David Anderson at Sykes Anderson Perry solicitors in London
Please note that the information herein is of a general nature and you should not act or refrain from acting on it without professional advice on the specific facts of your case. No liability is accepted by the author or Sykes Anderson Perry Limited in respect of this article. Law is a complex subject and the above is a basic outline only and is intended only as a general guide. This article does not constitute financial advice. Always consult an IFA.
The French viager system is similar to a UK private equity release without a bank or insurance company funding the transaction. It is a highly regulated contract which involves a seller(s) transferring their property to a buyer in exchange for a lump sum (bouquet) and a monthly payment (rente) until death. In some cases there is no rente. The price is discounted because the buyer does not get vacant possession until the seller dies.
The seller (usually an elderly person) gets an immediate lump sum and a monthly income and stays in the property. The buyer gets the property at a reduced price but gambles on how long the seller will live. If the buyer does not pay the rente, the seller keeps the bouquet, all the rentes received and the property ownership reverts back to him.
- Obligations on the buyer
- The parties can agree no bouquet is to be paid: however, in this case, the amount of the rente will be higher.
- The property is transferred to the buyer who has to pay the transfer costs as in a traditional property sale.
- The buyer has to pay the rente on the agreed date. The amount of this rente is freely determined by the parties (article 1976 of the French Civil Code) but must reflect the value of the property under penalty of requalification by the tax authorities. Generally, it is advisable to index the amount of the rente to an index to avoid inflation risks though this is to be agreed between the parties.
- Obligations on the seller
- The seller continues to occupy the property and is liable for the local taxes and charges.
- The seller is subject to the income tax on a lump sum percentage of the rente determined according to his age.
Repairs to the property
Normally, the seller must pay the expenses of repairs and maintenance of the property whilst the buyer is required to pay for major repairs (list provided by the French Civil Code and the case law).
The parties can agree otherwise.
Examples of prices
- Paris, 10th arrondissement, 87 m² apartment, 72 years old landlord:
Value of the property without viager: 830 000 euros
Value of the property with viager: 552 500 euros.
- Paris, 7th arrondissement, 66 m² apartment, 69 years old landlord:
Value of the property without viager: 1 200 000 euros
Value of the property with viager: 200 000 euros + 2200 euros per month for the rente
- Nice, 102 m² apartment, 81 years old landlord:
Value of the property without viager: 657 000 euros
Value of the property with viager: 165 990 euros + 2564 euros per month for the rente
- Cannes, 100 m² apartment, 77 and 74 years old landlords:
Value of the property without viager: 900 000 euros
Value of the property with viager: 365 000 euros + 2280 euros per month for the rente
Solicitor-Advocate and Chartered Tax Adviser