The sale en viager concerns mainly elderly sellers who want to enjoy additional income during their retirement years, which is a sufficient financial support to the pension. For the buyer, it is a little bit riskier: the buyer cannot predict when the seller passes away, thus, he doesn’t know in how many years he will get his property. However, buying en viager is less expensive than a mortgage, so many believe that this type of contract is a win-win deal for the both sides.
What is the viager?
To sell a property en viager means to transfer the property to a third party who will have, in compensation, to pay annuity to the seller until his death (en viager with one person), or until the death of the last living person (contract with several people).
Validity of the sale. En viager is based on hazard: the longevity of the seller. In order for the sale en viager to be valid, this risk must exist. Thus, if the seller is extremely sick and dying, the sale will be void (Civil Code, 1975).
Payment terms. The sell en viager must be considered as a normal sale, with the exception that the terms of payment of the price are special. Like all real estate sales, the sale en viager requires the intervention of a notary.
Why sell en viager?
For the seller (or creditor), the annuity can be compared to a real supplementary pension. For example, couples without children, who do not have enough income to continue to live decently, will be tempted by this form of selling which will have the double advantage of solving a possible estate problem and improving the quality of daily life.
For the buyer (or borrower), the economic reasons will of course be very different. For him, it will be essentially a "savings investment" with, as a bonus, the hope for a "good deal".
Unlike a traditional sale, with en viager the payment of the price is not instantaneous. It is paid to the seller as a rent and possibly, as a bouquet (an immediate payment of a part of the sum).
The calculation of the annuity
The calculation of the annuity is a little bit complicated. To cut it short, if the seller dies at the age of the average life expectancy, the buyer pays the full price of the house. If the seller lives longer, the buyer pays more than the value of the housing. So, only if the owners die before they reach the average life expectancy age, the buyer ultimately pays less than the real value of the property.
Criteria. To calculate the annuity, we therefore apply tables that take into account the age of the seller, and also the number of people who live in the house (a husband and his wife, for example). When en viager is concluded with an elderly couple, the house will definitely belong to the buyer only at the death of the last of the spouses.
The bouquet is a sum of money that the seller can request immediately. The bouquet is not mandatory but strongly recommended if the seller is very old. It is freely fixed by the parties. When there is a bouquet, it is deduced from the selling price of the property, so the sum of the annuity will be smaller.
Free or occupied en viager?
Depending on whether the property is free or occupied, the sale does not carry the same constraints for both the buyer and the seller. With en viager contract, you have two possibilities:
Either the good is sold free of all occupation and any reservation (free en viager);
or the seller reserves a right to live in the property (occupied en viager).
The right of habitation can be reserved until the death of the spouse of the seller.
If the viager is occupied, it is necessary to foresee the distribution of the charges in the sale contract. It is usually the seller who pays the rental charges and the housing tax. The buyer, in the meanwhile, finances the major repairs and pays the property tax. The seller who enjoys a right of habitation cannot rent the property, unless he has reserved this right (which is rare).
In the case of a free viager, the calculation of the price is simple: the whole price of the property is converted into rent, since the buyer will be able to use it from the day of the signing of the deed of sale. In case of an occupied viager, it's more complicated. We must deduct the price of the occupation from the sale price and the rent is only based on the difference between the two.