BUYING IN FRANCE:SELLING FOREIGN property post-credit crunch isn't easy. And selling sale and leaseback properties – once all the rage with buyers looking for a possibly self-financing investment that might yield a few weeks in the sun or on ski slopes – has become even more challenging.

Reports of sale and leaseback companies that have gone out of business, leaving buyers with mortgages to pay and no rents to cover them, have made anyone still interested understandably wary.

Ciaran Mannion, the Irish agent of UK-based property company OverseasProperties.com, still maintains stoutly that French sale and leaseback properties are one of the few solid investments around.

(In a French sale and leaseback deal, the purchaser, on signing the deed of sale, gets the property free of 19.6 per cent VAT and enters into a separate commercial lease with a management company which rents out the property, giving an agreed rental income to the owner. The leases typically last from nine to 11 years, and are renewable automatically after that unless either party states otherwise.)

The word “guarantee” – used with abandon in overseas property brochures – really does still mean something when referring to French sale and leasebacks, says Mannion.

The emphasis, if you are interested in such a property, should be completely on the word “investment”, says the Galway-based agent, who studied business at Queens’s in Belfast and in France. “You have to do the math,” he says, and has detailed brochures spelling out in financial detail how a sale and leaseback can be a sound investment.

The first thing he advises is that investors raise the mortgage from a French bank, against the value of the property being bought. French financial institutions are, and have always been, very strict about lending: intending buyers have to prove that two-thirds of their income is disposable before they will give a mortgage.

If they are satisfied, you may be able to get as much as a 100 per cent mortgage, says Mannion (although 70 per cent mortgages are more usual).

You get the property free of VAT, but there are of course other taxes and expenses associated with French property ownership – from notary fees, to the tax fonciere – land tax – to the Tax d’Habitation – a property tax – that you can claim against rental income.

There are about 15 standard documents involved in a sale and leaseback purchase, and Mannion’s company walks purchasers step-by-step through all of them.

Mannion maintains that not only can a sale and leaseback investment be self-financing, it can be income producing, depending on your mortgage (see panel).

The guarantee of course is only valid as long as the management company running your scheme does stay in business. A number of Irish buyers were badly burned when management companies like Transmontagne went out of business.

Mannion says that with due diligence, buyers can try to ensure that the developer building a sale and leaseback scheme, and the management company running it – are sound.

He says that, if you go to three French banks with the contract and lease agreement, they will check out the companies before handing out a loan. Alternatively, get an independent notaire to check it out for you.

He also says that the developer of a scheme and the management company should be two separate companies.

You should indeed always get independent legal advice when buying abroad, in France or anywhere else. And you should remember that eventually you’ll have to pay back all of an initially interest-free loan – plus, you will have to pay CGT in Ireland, even if not in France.

Leasebacks are best viewed as long-term investments if you want to make money out of them. They can be sold on before the lease is up, but tax may be clawed back and there may be other complications. And they may be difficult to sell if they are in an out-of-the-way location.

Currently, Mannion is offering for sale properties in a development in the south of France, and one in Evian les Bains on the shores of Lake Geneva.

There are maisonettes for sale in Le Chateau de la Mer, 9kms west of Cannes, and these will cost from €194,000 to €207,000: the one-bedroom properties in this development have kitchen/livingrooms downstairs opening onto enclosed gardens and upstairs, the bedroom and a toilet. This is a development that was originally built in 1998 and owned by one person who rented out the units himself. Now it has been completely refurbished and properties are available for immediate sale. The management company is Les Residences du Soleil (www.residences-du-soleil.com).

Meanwhile, sale and leaseback apartments are for sale in Evian les Bains in Evian, a long-established resort near Lake Geneva. They can be bought off plans from €84,999 for studio apartments, from €170,704 to €174,584 for one-beds while two-beds are from €239,181.

You can get more information on these developments on www.overseasproperties.com.

And on www.rtfrance.com/AFTERCARE.html

where there is an “aftercare” section which instructs French leaseback purchasers on how to deal with the annual paperwork received from the French authorities.