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Buying off-plan in the French Alps: avoiding the pitfalls

View profile for Loic Raboteau
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With the ski season well under way, many French property hunters are looking to find a place in the snow to follow their passion for skiing or for pure investment. France has plenty of ski resorts to offer for family ski holidays. The French Alps property market can match a broad range of budgets and remains very attractive with still very low mortgage rates for non-residents. However, overseas buyers should remain cautious and get advice to avoid pitfalls when buying off-plan.

Location

Be careful of developers or estate agents’ brochures advertising “ski in and ski out” property. Having the slopes on your door steps may be an important point of your purchase. “Ski in and ski out” can be misleading sometimes. Some buyers will have greater expectations than others and would not expect to walk across a public road or walk for more than 10 min to access the slopes. Therefore before committing to the purchase and signed your reservation contract, there is no better advice than inspecting the site yourself and reviewing carefully the site plan.

Delays

Purchasing off-plan means buying a property under construction where the purchase price will be paid in stages. Your contract will set out a detailed payment plan and a contractual delivery date. Unfortunately, delays can occur for many reasons (weather, failure of a sub-contractor, strike…).

Although the completion of the construction will be secured by a bank guarantee (mandatory in France), developers are often reluctant to include a penalty clause in the contract to cover late delivery.  In case of delay, your developer must explain the reasons and if at fault should compensate you. An experienced property lawyer will help you to negotiate the appropriate level of compensations.

Building specifications & plans

You may wish to change some of the specifications and plans proposed by the developer. Any change must be discussed with the developer at a very early stage to determine if the changes will be feasible and at what extra cost. Any changes will need to comply with disability access regulations.

Common area and services charges

The project under construction may include common facilities such as a swimming pool, spa and ski lockers room. It is important to check that your title will give you right of access to those facilities. Services charges will be voted annually by the owners at the annual general assembly meeting. It is important to get an estimate from your developer on the services charges as well as on the local taxes (taxe foncière et taxe d’habitation).

Price

It is possible to check the price per scare meter in the area you wish to purchase or the sale price of a neighbour property. In order to avoid paying the odds for your dream ski chalet, it is important to do your due diligence.

Buy-to-let options

There are many ways to let your property and it is important to consider carefully which one will suit your needs as each of them will have different tax and legal implications.

                -using a local estate agent or managing the property yourself;

                -leaseback property: this type of property involves the signature of a commercial lease with a managing agent, who will rent out your property to tourists. You get a fixed annual rent and get a refund of the VAT of the purchase price. The lease will have a 9-year minimum duration and must be renewed to avoid paying an exit penalty and repay the VAT. Leasebacks are not for everyone and specialist advice is recommended.

                -para-hotelier: letting your property with the provision of certain hotel services can make you eligible to apply for a VAT refund of the purchase price.

Your tax status

Different tax status may apply to the taxation of your rental income (LMP, LMNP...) and will depend on the level of rental income you will generate. For high-end properties, wealth property tax must also be considered.

Purchase structure

It is important to seek advice at the time of purchase and decide on the most suitable purchase structure and wills to ensure you will be in a position to transfer the property in the way you would wish, in a tax efficient manner.

Independent advice

If you are considering purchasing a property in the French Alps and need legal advice, please do not hesitate to contact Loic Raboteau via email at loicr@bandmlaw.co.uk

Disclaimer: These articles are for information purposes only and are not intended as legal advice. Professional advice should always be obtained before applying any information to particular circumstances.

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