Hundreds of holiday ski chalets owners who signed up to a tax-beneficial scheme promoted by the French government are facing “astronomical” bills of up to €200,000 at the end of their contracts – or costly legal action to challenge the fees.
Those affected, including Britons, bought the properties as part of a so
called leaseback scheme in the early 2000s, that encouraged people to buy holiday homes to rent out to tourists.
Buyers would not have to pay the 20% VAT usually applied to property purchases and could use the home for up to six weeks a year in exchange for agreeing to lease it for 20 years.
During this time they would also benefit from the steady income from tourist rentals.
Read more: Understand French tax rules on furnished rentals
Backtrack on promises
Pierre & Vacances (P&V), a leading French holiday rental company which also runs Center Parcs, managed many of the lettings.
It had previously promised investors that they would not face any of the exit charges that leaseback companies have the right to levy at the end of the term, which compensate them for the resulting loss of income.
This fee, called an “eviction indemnity”, is usually worth between one and three years of the apartment’s turnover.
However, P&V now says it cannot be held to this promise, leaving many chalet owners with huge bills or locked into the property contracts until a resolution is found.
Max Berger, a lawyer at Stand-Law, which is representing several clients facing unexpected fees, said: “After encouraging landlords to sign by undertaking not to claim eviction [exit] compensation at the end – an under
taking repeated after the leases had been signed – P&V is now demanding astronomical sums from them.”
Clients represented by Mr Berger say: “P&V indicated that we could terminate the lease every three years simply by sending a registered letter. “Now it is trying to say that none of this is legal and that if we do get out, we owe them between €100,000 and €200,000.”
Many of the properties affected are in Arc 1950 (Savoie) in the French Alps.
P&V acquired around 650 commercial leases from Canadian developer Intrawest in 2009, pledging not to demand compensation from owners at the end of their leases.
A spokeswoman for P&V said: “Pierre & Vacances operates apartments as tourist residences under commercial leases. We have always been, and still are, in contact with the representatives of the owners’ association.
“The rules applied by Pierre & Vacances comply with the French commercial code. Our wish is to continue our activity as an operator and to retain a maximum number of flats.
"Keeping the business is also essential for the many landlords who wish to continue their leasehold relationship with [us].”
Read more: French property and tax: 7 common questions
'Taking advantage of overseas investors'
Cynthia and her husband Nick, who declined to give their surname, were living in London when they bought a two-bed apartment in Arc 1950 in 2002.
“This arrangement suited us as we had no intention of spending more than two weeks a year in the apartment and working with a profession
al hotel operator would take away the administrative hassle,” Cynthia said.
“At the end of the 20 years, we would be approaching retirement, would have paid off our mortgage and would be looking to spend substantially more time in the apartment.”
The VAT savings of the scheme meant the couple bought the apartment for around €300,000, rather than €350,000.
The lease ended on April 30 this year. They advised P&V they did not wish to renew it and received a letter informing them that if they did not, they would owe €150,000 as indemnité d’éviction.
“We were utterly astonished,” said Cynthia. Despite offering to compromise with a shorter lease extension, P&V rejected this, leaving the couple with no choice but to go to court.
“The whole affair raises many questions,” said Cynthia. “The key one is how a large corporation that was bailed out in 2021 by the French government is able to take advantage of overseas investors who purchased property under a leaseback scheme promoted by the government and not face any consequences.”
‘Astronomical amount’
Thierry Collet, from Paris, bought a two-bed apartment in La Plagne (Savoie) in 2001 through a building contractor.
He signed a commercial contract allowing them to rent it out for an annual fee. Five years later, the firm was acquired by P&V and Mr Collet’s contract automatically transferred.
By 2019, he said P&V had decided to start implementing eviction indemnities.
He gave P&V six months’ notice when he decided to terminate his contract this September.
“After chasing them for a response, I received a letter asking for an astronomical amount of money, more than 50% of the value of my apartment.” Mr Collet felt he had no option but to hire a lawyer.
“This was my preferred choice because the law is very complicated, with lots of loopholes. At the end of a six-month process, we came to some sort of agreement.
“The whole thing has been a nightmare because it is set up for commercial businesses, not people like myself.
“P&V is taking advantage of that because most owners are 70 or 80 years old, who bought property to sell to enjoy their retirement. They don’t want to spend years going through a lengthy juridical system,” he said.
“Now over 200 owners have come together to sue P&V but the first trials began more than four years ago and are still not finished.
“In the meantime, owners have to pay legal costs and can’t use their apartment because their contracts are on hold. It gives P&V the right to keep exploiting owners’ apartments for as long as it takes before a final decision is made.”
Read more: Property owners in French Alps limited to one tourist rental each
‘Destroying dreams’
Simon Stevens, from Bishop’s Stortford, UK, invested in an apartment in the late 1990s with wife Tanya.
“We always saw the scheme at Arc 1950 as a great long-term investment and hopefully now that we are in our fifties, an opportunity to spend more time there.”
Mr Stevens requested confirmation in writing that he would not be charged an eviction compensation when he signed a new lease in 2017.
“I received an email assuring us we wouldn’t, but nevertheless they’re still trying to charge other owners. When I asked for clarification, I was told P&V are effectively going to renege on their written assurance to us.”
Mr Stevens was involved in a serious motorcycle accident in 2010, which affected his earning capacity and means he does not have the sort of money P&V is demanding.
He says that while he has enjoyed some magical family holidays over the years, “this awful, dark cloud over the resort is destroying the original dream and the atmosphere among many ever- more disgruntled owners there”.
His lease ends in April 2026.
He plans to watch the legal challenges to see what happens.
“One thing’s for sure: I have something robust in writing and will pursue this with every scrap of energy I have to ensure firms like P&V don’t destroy other people’s dreams.”
