English
FrançaisI have been offered a mandat de gestion contract by my management company with the cancellation of my 1 year old leaseback contract without any indemnity charge.The one provision is that I must include a min of 50% of the winter school holiday periods in the availability of my apartment. As from next year this is no problem for me as my son leaves school this year.
If I understand correctly, i can offer my apartment to the management company for all of the winter school holiday periods under the contract and use the apartment as i wish for the rest of the year.
- retain VAT advantage as under the mandat de gestion it will be rented under the same terms as a leaseback
- mandat de gestion yearly contract does not fall under the commercial lease laws and can be stopped at any time after a yearly contract expires (not that I would want to stop it as it would pretty much guarantee some income as the propertty is normally full during holiday periods)
- No longer tied to a restrictive one sided commercial lease agreement and indemnity charges if later wanting to pull out of agreement
Negatives
- higher owners costs
- liable for taxe d'habitaion
- income not guaranteed
i would appreciate any thoughts on taking up this option, pitfalls etc., etc. My primary reason for purchasing was for using the apartment myself while gaining some income while not using the apartment. As I am approaching retirement age, another 5 years or so I will be wanting to use the apartment more and more throughout the year. The leaseback system then becomes less and less interesting. Giving up my apartment for xmas, new year and 3 weeks at easter does not seem a bad compromise to retain the vat advantage and avoid the indemnity charges. Less rental income is not really a big issue and I have no mortgage on the property.
win for the management company financially in the short term and a win for myself financially in the long term?
Hi,
not sure exactly what is meant by a 'Mandat de Gestion' ??
Bear in mind what it says on the Notaires website:
"Is there any alternative to the commercial lease?
Yes, the French Commercial Code authorises parties to enter into agreements that do not have the status of a commercial lease. This applies particularly to tenancies-at-will which may not last for more than two years (not to be confused with precarious occupation agreement which are commonly known as tenancies-at-will).
If, on the expiry of this term, the tenant is left in possession of the premises (or if the lease is renewed, or if a new lease is concluded for the same premises), a nine-year commercial lease automatically comes into existence.
Conversely, if the landlord wants the tenant to quit the premises, the tenant must comply and will not receive any compensation for non-renewal of the tenancy."
https://www.notaires.fr/en/commercial-lease
Hi Sinead,
thanks for reply.
mandat de gestion is a management mandate, where i sign a 1 year contract, where the management company manages my interest in the property for that 1 year only and in this case, only the weeks that i make available for rent.
I have read in another thread that after stepping out of leaseback or failure of a management company, you can find another management company to supply a min of 3 of the services required and maintainyour tax advantage. In this case my contract is with the same management company and they will provide the same services but only for the weeks stipulated in the mandate.
In other words they will let me leave leaseback provided that i have a contract with them for the school holiday period.
in theory, after the first year expires on the mandate, i could replace them with another company.
Hi,
what about the other owners in the complex ?
Are they remaining under Leaseback arrangement or are they being offered to switch (everybody) over to 1 year Service Agreement ?
In other words is the existing management company running with 2 different arrangements (Lease & Serevice Agreement) in the same complex ?
Thanks, Henri
Don't know about how many other owners Henri, the offer to switch came after a pretty heavy discussion with the management company about things i sasn't happy with.
Obviously they can't offer it to that many owners as they need to keep a stock of apartments available for the whole season. I can understand that for them it can be interesting to have some apartments extra for the busy weeks. Cheaper for them too as they only have to pay me when my apartment is used. Better for me because i want to use my apartment more and more myself outside of the school holiday periods .
I see the contract as using the management company as any other letting agent for a few weeks a year to maintain my tax benefits. I would just like confirmation of where it puts me legally and seems to be a good way of getting out of the constraints of leaseback and not having to pay indemnity compensation.
As far as i know the business in my complex is going quite well.
Geoff,
thanks for that - very interesting. I might look for such an arrangement myself.
Henri
Geoff - legally it means that your tax activity is still LMNP and so you have to continue to submit a tax return. But you must declare VAT with your rent. You are free to sell your property as a normal property but if you do you will have to pay back the VAT 1st refunded to you pro-rata (i.e. for remaining years of the 20 which the VAT refund applies to). You can use any local company (or individual) to manage it so long as they have a SIRET number and their principal activity is managing property.
Seamus
Thanks Seamus, seems to confirm what i was told and that i can escape with a soft leaseback exit!
Is it best to make sure that all correspondence, cancelling of leaseback and new mandat is done via registered post
I depends what you mean by "cancelling a leaseback". If you mean refusimg to renew the lease then you must use a bailiff to do that. If you are signing a new lease then the lease is a legal document and I would recommend registered mail.
The management company mutually agree to cancel the leaseback without indemnity as long as i take a 1 year mandat de gestion contract with them containing at least 50% of the school holidays for their use.
I just need to let them know what weeks will be covered by the mandat.
"Soft leaseback" is best description I have heard to date. The cancellation of existing lease will need to be co-signed by you and the operator. You can sign "mandat-gestion"/"mandat-location" with same operator or new operator each year but as Seamus mentioned the operator must supply 3 of the 4 hotel services which were supplied in your original lease and up to you to collect 10% TVA on any rentals. This ensures you are still lmnp/leaseback compliant but not locked into multi-year commercial lease.
An advantage over commercial lease is that you can sell freehold as your "mandat-gestion"/"mandat-location" just signed yearly so lapsed by time new buyer takes over your apartment. However your "cancellation document" of original lease is crucial if you are selling and required by buyers notaire as it is proof that original lease no longer active. Differerence though with this sale is thaat purchase TVA muts be repauid pro-rata. If selling apartment with original lease then no TVA payable but may not attain same resale value.
Sound like an ok deal for first year and lets you look for alternative local operator thereafter.
Thanks a lot for the info and advice guys, much appreciated!