The Life Annuity sale
The meaning OF THE "viager" WORD...
Etymologically, the term "viager" is a derivative of the word "viage" which means, in old French, "course, duration of life" *. In the literal sense, the word "viager" can be understood as "old life" or rather "elderly living".
DEFINITION OF THE LIFE ANNUITY...
This is a particular form of sale considered as "random". By life annuity, we mean a dismemberment of the right of ownership. In summary, it is a kind of credit sale of a property. The annuitant will indeed receive from his buyer a "bouquet" (sum lump) and a monthly life annuity until he dies.
* source : http://fr.wiktionary.org/wiki/viager
A BIT OF HISTORY...
Historically, the life annuity system is as old as the oldest civilizations. Babylonians, Egyptians, Greeks and Romans knew the principle of the life annuity. At that time, it was mainly used to prevent land loss and the transfer of wealth to third parties. In the Middle Ages, this method of financing pensions was also used. The life annuity sale was living a golden age with Napoleon and especially the Civil Code. The advent of credit in France has lead the life annuity system to be more or less forgotten by the public. It became a niche market for savvy investors. The economic crisis passing by, the life annuity sale is getting rediscovered in a more modern angle, far from the image of Pierre TCHERNIA's film ("Le Viager") or the novel "Le petit fût" of Guy de MAUPASSANT.
Well known characters and the life annuity...
Louis XIV, Empress Marie Louise, Charles de Gaulle or Valéry Giscard d'Estaing are all important political figures who were in their time purchased a property via life annuity . Among our contemporaries, we can also mention Ségolène Royal and François Hollande, who acquired a villa in the city of Mougins, occupied life annuity, through the Etude Lodel.
The Life annuity today...
The life annuity, despite its seniority, displays an insolent youth. It is a resolutely modern and up-to-date principle since it is a formidable response to the ageing of the population and to the problems that this entails, in particular with the financing of pensions and the decline in the number of active people. In the end, the life annuity is the oldest funded pension system...
AROUND THE WORLD OF THE LIFE ANNUITY...Life annuities exist in other countries, particularly in countries where the Napoleonic Code was in effect.
But the two countries where this particular sale is widespread are France and Belgium. Italy knows the principle in the form of the bare property. Switzerland is also familiar with the system but it is not widespread. In Spain, this system exists but is reserved for insurance companies, the only ones authorized to issue it. The Anglo-Saxon countries know the life annuity system as a related form known as "reverse mortgage".
some VOCABULARY about the life annuity...
- - "Crédirentier": seller.
- - "Débirentier": buyer.
- - Head: another word used to design the "crédirentier" .
- - "Bouquet" (lump sum): capital paid by the "débirentier" on the day of the signing of the notarial deed. This capital must necessarily come from the moneys of the purchaser, the banks does not lend money for a life annuity transaction.
- - Annuities: monthly amount paid by the "débirentier" to the "crédirentier".
- - Right to use and habitation: right to inhabit a property without being able to give it up or to rent it. This right ceases if the annuitant abandons his right or in case of a death.
- - Usufruct: full usage of a property (possibility for the seller to lend or rent the property in which he lives).
- - Cancellation clause: clause protecting the "crédirentier" which is used to cancel the sale in the event of non-payment of an annuity by the "débirentier".
- Seller's privilege: a real estate security.
- - "Random" contract: contract for which the obligation of one of the parties is not known.
- - Indexing: revision of the annuity.
- - "Valeur vénale" of a property: market value of a property.
THE DIFFERENT TYPES OF LIFE ANNUITY SALES...
OCCUPIED LIFE ANNUITY:
It represents the majority of life annuity transactions. In this type of life annuity sale, the annuitant has the right of use and habitation of the property in which he lives. This right is personal to him, that is to say, he can neither give it up nor lend it. The annuitant is considered a lessee, the "débirentier" being the owner of the property as soon as the deed has been signed at the notary's.
VACANT LIFE ANNUITY:
Quite rare and quite popular with buyers, it can serve as a main or secondary home for some, or as a rental investment for others. The interest of this particular typology of life annuity sale is that it allows to do things without a bank and all that it induces, fees, bank interest, insurance and other ...
SEMI OCCUPIED LIFE ANNUITY:
This is a rare case. This is a life annuity sale that includes two dwellings. The first one is occupied by the seller and the second, by the purchaser.
OCCUPIED LIFE ANNUITY LIMITED IN TIME:
In this case, the right of use and habitation will end on a date fixed in advance in the act. By this date at the latest, the seller must have left the property in favor of the purchaser.
Note that the life annuity is generally a fairly flexible product. It can therefore adapt to everyone's situation.
LIFE ANNUITY SALES GUARANTEES...
The life annuity is a contract that is secured by two factors, the seller's privilege and the cancellation clause.
- SELLER'S PRIVILEGE:
It constitutes the right for the seller to be paid by preference to other creditors. It is actually a kind of mortgage taken in favour of the seller in order to guarantee the proper payment of his annuity until the end of his life. This mortgage is renewable every 10 years and payable by the "débirentier".
- CANCELLATION CLAUSE:
In case of a proven lack of payment, the seller may request (after making a first command to pay) the sale to be cancelled by a judge. In this case, the purchaser will lose all the sums he already paid and invested (bouquet, annuities, embellishments ...). The seller will therefore take back the ownership of the property he sold.
THE BENEFITS OF THE LIFE ANNUITY…
ADVANTAGES ON THE SELLER'S SIDE:
- Regular and secure income for life;
- Ability to stay in his property until the end of his days;
- No more property taxes or heavy works fees;
- About -30% condo fees.
ADVANTAGES ON THE Buyer's SIDE :
- Acquisition of a property at a lower cost with just a small contribution to provide;
- A way to create your own retirement savings;
- The property will be maintained by the annuitant as long as he will stay there;
- No rental risks.
Q&A ABOUT THE LIFE ANNUITY SALE...
CAN A LIFE ANNUITY CONTRACT BE SOLD?
The life annuity being a contract, as such, it can, therefore, resell. The new buyer will take over the payments of the monthly annuities as well as the various obligations arising from this contract in place of the former buyer. Upon resale, the new "débirentier" will pay to the former "débirentier" a "bouquet".
CAN AN ANNUITANT GIVE UP IS RIGHT TO USE AND INHABIT?
- The "crédirentier" can waive his right of use and inhabit. To do
this, he must follow a rigorous formalism. He must inform his
"débirentier" of his intention to release the premises via registered
letter with acknowledgment of receipt and, at this point, will have
three months to return the keys of the property (given enough time for
him to empty the premises of all movable goods and objects). At the end
of this key collection phase, and after a release agreement is signed
between the two parties, the monthly annuities will be increased by +30%
(value corresponding to the rental value of the property).
"débirentier" can, therefore, dispose of the property as he wishes. Note
that this decision is irremediable once the letter has been sent.
- Moreover, the "débirentier" can not oppose the will of his annuitant to release the property he occupies.
WHAT CAN BE BOUGHT WITH A LIFE ANNUITY?
Absolutely everything... All movable or immovable property can be sold for life. Whether it is a field, a vault or a barge, everything can lend to life.
WHAT ARE THE DOCUMENTS TO GATHER IN ORDER TO BUY A LIFE ANNUITY?
There are no documents required to provide in order to purchase a life annuity due to the fact that this type of contract is involving the responsibility of the person who commits himself. Especially since the rules are very strict. If a single monthly annuity payment is missing, the "débirentier" will lose the sums committed (bouquet, annuities and embellishments paid) as well as the property, (the seller will recover the property of the good he sold).
WHAT ARE THE PARAMETERS THAT COME INTO PLAY IN THE CALCULATION OF A LIFE ANNUITY?
To calculate a life annuity sale, two parameters come into play, namely: the market value of the property and the age of the seller(s).
IS A MONTHLY ANNUITY ALWAYS INDEXED?
An annuity is obligatorily indexed. The fixation of the index is a free choice to make, however, it is customary to index annuities based on the "cost of living" index.
CAN A LIFE ANNUITY SALE BE BOUGHT BY ANYONE?Individuals can buy a life annuity and we favour this approach. That includes French residents, expatriates or foreigners. As far as foreigners are concerned, it is important to know that they represent a wide range of life annuity buyers and that the life annuity insurance guarantees work in the same way as it would work with a French tax resident.
In the case of "Société Civile Immobilière" (S.C.I.), they can buy life annuities. In order to provide the best guarantee to the sellers, in addition to the seller's privilege, the cancellation clause and the maintenance obligation that the life annuity brings to the purchaser, we ask for the personal guarantee of the manager of the S.C.I. as well as the joint guarantee of all the partners.
The so-called "commercial" companies are excluded from purchasing a life annuity. In fact, they can go bankrupt and in this case, the cancellation clause and the seller's privilege would have no effect, which could be dramatic for the annuitant.
WHO CAN SELL A LIFE ANNUITY?
Any individual is entitled to sell his property (with an exception for the "S.C.I.", a prior dissolution being mandatory).It can be a:
- Principal residence ;
- Secondary home ;
- Rented property (it is then sold with the tenant, the purchaser resumes the lease);
- Commercial premises;
- Garage, cellar, barge, building, vault...
TO CONCLUDE…The life annuity is:
* The fruit of a long customary tradition;
* An intergenerational exchange;
* The best retirement system for both the seller and the buyer;
* A secured investment in the "stone".
=> For more details on the life annuity, do not hesitate and contact our team!