Life annuities could become the preferred solution for buying or selling under the best conditions in 2023. The key to this is lower prices for buyers and the occupation of the house for the seller.
Real opportunity for the seller as for the buyer, the life annuity fully meets the needs of the moment. And there is no need to worry about the legal aspects as it offers a very secure framework.
Free or occupied ?
If the seller does not occupy the house after the signature of the deed of sale, it is called a free life annuity.The purchaser has full use of the property but, in return, must pay for all work, charges and maintenance costs. The seller may wish to reserve the right to use and live in the property until his death. This is the most frequent case. The life annuity is then called occupied.
A sale almost like any other
The life annuity sale is a sale like any other and follows the same "procedure". Like all real estate transactions, the viager must be established before a notary. The notary will have first verified that all the conditions relating to the person of the seller (the creditor) and the purchaser (the debtor) are met.The notary will have checked beforehand that all the conditions relating to the person of the salesman (the creditor) and the purchaser (the debirentier), as well as to the good itself, are met (capacity to sell or to buy, agreement on the thing and on the price...). What differentiates the life annuity from an "ordinary" sale is in fact the presence of a hazard, namely the life span of the seller(s). The buyer will be fully owner only at the death of the seller. A life annuity sale in which the hazard is absent can be cancelled. This is particularly the case if the seller, who is ill at the time of signing the deed of sale, dies within 20 days.
The other particularity concerns the terms of payment of the price. In the majority of cases, the buyer does not pay the purchase price "in cash", but pays an annuity until the death of the seller (and, if applicable, that of his spouse). However, in practice, it is frequent that on the day of the signature of the deed of sale, the buyer pays a sum of money, (the "bouquet"), which varies on average between 10 and 30 % of the value of the property.
The life annuity in some figures
- approximately 90% of life annuities are occupied life annuities;
- 60% of the transactions concern houses and 40% apartments;
- the average age of the seller is between 70 and 75 years
- 36% of sellers are couples, 39% are single women and 25% are single men
- 68% of sellers have children
- the objective of sellers is essentially to : finance their daily needs (34%), anticipate their estate (21%), afford more leisure time (20%), protect their spouse (11%), rerenovate their home (8%);
- the average monthly annuity is €730;
- 71% of buyers are couples and their average age is 49.
Mutual benefits
Increasing life expectancy, difficulties in financing dependency or simply meeting daily expenses, obstacles for younger people who wish to become homeowners... all these problems can be solved with a life annuity.
For the seller, the occupied life annuity allows him to stay in his home while receiving an additional income for life to improve his daily life and to anticipate the future of his spouse. This solution is very often chosen by couples without children, anxious to maintain their standard of living or simply to live decently.
Still in the case of an occupied life annuity, the buyer accesses the property at a lower cost since the price of the property is calculated by applying a discount for occupancy of the property. But also because the totality of the sale price is not paid the day of the acquisition.
In the case of a free life annuity, the purchaser has the property at his disposal immediately and, as such, he can live in it or rent it out as soon as the deed of sale is signed. It is an efficient way to build up a real estate portfolio at a lower cost in order to prepare for retirement and/or anticipate the transfer of one's assets.
To know more
The life annuity can be planned until the death of the seller's spouse (it is said that the life annuity is on two heads). The surviving spouse will continue to receive the totality of the life annuity (and to live in the dwelling in case of occupied life annuity) thanks to the mechanism of the reversibility.
An advantageous tax system
The life annuity is one of the most interesting operations fiscally. And that as of the payment of the transfer taxes. More especially when the life annuity is occupied. In this case, the rights are calculated not on the market value of the property but on this one after application of a "discount" for right of use and housing. Although subject to income tax, the life annuity benefits from an allowance, the amount of which varies according to the age of the seller at the time of the sale. Only a fraction of the life annuity is taxed:
- 70% for a first payment under age 50 ;
- 50% for a first payment between 50 and 59 years of age;
- 40% for a first payment from age 60 to 69;
- 30% for a first payment at age 69 or older.
As far as local taxes are concerned, the seller, in the case of an occupied life annuity, no longer pays the property tax, but only pays, since he/she still lives in the property, the housing tax and the tax for the removal of household waste (TEOM).
What if the buyer dies before the seller ?
The heirs of the buyer get the property back in the estate passed on by the deceased. They then have the choice of either continuing to pay the annuity or reselling the property.
Marie-Christine Ménoire