Full ownership vs. commercial lease in the mountains

Freehold Ownership vs. Commercial Lease in the Mountains

What are the differences and implications?

A commercial lease is a rental contract concluded between a property owner (the landlord) and a professional operator (the tenant).

In mountain resorts, it often involves a hotel or tourism management company (such as Odalys, Pierre & Vacances, etc.).

Very common in tourist residences, this lease comes with specific features that must be clearly understood before buying or selling a property.

Buying a property in a ski resort or mountain area often raises one essential question:

Is it freehold property or subject to a commercial lease?

This distinction has major consequences on the property’s use, profitability, and resale potential.
Here are the key differences between these two regimes, their advantages, constraints, and the best practices to adopt before buying.

1. What is freehold ownership?

   Freehold ownership means you are entirely free to occupy, rent out, sell, or modify your property as you wish, subject to condominium rules and urban planning regulations.

   Advantages:

   • Full flexibility: short-term rentals, long-term rentals, or personal use.

   • You may sell at any time, without contractual restrictions.

   • Perfect for mixed use (second home + seasonal rental).

   • Eligible for advantageous tax regimes such as LMNP (Loueur Meublé Non Professionnel).

   Keep in mind:

   • You must handle rental management yourself or hire a concierge service.

   • Profitability will depend on your involvement and the quality of management.

2. What is a property under a commercial lease?

   In this case, you purchase a property rented out to a professional operator (e.g., Odalys, Pierre & Vacances, Lagrange…), usually within a tourist residence. The property is then sublet to holidaymakers by the operator.

   Advantages:

   • Guaranteed rental income: you receive a fixed or indexed annual rent, whether the property is occupied or not.

   • Zero management: the operator handles everything (cleaning, reception, bookings…).

   • Possibility to recover 20% VAT on the purchase price (if conditions are met).

   • Often eligible for the Censi-Bouvard scheme (in case of new-build purchases).

   Constraints:

   • You are bound by a 9- or 11-year renewable lease with the operator.

   • Limited personal use: occupancy often restricted to a few weeks per year.

   • More difficult resale: the market is limited to investors, with often discounted prices.

   • Complex lease exit: some residences impose continued leasing or require buying back operator rights.

3. Comparison Table

What if the operator goes bankrupt?

• The lease becomes void, and you lose rental income.

• You may recover full use of the property, but must handle management yourself.

• The residence may lose its classification and associated tax benefits.

This is why choosing a financially solid operator is crucial.

How to exit a commercial lease?

Exiting a commercial lease in a tourist residence can be complex: generally, you must wait for the contract’s expiry (often 9 or 11 years), or negotiate early termination with the operator.

In such cases, eviction compensation may be required, corresponding to damages for early termination, with amounts varying depending on the contract clauses.

Termination deadlines :

• A typical commercial lease runs for 9 years.

• It may be renewed tacitly if neither party objects, or via a new written lease.

• Without formal termination within the legal deadlines, the lease is automatically renewed.

Example of a termination letter (as per French law):

“Pursuant to Article L145-9 of the French Commercial Code, I hereby inform you that I do not wish to renew the current commercial lease. This decision takes effect upon expiry of the lease and is notified to you within the legal six-month notice period.”

The letter must include:

• Lease reference details (address, signing date),

• The operator/tenant’s name,

• The contractual expiry date.

What are eviction costs?

Eviction costs are compensation the landlord may have to pay to the operator if they terminate or refuse to renew a commercial lease without valid grounds or before its contractual term.

• They compensate for the operator’s lost right to exploit the property.

• The amount may be fixed in the lease or assessed case by case, sometimes judicially.

• They may reach several thousand—or tens of thousands—of euros in successful tourist residences.

Key takeaways

• Always read the existing lease before any purchase.

• Seek advice from a professional (notary, lawyer, or local real-estate agent).

• In case of resale, the property remains subject to the lease, unless agreed otherwise with the operator.

Which option suits your profile?

• Looking to enjoy the mountains while renting out your property?
  → Choose freehold ownership, with full freedom and flexibility.

• Looking for a secure investment without involvement?
  → A commercial lease may suit you—provided you accept more constraints on resale.

Beware of misleading deals: some properties under commercial lease are marketed as “second homes,” while personal use is in fact restricted. Always check the contract type before buying.

Final word

The choice between freehold ownership and a commercial lease depends on your personal and fiscal objectives.

In mountain resorts, freedom of use is often key—especially for buyers who want to enjoy their property or resell easily.

Before signing, always request:

• The property’s legal status (with a copy of the lease, if applicable),

• The conditions of termination or renewal,

• The advice of a local professional who knows the market’s specifics.