Viager Sales are often confused with a French Equity Release Mortgage because they release equity from your French home.
You can only make a viager sale in very specific circumstances. Even so, they are common in the retirement areas of France.
The main requirement of a viager sale is that you can prove that you have no inheritors. This is because, under French law, inheritors take precedence over the purchaser of the viager.
Please read through this page fully, before you get carried away with the possibilities of viager sales. You can only use viager sales if some very specific tax and legal provisions are met.
If you are not a French born citizen, you probably can’t use viager sales.
Finally, legal advice covering French and home country law are essential if you are considering the viager sale option.
An Explanation of Viager Sales
If you need more retirement income viager mortgages may be the perfect solution.
Under the French law you can sell your French property to realise the capital you have tied up in it. However, to qualify you must have no inheritors that recognised under French inheritance laws.
Depending on your needs, you can receive a cash payment, a monthly income and live in the property rent free.
The buyer and seller agree to the purchase/sale of the property for money paid at the point of sale. However, the property won’t pass to the buyer until later, after the seller’s death. The seller will continue to live in the property, rent free, whilst receiving a monthly income from the buyer.
Essentially the buyer and seller are betting against each other. The seller betting that they will live longer than the forecast and the buyer betting that they won’t.
An Example Sale
Suppose the open market value of the property is €100,000 and the owner is 80 and in poor health.
Using actuarial tables, it is predicted that the owner only has a 0% chance of living beyond 90 years. This implies a 40% discount to market price, thus a price of €60000. The notaire will reduce the price because the buyer must wait 10 years to take possession.
If the seller dies earlier, the buyer takes over the property immediately and makes a profit of €40,000. They won’t have to wait 10 years before taking control of the property.
If the seller outlives the buyer, then the buyer never receives the property and loses €60,000.
The seller is free to use the €60,000 they receive as income, because it never has to be paid back.
This is only a very simple example to give you an overall idea of how viager mortgages work. You should not base your expectations on it.
The Process for Concluding a Sale
First, the seller must prove that there can be no legal claim from an inheritor under French law. This is a simple matter if the seller was born a French national, but almost impossible otherwise.
The sale offer specifies the current open market value of the property and the age and health of the owner(s).
Using actuarial tables, the Notaire calculates a fair sale discount for the property, making due allowance for the expected life span of the owner(s).
Essentially, for you accountants, the sale price is a discounted NPV (Net Present Value) price.
The notaire will draw up a contract between the buyer and seller stating the price and specifying the following three elements:
The Bouquet
This is the initial up-front payment the seller will receive from the buyer.
The Rente
This is the amount of the regular payment the seller will receive from the buyer for the rest of the life of the seller.
This may be zero if the seller has taken the full agreed value as an increased Bouquet.
The Usufruit
This is the date or conditions on which the use of the property passes from the seller to the buyer.
The buyer and seller must sign the contract and wait to see who lives longest!
Is This Right for Me?
Firstly, viager sales are not possible for most people. Good legal advice and time are essential, because the legal process is long.
They are only possible if you can prove to a notaire that you have no inheritors under the Code Napoleon.
Viager sales can be a wonderful way of augmenting your retirement income whilst allowing you to stay in your French home for as long as you wish.
Watch the following video for a more detailed explanation of viager sales.
For more information go to the French Notaires official website.
