English
FrançaisI have a general question that I'm hoping someone can answer with authority. It concerns the repayment of the VAT 'saved' when a leaseback property was bought.
My understanding is that you must repay a proportion of this VAT to the French government if, within 20 years of the purchase, you voluntarily break your lease with the management company and take the property out of the tourism circuit - that is, you decide to use or rent out the property as a 'normal' residence or as a privately-managed holiday home.
However, what happens about the VAT if the lease is broken and the property is out of the tourism circuit due to no fault of your own? For example, what happens if the management company goes out of business or you terminate the lease due to non-payment of rent by the management company? If you cannot find another company to take on the lease, are you then obliged to pay back the VAT?
I was under the impression that you have one year to find another management company before you must pay back the VAT. Is this the case? If so, it seems that this VAT issue is the main stranglehold that the management companies have on property owners, as they know that the French government will eventually wave a big bill at owners who withdraw their properties for non-payment of rent.
I have also heard that management companies can, under French law, demand compensation from owners who terminate or do not renew leases that have expired. This is not mentioned in my contract, nor was it mentioned by the selling agents (Valority), and therefore seems plainly corrupt.
If anyone can shine any light on these issues (in plain English), this would be much appreciated.
Hello Clive UK
We have exactly the same issues re VAT etc as you. However, we are just at the beginning of our problem - rents are overdue. Will keep you posted on anything we pick up on VAT etc
John Rockface
Hi Clive,
The best thing is either to take a lawyer (specilized in Fiscal question = avocat fiscaliste in French) or to write to the tax office and they will answer you.
In the mean time I have some answers to some of your questions.
"if the management company goes out of business or you terminate the lease due to non-payment of rent by the management company" = there are 2 questions in this one.
if the management company goes out of business = the administrator will either break you lease or elect a new management company via a court case. So if a new management company is nominated by Judge, no VAT repayment needed. Please be aware that there are a lot of troubles with the Mgmt companies in France so check the liability of the "new one"
If your lease is broken by the administrator, you will have 12 months to find out a solution. At the end of those 12 months you might need to pay the VAT back.
"you terminate the lease due to non-payment of rent by the management company" -- if you want to terminate the lease you have to send a Mise en Demeure via registered mail and then contact a bailif, which will issue a Commandement de payer and if you have no payment after the legal term, you will be able to terminate the lease. In this case you might have to repay the VAT back as YOU are the one terminating the contract/breaking the lease...
You know that once the lease is broken by either the administrator or by the mgmt company, you are entitled to a 12 month period to find solutions & sort out the situation before the tax request you to pay or pay back.
I highly advice you to contact a lawyer and to speak with the other owners of your residence.
Good luck
Thank you for your reply srunner. Fortunately, it hasn't quite got to that point with ResidHotel yet.
However, on a general note, it seems grossly unfair that we were sold these deals with phrases like "11 years of guaranteed rent", yet this is not what we're getting and we may be penalised by the French government if it's necessary to break our contracts because, for whatever reason, the management company are not keeping to their side of the deal.