The restoration of historic monuments is rarely guaranteed

The rehabilitation of such structures sometimes carries the risk of a total loss of the investment if the work is halted.

A castle designated as a historic monument in Mellionnec, in the Côtes d’Armor (22).

When it comes to the restoration of historic monuments governed by the Malraux Law, it is common for investors to opt for a “turnkey” arrangement. This arrangement involves the investor joining a Voluntary Homeowners’ Association (ASL), to which they will pay the majority of the purchase price (approximately 75% of the price), which will be used to finance the restoration of the historic monument; as for the balance, it is paid to the real estate developer as consideration for the land (purchase of the building prior to restoration).

In this arrangement, construction proceeds in tandem with sales; that is, renovation progresses as units are sold to investors. Therefore, if sales stop, renovation stops. In the best-case scenario, all units will eventually be sold, but construction stoppages will almost invariably result in investors being forced to put more money into the project to complete the renovation, the budget for which will likely have had to be increased.

In the worst-case scenario, sales do not resume (the longer the construction halt, the more difficult the restart), and investors risk losing nearly all of their investments, remaining owners of a unit in a partially renovated building that has been left to fall into disrepair. This risk—namely, that all units will be sold within a given timeframe—is rarely disclosed to investors, even though the resulting risk is very significant.

Our advice: Ensure that the renovation is completed

Before committing, investors must review the project plan and, above all, ensure that guarantees are in place regarding the completion of the renovation even if some of the units remain unsold.