French Leaseback Troubles

French Leaseback property has been somewhat of a darling of the Irish overseas property investor for over half a decade now. Although sales for leaseback properties, as with all other types of property, have slowed dramatically in the past year, up to that point the Irish were in the vanguard of buyers for this rather unique property product.


Note – For those interested, a petition has been set up in early 2017 with the aim of highlighting issues with French Leaseback properties at EU and French government level. If you wish to sign the petition the link is :


Note from February 2018: An Irish leaseback property owner is being sued by a French Bank following default on a mortgage for a French Leaseback property. The owner is fighting the legal action through Dublin solicitors Mason, Hayes & Curran. If you would like to help out (and possibly create a precedent if you are in a similar position) you can do so on the GoFundMe page set up to fund the case. It can be reached via the following link – FrenchLeasebackScandal Go Fund Me.


For the uninitiated, around thirty years ago the French government introduced a property incentive scheme to increase the supply of holiday rental accommodation. The scheme, called Residence de Tourisme, has come to be known as leaseback and, once discovered by Irish agents, it was marketed heavily because it offered the one thing most holiday properties lacked – a guaranteed income stream.

The premise is that investors buy a new or refurbished freehold property which is then leased back to an onsite management company, pre-arranged by the developer, for a fixed period of up to 12 years. The guaranteed index-linked rental provides an annual return, usually between 3 and 6%. The management company has complete responsibility for the letting and upkeep of the property over the rental period. There is also usually an agreement for owners’ use of the property included in the agreement.

The great advantage is that you should have a relatively hassle free existence, which is a serious attraction for an overseas investor. Contact with tenants, damage to the property and cleaning are none of the owner’s concern. On the downside owners are obliged to remain in the lease for a substantial lease period, and selling with an index linked lease restricts capital appreciation possibilities. Having said that the attractions of this scheme seem to have vastly outweighed the disadvantages for Irish buyers, who have invested in leaseback property in their droves.

In the past two years, however, a worrying trend started to appear, that of leaseback management operators running into financial difficulties. One of the biggest operators on the Alpine ski slopes, Transmontagne, was the first high profile casualty, highlighting the difficulties that ski operators, in particular, have been encountering. The experience of Transmontagne (TM) clients has been traumatic. Along with receiving no rental from TM, investors were left with properties they couldn’t sell. Part of the TM portfolio is now being managed by another company called Maulin, but many former TM clients have still received no rental payments to date. While the Transmontagne story sent tremors through the French property industry, there are now worrying signs that other operators are destined to follow, and not just ski based management companies. Overseas property solicitor, Tom McGrath, says; “we are getting quite a number of people coming to us saying that they are not getting their rent from a number of rental companies in France.”

One of the incentives in leaseback is that the French government refunds the VAT of up to 19.6% of the property price. But therein lies much of the problem with how this scheme is perceived. The French government involvement in returning the VAT means that the scheme is very often seen by purchasers as a ‘safe bet’, something vetted and guaranteed by the French government. The truth of the matter is that the government has absolutely nothing to do with the scheme after a project has been vetted and passed as a qualifying ‘Residence de Tourisme’ product. Consequently it has not, to date, shown any great inclination to bail out privately run management companies that have run into trouble.

In fairness to most agents selling leaseback product, it was not generally promoted as a government backed scheme, although the perception that it had such backing was often not fully quelled. Once the property has been purchased the only contract is with the developer for the building of the property and the management company to run it for the duration of the agreement. If a management company goes into liquidation, investors have virtually no protection from a legal standpoint as most contracts protect the management companies rather than their clients.

As if the lack of rental were not bad enough, this is generally only the beginning of the problems. When a leaseback operator becomes insolvent its former clients will be obliged to pay back, pro-rata, the VAT that was initially waived by the French government, since the properties no longer come under the auspices of the leaseback scheme. This is often the final straw for owners who have not received rental for months and have seen their variable rate mortgage repayments balloon in the past year.

Last month another well known leaseback operator very publicly admitted the crisis in which it finds itself. Maisons de Biarritz president, Michel Dupey, sent a letter to his company’s clients on September 18th stating: “As you might already be aware of, Maisons de Biarritz is in the middle of a very difficult financial situation. This is partly due to the enormous crises in the financial and real estate area, which is gravely affecting our real-estate development/sales and as a matter of fact, is today, putting the future of the whole group in serious danger.”

The letter continues: “We are in the process of reviewing a survival plan for the Hotel Residential part, in which revenues are steadily growing and for which the upcoming future is looking more than healthy. We continue meeting potential investors, willing to invest into the future of Maisons de Biarritz Vacances.”

“As you know we have not been able to effectuate the payment of your rentals due, even though we informed you in a previous letter that as of September 15th all this would be settled. As of today, we are not in the position to give you any better news as our meetings with potential investors are still in progress and no final information is available at this point.”

The letter concludes: “In the meantime we are investigating other solutions which possibly will enable us to fulfill our rental obligations early October 2008.” Despite this the company appears to still be selling leaseback property with no explanation of any description on its website of the current financial difficulties under which it is operating.

This letter starkly outlines the environment in which leaseback management companies are currently operating and consequently why many leaseback owners are not now receiving rental payments.

Some of the developments promoted by France First, the main Irish agents for Maisons de Biarritz include Charles de Gaulle Roissy, a four-star development situated close to Charles de Gaulle Airport and Perle de la Cote d’Argent between Bordeaux and Biarritz. In 2005 Azur Assistance also promoted the Les Cottages du Lac development in Parentis, 45 minutes from Bordeaux. Peter Woods of France First was unavailable for comment and Azur Assistance have not had an Irish office for some time.

Over the past few weeks forums and newsgroups have been buzzing with comments from investors who have received no rental income for months. In Ireland the financial forum has posts from a number of disgruntled investors. There is also a French Maisons de Biarritz owners group at which had an English version but it has been removed in the past week.

So how do you prevent running into such problems? Leo O’Brien of says that, in general, it is better to avoid purchasing through companies who offer both development and management services. “Building properties is for a builder and property management should be given to a professional property management firm with a good selection of property in areas with historically strong rental demand in order to diversify the investor’s risk. As with any property investment, location is critical.” A management company with a lot of property in out of the way or borderline tourist locations will definitely suffer in the longer term.

Ciaran Mannion of agrees that developers and agents should be separate entities. He says that buyers need to judge developments on a number of criteria including confirmation of developer experience and reputation with banks of a high standing. Mannion also says that purchasers should only proceed subject to the developer lodging a ‘Hypotheque’ (insurance for completion of development) irrespective of the developer’s financial ability to complete.

Mannion continues that the management company is critical and buyers should only deal with management companies that maintain a tight grip on their residences or companies who operate residences in urban locations with high through trade. He says prospective purchasers should be very aware of site location and areas with multiple airline access. He cites areas such as Paris, Geneva, Cannes, Montpellier and Biarritz as ones which should prove popular on an ongoing basis.

What options are open to clients who are not receiving rental income? O’Brien says that the creation of an association of owners with a common lawyer to take a case against the management company is usually the best way forward. McGrath says: “In reality, this is a contractual position, in that the purchasers would normally sign a separate agreement with the rental company. The remedies for the non-payment of rent would be the issuance of proceedings by the purchasers for the recovery thereof.” He says that as contracts vary from company to company they would need to be assessed individually to see where the client stands. Clients who are already badly out of pocket will, of course, wonder if taking such an action against a bankrupt company is simply throwing good money after bad. In a situation where a management company has stopped paying rents a vote of 80% of the owners can be used to oust the management company but this is obviously very difficult to arrange in reality.

Diarmaid Condon is an independent overseas property consultant with significant agency experience. He can be contacted by email at

About diarmaidcondonadmin

Diarmaid Condon is Ireland's foremost Independent Overseas Property Consultant and Journalist. He has been in the industry since 1995 and, in that time, has been a strong advocate for improved legal protection in the sector.


  1. considering buying a french leaseback fractional in Chateau de la Cazine..France 1/13th share with group which owns development…Barrasford and Bird. Any advice? Thanks

    • They aren’t truthful and apparently impacted by brexit. I will probably lose my investment as will others.

      • I am in the same position as Upset client. They have not told any of their investors of their financial problems and about the Chateau being in redressment. This has been a noose around my neck and as the author above says it is the developer who is protected and not the investor.

        • I am also very worried. I invested in a 25% fractional ownership in the Chateau de La Cazine property development and it is now going on to 4 years without any return. The owner Robin Barrasford is declaring that Brexit is the cause….

  2. Hi,

    as you’ll see from my previous posts on French Leaseback property, I’m not really a fan, but it is entirely down to personal preference.

    If you really like the area and the development, you’re likely to avail of your own use options (you’ve not specified if this is an option, it is with some Leasebacks, not with others) and the income is not being relied upon to pay down mortgage debt then by all means go right ahead.

    On the other hand, if you’re approaching this as an investment, from what I’ve seen of French Leaseback investments going spectacularly wrong I’d steer well clear.

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