Leasing options to purchase your rental property

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Leasing options is a scheme by which a tenant may purchase the home that they rent, when they have rented it for a certain time agreed with the owner when the contract was signed. Rental-purchase allows families without personal contribution to acquire the accommodation they occupy.

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What is the leasing options?

For many years, organisations that provide social housing offered a scheme known as location-attribution for the benefit of those living in social housing. The Law of 12 July 1984 replaced this scheme with the leasing options scheme.

Leasing options is a scheme by which a tenant may purchase the home that they rent, when they have rented it for a certain time agreed with the owner when the contract was signed. The property involved may be residential or mixed use, collective or individual, finished or under construction, accomodation which is old or new. Although the scheme is not limited to this sector, it mainly applies to social housings.

How the leasing options system works?

Any leasing options contract involves the drafting of a notarised instrument which has to be signed by the owner and the prospective buyer.

The deed, which is registered on the land register, stipulates the two distinct phases of the operation:

  1. an initial period of use during which time the prospective buyer, who is neither a tenant nor the owner, pays a fee. This fee is made up of two parts: the first part (rental part), which the seller keeps, covers the use of the property; the second part (purchase part), is a down payment towards the purchase of the property. This is returned to the tenant, after the deduction of an indemnity, if the option to purchase is not exercised at the end of the contract or if the contract is terminated.
  2. exercise of the option to purchase: at the end of the period of use, the prospective buyer must choose whether to buy the property or not. If they choose to do so, the prospective buyer must pay the balance of the price in order to acquire ownership of the property.

The final contract before a notary must indicate certain mandatory information: the sale price of the property, the terms of payment, the date of entry into use, guarantees, any charges for the purchaser, etc..

In order to help people buy their home, a loan scheme was set up in 2004. It is known as the prêt social location accession (PSLA) [loan scheme for those on modest incomes]. State regulated, it provides specific tax assistance. However, it only applies to new property. This loan agreement concerns housing occupied as a main residence by people whose income is below the resource limits of the zero-rate loan. This social loan helps low-income households without personal contribution to acquire real estate.

When the option is applied, it is possible to resort to other loans in addition to the PSLA.

Moreover, rental-accession allows you to benefit from an exemption from property tax for 15 years from the year following the completion of the property. The buyer benefits from this exemption for the remaining duration when he applies the option.

While exercising the option, the seller offers two guarantees: a buyback guarantee for 15 years under certain conditions and a rehousing guarantee in the case that the option is not exercised or at any time during the acquisition phase.