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Landlords Concerned by New French Leasehold Law

A new property reform bill due in France includes plans to extend a leasehold scheme to the general market, concerning landlords who are worried that it could mean they have to pay rent to the State.

The new law contained in the reform bill – which is being examined by senators after being adopted by MPs on its first reading in November 2019 – extends a leasehold style property ownership system, that is currently used only for social housing in towns and cities where the property market is under pressure, to the general market.

The idea of the new law, which would also affect overseas property investors, is that taking the cost of the land out of the sale price will help make properties in more expensive locations more affordable to property buyers. The payment of a monthly ground rent to the developer will cover the cost of the land price.

The leasehold scheme already exists in France but is limited to social home ownership schemes – such as one well-publicised plan to develop 500 ‘half-price homes’ in Paris.

In recent years, ‘affordable’ real estate programmes have been developed in Lille, Rennes, Paris and the Paris suburbs to help alleviate a booming French property market.

Leasehold properties have been available in the UK for many years, but the draft law has caused concern among private landlords in France, who are used to the co-propriété system.

Under the plan, offices fonciers libres (OFL) will be created, similar to ones that operate social housing schemes, and will offer housing, offices or shops for sale, via real, extendable, long-term leases of up to 99 years, in areas where the French property market is under pressure.

These OFLs will be majority-owned by public authorities, in a bid to prevent land speculation, and keep ground rents down.

Overseas property investors will have to check in future if French properties are being sold freehold or leasehold.

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