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US$1 equals 1.13 euro  About a year-and-a-half ago, my husband Karl and I were in England visiting my family there. A few months earlier, Karl had noticed a short article in International Living mentioning something about the French government leaseback program. The article gave the name of a London law firm—John Howell and Company—that specializes in helping foreign buyers arrange a French leaseback. Being in London, we decided to make inquiries. We had read of leasebacks available for purchase in Normandy, Brittany, Provence, Paris, and the Alps. However, Stephanie Carrisimo, the woman we worked with in John Howell's offices, immediately said to Karl, “Oh, m’sieu, if you want the best weather and property appreciation, you must go to the Côte d’Azur.” Neither of us had any idea that she was speaking of the French Riviera.

Stephanie arranged a meeting with a real estate office in Nice. We left the next day by ferry from Dover to Calais, then caught the train to Paris. From there, we took the TGV (the "train of great speed"—184 miles per hour or more) to Nice.

On this, my first trip through France, I found the countryside entrancingly beautiful, the food and wine exquisite, and the people, with a few exceptions in Paris only, warm, friendly, and always polite and helpful. On our return trip this past October, American flags were displayed everywhere, and many French people told us of their support for the war on terrorism as well as their sorrow for the tragedy in September.

In Nice, we were introduced to Mr. Eric Groux, owner of the real estate firm (for contact details see Rolodex on page XX), and Beatrice, his capable assistant. Mr. Groux gave us further details about how the French leaseback program works.

The program was enacted by the French government because of the shortage of hotel rooms and other tourist accommodation in France. Paris is the most visited city in the world, and the Riviera figures come not far behind.

We experienced this accommodation shortage ourselves. We were unable to find a hotel room in Nice at any price in October 2000, and would not have been able to stay except that Eric found a place for us belonging to a private party. 
 

Taxes, rents, and other particulars Here's how the program works: A private developer applies to the government to do a project. As soon as the project is approved, the property can be marketed. We were able to see what we bought, but due to high demand, many of these properties are sold off the plans years before they are built. The V.A.T. (value added tax) is taken off the price under leaseback. In other words, there is a 19.6% reduction on the asking price. The bank, or other lender, assumes that the property is selling at the asking price and will lend you up to 95% of the purchase price. And this is without any bank reference in France, social security number, property etc. You need only use the property as a guarantee, which is quite rare in other parts of the world.

Under the leaseback program, you are required to lease the property to a property management firm for nine years. The particulars of owner's rights and rents paid vary region by region. The management firm handles all maintenance--right down to replacing lightbulbs at their own expense. For a condo, they pay condo fees, utilities, etc.

In our case, we are paid quarterly by the leasing company. We have this money deposited into our bank account in Nice. The payments have an indexed rise each year linked to the rise in the cost of construction. This year the rise was 5%, more than the rate of inflation, a slight bonus for us. Our lease period began on Oct. 31, 2001, regardless of the actual purchase date, so had we purchased on Nov. 1, it would have been a 10-year lease.

Karl structured our down payment so that in the first few years we are slightly short on the balance between payments coming into the bank from the leasing company and going out for the mortgage. In later years, we will accumulate euro in the account, but not enough to worry about exceeding the U.S. treasury reporting requirements for funds in a foreign account. We can access the account from America using the Internet. We also receive statements mailed to us in the States. We opted for no checks.

We have the right during the nine years of the lease to come to the complex where our condo is located and to stay at a reduced rental rate in our condo if it is available, elsewhere in the complex if it is not.

Karl looks at the leaseback program in a couple of ways. We chose to pay about 33% down. This allowed us to structure the transaction so that it is close to neutral in revenue versus cost. If we wished, we could treat this purely as an investment and not visit for nine years, and then renegotiate with the leasing company for fixed time or more time in our condo, as well as a substantial increase in the payments we receive. Or we could do anything else with it we wish. We are considering "coretiring”--that is, keeping both our place in France and our home here in the United States. 
 

Compared with the two to three years previous to the purchase, the current weakness in the euro versus the dollar, combined with the tax reduction, procured us this property at roughly a 50% to 55% reduction in price in dollar terms. This is an obvious reason why purchases in Europe make so much sense now.

Money, by the way, was available for up to 20 years at 6%. The prevailing interest rate may well be less now. We pay roughly 6.5% for a fixed-rate 20-year mortgage. The extra is for mortgage insurance, compulsory in France and, as a result, relatively cheap. With this insurance, if the owner dies the mortgage is automatically paid off. By proxy, this also makes this kind of purchase a reasonably good estate-planning tool.

You need a French will 

There are a few details that were not immediately obvious to us in reading the literature about leaseback. It is highly advisable to make a French will governing the property. You do this in your own handwriting (a holographic will). We were able to organize this in an hour meeting with an English-speaking French solicitor. The cost of the meeting and our two wills was $36. 

We pay a small owner’s tax, and we have an agreement with a French tax firm to make a tax return for us in France, if and when it should it be required.

In France, property is purchased through a notaire (notary), a French lawyer specializing in real estate. We also had our own lawyer, licensed in France, at John Howell in London. The notary receives a fixed fee, much of which goes to the French government. For this, he is responsible for checking the title and taking care of the necessary paperwork. 

In France, which operates under Napoleonic law, the physical deed remains in a central depository in each region, but you can get a copy if you like. This makes title searches easier and title problems rare. This is also true for a will, by the way, except in that case, there is a central depository for the entire country.

It is important to have the purchase agreement translated if you don’t read French. There should be a clause saying the leasing company cannot ask for damages if the lease is terminated after nine years. The lease does not simply run out, the leasing company must be legally notified of non-renewal more than a year before the termination date. If you fail to do this, there is automatic renewal at the old terms for another three years.

Our little bit of France
 

We purchased our piece of France in Golfe-Juan—impulsively and on first sight—with money from the tech boom that has since become the tech wreck. We returned in October 2001 to complete the transaction, about a year after contracting to buy. It was then when we realized how good our “impulse” was. We were also glad, being a little nervous about a transaction so far away, to see our banker and the bank and to receive the first tri-monthly payment from the leasing company. Our apartment is on the top floor of a complex named Port Azur. In France, you pay for height and quiet, as well as, of course, location. Underground parking is available, with elevator access to the higher floors. There is a large piscine (swimming pool), surrounded by a large sun patio, on the first level. From our top-floor windows, we have breathtaking views of the Vieux Port, or old port, and the Mediterranean to the south.

The condo, while not large by American standards, has two levels, with a master bedroom and a guest bedroom upstairs, a living room and a kitchen downstairs. There are bathrooms on both levels and, yes, there is a bidet. And lots of storage space. Off the living room is an outside loggia, or terrace. It is large enough for a table for eight and a compact garden. A motorized canopy protects the terrace against sun or rain. You can dine while watching the leisurely activity of the port and the town below…or time lunch to the return of the fishing fleet. The boats all come with fresh fish to the “quay of the fishermen,” which is open until just after noontime. The local restaurants buy the fish and shellfish and serve them up fresh.

Golfe-Juan is between Cannes and Cap d’Antibes, and within sight of both. The train station is a five-minute walk and by local train, it takes less than an hour to get to Nice or Monte Carlo and the famous casino, with most of the Riviera served by train stops in between. Of course, continuing on the train, there is northern Italy, or northern Spain, depending upon direction, or Paris and London for that matter. 

Bus service up and down the coast is also available nearby. Both train and bus travel are extremely inexpensive. A pleasant round trip to Nice by train cost us about $6 for two. From points along the Med, you can take a ferry to such offshore destinations such as Malta, Greece, and Corsica.

Less than a five-minute walk from the station in the opposite direction is the promenade, a seaside walk lined with excellent restaurants. Here's the surprising part: The cost of eating in these restaurants is less than the cost of eating out in our hometown, and the food and wine are better. We had a bottle of wine with every evening meal, something we would do only once or twice a year, for special occasions, back home. The local Provençal wines are excellent and cost just $3 to $5 a bottle. 
 

No fat French people

Within close walking distance are local butcher shops, bakeries, wine shops, groceries, and other specialty shops. We found a shop with more than 100 different types of olive oil! The olive harvest was just coming in, so we usually had breakfast at home with fresh olives, bread, boursin cheese, and coffee. Eggs, bacon, sausage, and such were available had we wanted them. Karl ate the local diet and lost five pounds in two weeks--and, believe me, he wasn’t suffering. We did not see any fat French people of any age. Our guess is that this is due to the amount of exercise they get, combined with the excellent cuisine.

Flanking the old port, which dates from pre-Roman times (when the French say old they mean old), on either side, are two of the famous beaches. Good for sun, and if you want to join the locals, you should take your top off. A bit risqué for me. 
The weather for both our Octobers in Golfe-Juan was superb. Warm, sunny days, cool, comfortable, starry nights, and no insects outside on our terrace. We have a telephone and a television with cable channels in at least six different languages. Karl, who speaks German, was consumed one evening by a science fiction show in German. 

By the way, the water supply is crisp, cold, and clean. Piped in from the High Alps, we were told.

Where Picasso made pottery

One day we took a cab to Vallauris, two miles away. Picasso came to Vallauris to make pottery. Good choice. Vallauris has been a pottery center for 8,000 years according to archaeologists. The museum there includes a small medieval chapel that Picasso worked on and boasts his masterpiece War and Peace. Both the museum and the old town were fascinating. There are numerous other ancient sites and museums a short distance away up and down this ancient coast. 

But if you’re not into history or art there are plenty of other things to do. The famous film festival is a yearly event in Cannes. The less famous music festival and other cultural events abound on the Cote d’Azur at all times of the year.

We’re delighted with our purchase and investment under the leaseback program. It offers a safe, fun way to diversify out of American assets. We can be involved at whatever level we choose. We can let all it run automatically, or we can visit frequently. On the other hand, a few years from now, when we are thinking about slowing down and enjoying a more restful life, we will have our base in a beautiful, comfortable, and modern part of Europe.

Rolodex

. For more information, contact Europe Law (John Howell), 17 Maiden Lane, Covent Garden, London, WC2E 7NL, England; tel (44)20-7420-4160; fax (44)20-7420-4170; e-mail: info@legal21.org; website: www.legal21.org.

. Conseil Patrimoine (Mr. Eric Groux), 52, bd Victor Hugo, 06000 Nice, France; tel. (33)497-030-333; fax (33)497-030-334; e-mail: info@french-investments.com;
website: www.french-real-estate.com or www.french-investments.com.