Dozens of Britons who bought ski chalets in France as part of a tax-beneficial scheme promoted by the French government are facing six-figure bills to get out.
The Telegraph has heard from several investors who snapped up properties from Pierre & Vacances (P&V) in the 2000s and have now been hit by exit penalties of over ￡100,000.
Affected owners said their retirements have been ruined as a result of the fiasco while others claimed they are locked into the chalets until a resolution is found.
P&V, a leading French holiday rental company which also runs Center Parcs, had previously promised these investors they would not face any exit charges. It now says a recent court judgment means it cannot be held to this promise.
The properties were bought through a so-called “leaseback scheme” promoted by the French government to encourage buyers to purchase holiday homes and rent them out to tourists. It allowed investors to bypass the 20pc VAT France usually imposes on property purchases.
Mike Blyth, 74, from Ayrshire in Scotland, and his wife bought an apartment in popular ski resort Les Arcs in the 2000s but had recently decided their skiing days were near their end.
They gave P&V six months’ notice that they would not be renewing their lease after it expired in April 2024. It was at this point they were informed doing so would cost them €125,000 (around ￡104,000).
Mr Blyth claims this was despite the fact the company had previously written to him waiving its right to charge an eviction indemnity.
He told The Telegraph: “We had always been told that this eviction indemnity wouldn’t apply. They are a major company – it leaves a bad taste in the mouth.”
Tax break incentive
Les Arcs, an idyllic ski resort in southeastern France, is home to four alpine villages.
Hundreds of French, British and American investors have bought properties there over the years, drawn by the ski trails, pine forests and panoramic views of Mont Blanc.
But investors were also lured to the French Alps by a generous tax break introduced in the 2000s which meant investors who bought homes to rent out to tourists would be spared VAT.
The deal allows the French tourism industry to maintain business throughout the year while investors could save tens of thousands on purchases of property.
To claim the tax break, property owners have to sign up to a commercial lease. The scheme requires owners to rent out their property for at least 20 years, providing a hotel-like service and staying in the apartment for only a few weeks each year.
To many British skiers, this seemed like the perfect investment. A holiday home in the French Alps, subsidised by the government, that would bring in a steady income from tourists visiting the area.
But in France, leaseback companies have the right to levy something called an “eviction indemnity” at the end of the term. This is to compensate the business for the resulting loss of income. It is usually worth between one and three years of the apartment’s turnover.
Pierre & Vacances had assured buyers that it would not charge an exit fee to investors at the end of their contracts.
One letter seen by The Telegraph reads: “We shall not ask you for compensation of eviction or any kind compensation if you decide to take back your property in conditions specified [...] or if you refused to give us renewal to its normal term.”
But it is now arguing it never had the right to waive the eviction indemnity in the first place. The firm says a recent court judgment means it cannot be held to this promise.
‘This property was my wife’s pension’
Rob Lakey, 45, from Poole, claims he was slapped with an “extortionate” €105,000 charge.
He said: “This property was supposed to be my wife’s pension because she didn’t have anything at the time. The intention was to have a simple long-term investment.”
He added: “This will discourage other people from signing up to similar schemes in the future.”
Mr Lakey says he faces an ‘extortionate’ €105,000 eviction indemnity charge
Lakey’s apartment sat in Arc 1950, a village in Les Arcs built in 2003. It has about 700 apartments. Many leases in some of these buildings came to an end in April of this year.
Panic swept through the buildings after a number of property owners served their notices and to their shock were hit with the indemnities.
For one, the €150,000 (about ￡125,000) bill was half of the purchase price of the apartment.
Nick, who asked The Telegraph not to use his full name, bought a home in Arc 1950 with his wife for about €300,000 in the early 2000s.
He said: “With our first child on the way, we were looking to acquire somewhere we could bring our children to every year that would be ours.
“This arrangement suited us, as we had no intention of spending more than two weeks per year in the apartment.”
As he and his family considered not renewing their lease this year, rumours were swirling about P&V charging exit fees.
Nick said: “We were utterly astonished when we received a letter in March 2024 advising that the amount we needed to pay as an eviction indemnity was €150,000 (around ￡125,000) – half the purchase price of the apartment.”
Property owners in Arc 1950 were first alerted to the high exit charges after some investors decided not to renew their lease
Max Berger, of Stand Law, is now on the verge of bringing a lawsuit against P&V on behalf of 30 property owners.
He said: “Lots of people feel completely trapped. Pierre & Vacances is maintaining that as long as [the eviction indemnity] is not paid, it will not leave the apartment.”
He added: “Some of these people are wealthy but for others, this was their retirement plan.”
“It’s a massive worry”
Many property owners who have yet to serve notice on their lease are nervous about what it means for them.
Mr Berger said: “I have clients with leases that terminate in 2027 and after, who are afraid of what’s going to happen.”
Among those fearing what the future holds is Simon Stevens, 53, who bought a two-bedroom apartment in Arc 1950 with his wife when they were in their 20s.
“We thought it would be great to have a place in the mountains so we said ‘let’s do this’.”
Mr Stevens fears he could face a steep penalty
Mr Stevens signed up to a nine-year lease in 2017 on the understanding he would not have to pay an eviction indemnity at the end of it. But now he fears he could be hit with a huge bill.
“It’s a massive worry,” he said.
“For my wife and I, the indemnity eviction was a fundamental aspect of signing the new lease back in 2017 – had they stated to us prior to signing that we would still have to pay an exit charge, we would definitely not have signed the new lease.”
Pierre & Vacances appears to have changed its approach to eviction indemnities very recently. Property owners told The Telegraph that they knew of others who had exited their lease prior to 2020 without paying a penalty.
The company argues that a recent court judgment made in 2023 means it was never entitled to waive the eviction indemnity.
A letter notifying a property owner of a €105,000 eviction indemnity, seen by The Telegraph, reads: “Our company cannot waive its right to lease renewal and its corollary, the right to eviction compensation, in the event of refusal to renew.”
A spokesman for P&V said: “Pierre & Vacances operates apartments as tourist residences under commercial leases.
“The rules applied by Pierre & Vacances comply with the French Commercial Code. The law in force is defined according to the location of the residence, in this case France.
“Our wish is to continue our activity as an operator and therefore 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 Pierre & Vacances.”
