Pay less for 99 year lease

A NEW type of leasehold property ownership has been launched to give people access to the housing market despite soaring prices – with its main feature being that the lessee only has temporary ownership of the property, avoiding the burden of having to pay the full value of the land on which the property is built.

Called the bail réel immobilier de longue durée (Brilo) it applies only to new or renovated properties in competitive housing areas and purchasers will get a “lease” for a period of between 18 and 99 years and pay about 70% of the market price.

It gives an “intermediate” state of ownership where the bailleur has full and exclusive use of the property with the ability to rent it out, raise a new mortgage against it, pass it on to their descendants, sell at a reduced price or keep the property until the end of the lease and give it up.

The government’s aim is to offer housing that is midway between the social housing of HLM and the open free market – giving occupiers the choice of either a step on the property ladder or a home that is secure for two or three generations of family.
It fits with the official target of building 500,000 new homes a year to kickstart the property market and ease price inflation.

Public aid to buy property totalled €4.13billion in 2013, but most young couples find owning a property in Paris is out of their reach. They either buy in the suburbs or rent a city centre property that cuts their commute – meaning prices are rising in the suburbs and rents have soared.

Paris property prices doubled over the past 10 years – from €4,000/m2 in 2003 to an average €8,140/m2 in 2013 – but other cities are also affected, with Lille and Bordeaux prices also more than doubling.

The scheme has been criticised by private investors who see no benefit for them – renting a property gives a greater return over the lease period and selling gives around the same return – but it is interesting for public or private operators looking for long-term ownership.

They would lease properties under Brilo agreements – fulfilling a role in society by finding people a home at a discount, getting them onto the property ladder and then having the property returned to restart the cycle, thus maintaining a financial interest.

People who took out Brilo leases would be able to resell the property – again at a discount in line with the period remaining on the lease – and this would act as a deposit for the next purchase.
Prices for properties to be offered on Brilo leases will be regulated by décret as will lessees’ maximum income levels to avoid speculators taking advantage.

Much of the work for the scheme was done by the Cheuvreux Notaires practice in Paris. Maître Bruno Cheuvreux said:
“The aim is to separate out the price of the land which can represent up to 40% of the price of housing in Paris.”