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Leaseback Property End of Contract

France - Leaseback Property End of Contract


At the end of the lease contract it is the aim of many owners to renew for at least the same period of time so as to be in a position to keep the full VAT refund and to avoid capital gains tax liability (can be applicable if the property is sold before 15 years).

Some owners may wish to renegotiate the terms of the lease to, for example, include more personal occupation etc. in which case it is generally advisable to begin negotiations at least 6 months to a year before the actual lease contract expires.

Similarly, those who do not wish to renew the lease contract should serve the appropriate notice as set out in the lease contract. In the case that this is not stated in the contract the minimum is normally six months although a years notice is recommended.

French commercial leases are governed by French commercial law which is a complex matter and protects the tenant. The law states that the head tenant can claim an indemnity if they are evicted from the property at the end of the lease contract. The law also permits for the tenant to have a right to renew the property when the lease comes to its term.

Whilst this is more applicable for high street shops and it is not the intention of the property management company at the start of the lease it is a possibility and should be taken into consideration.

Some management companies will provide owners with a letter stating that they will not ask for these fees so as to reassure the owner.

In the case where eviction indemnity was to be paid should the owner not wish to renew the lease, French agents expect or have experienced eviction fees of approximately 6 months to 1 years worth of rental income earned by the owner of the property. This is a relatively small amount when capital appreciation and the VAT rebate is taken into consideration.

In any case, the owner is the freeholder of the property at all times, and after the lease contract is terminated they can do as they wish with the property.

If the owner of the property wished to sell it during the lease period this can be done and the new owner would have to honour the remainder of the lease.

If the property was being sold after the lease period then it can be sold as a normal property through a local estate agent.


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