tony
I've heard about a leaseback development in an area I know fairly well and could be interested in, I was really interested to read your recent newsletter to which I subscribe, you know your stuff so would like ask a question or two, my thoughts were to sell the studio I own, leaseback a 1 bed place, use it the 4/5 weeks (I'm allowed up to 8) with a return then reduced to about 2.5/3 % , you clearly explain not to use this "leaseback" as a holiday home but in my circumstances I can see I'd like to keep visiting for the next 10-15 years at least but not more than 2 months.

It's for 11 years and you CAN live in it/sell it/ rent it out yourself/ let them rent it/ after 11 years giving them notice. Your points you raise make me think the downside could be if the government takes the flexibility away which would be in the contract at point of signing the resale value must be affected, therefore is it such a good purchase if you off load as soon as you are allowed to? who do you sell to? there is no (vat) tax benefits to a new investor. I'd really appreciate your comments, I haven't a clue who to ask, and you're the most unbiased commentator I've researched over the past few days, your email with the newsletter was heaven sent! many thanks in advance I eagerly await your contact Kay

===

Hello Kay
For a seasonal use at a reduced income this could work for you. But there is absolutely no certainty that the management company will allow you to use the property as you describe in 11 years time. Depending on the developers, many management companies are "shell" companies which have little or no incentive to comply with any contractual terms, such as handing back to you the property after the first lease period. Even if there is a clause in the leasing contract - the management company can still insist, under French law, on compensation for "loss of livelihood" if you give notice to cancel the lease.

It is unlikely to be possible for you to live permanently in the property after 11 years as this would mean that the whole development (not just one or two properties) must be deregulated from the original leaseback structure - this means repaying the VAT.

If you sell after 11 years - you will have to repay half the VAT to the government and the new purchaser can get the benefit of this.

Yes the French government can change the rules at any time and they are experts at retrospective legislation.

These and other points make me say that the leaseback plans can be good value if the construction and management companies are solid and well supported. This "rule" applies to all assets and shares.

As a lifestyle proposal I cannot recommend them and my comments are strongly against those publications and agents who promote the leaseback plans as a good way to get a self-financing holiday home.

Hope this helps best wishes

Tony

===

Hi Tony
Many thanks for coming back to me so soon, taken your points on board, and yes there are many companies selling these leasebacks as a way of financing your 'dream' holiday home.

How would you know if the construction/management companies are good? shares can show you past returns? what is starting to worry me is how good an purchase is it if at the end of it you're stuck with it? prices will presumably go up but if you can't off load because of some stigma or a non existent market how does it become an asset? I still think in my particular circumstances for the few weeks a year I would use it then it may be cost effective, but what investor/purchaser would buy a property with so many 'conditions'? am I missing something? I have not seen a property advertised as an ex- leaseback property/? The idea was to let friends/family use it after the 11 years, but it still wouldn't be lived in full time but this benefit looks as though it couldn't be guaranteed. I'm wondering why anyone would buy a leaseback with a contract that meant nothing, are there any guarantees? or could it be like my endowment plan ... gone down the pan (along with my Equitable Life Pension) many, many thanks for your thoughts Kay


===

Hi Kay

From our wesite at French Property Digest we do research both the construction and the management companies and if we have clients looking for a property portfolio though us we can help and advise.

The management company has to have financial guarantees for the term of any lease contract so this is secured. But some of the claims being made by the people marketing these plans about reversion and resale are very misleading. Not all constructors or management companies are equal.
As in endowment plans and as with all equity, you cannot predict future trends, property prices can go down as well as up. The safe thing about the leaseback plan is that there is a guaranteed (by a bank) income for a minimum of 9 years and your capital is invested in real-estate, usually in a high value area.

The resale value will not be the same as with normal unencumbered real-estate, in fact the resale values could be higher than the "open" market place in hard times due to the guaranteed income.

In your case with the information you have given me, a leaseback plan could be a good solution.

Bonne Chance

Tony

=======