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The creation of a French leasehold; bail reel immobilier

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In UK, there are two main types of properties: freehold and leasehold properties.

The most simple type is freehold property, which gives ownership of the land and any building that is built on it (like in France).  A leasehold property means that you own the property for the length of time that the lease specifies and you have been given the right to live there during that specified time by the freeholder. Ownership of the property returns to the landlord when the lease comes to an end.

The length of a lease in UK can vary but usually starts at 99 years and can be as much as 999 years.

In France, nearly all residential properties are bought freehold. The concept of leasehold is quite unknown to overseas buyers in UK.

On the 20th February 2014, the French leasehold also called “bail reel immobilier” was added to the French construction and habitation code (articles L. 254-1 and L254-9). Under this type of contract, the leasehold owner will have the obligation to build or renovate existing properties. The properties under this leasehold must be occupied as a main residence by individuals whose incomes do not exceed thresholds fixed by decree. The condition of incomes only apply to the occupants. Private investors can therefore invest in those French leasehold properties.

The length of the lease can be between 18 and 99 years.

The leasehold property can be mortgaged, bought, sold at any time and passed to relatives.

However, due to the short duration of the French leasehold, it may be difficult to find a buyer if there are less than 60 or 70 years left to run.

This new regime has been mainly introduced to help people to step into the property ladder in areas where property have become unaffordable for first time buyers, Paris in particular.

For more information on the French leasehold, please do not hesitate to contact Loic Raboteau via email at loicr@bandmlaw.co.uk or tel on +44 (0) 207 356 0833.

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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