Viager: expert advice to avoid all the pitfalls

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Get a monthly pension, while enjoying your home. Here is what the sale of a property in life annuity allows. As for buyers who decide to invest in this alternative real estate market, they can increase their wealth at a lower cost. For this transaction to be a success, however, pitfalls must be avoided. Philippe Buyens, Managing Director of Capifrance, the leading network of independent real estate advisers in France, lists them for you.

Philippe Buyens. The life market is expanding, even if it remains a micromarket at present. With 4,000 to 5,000 life annuity sales per year in France, we can see that this is still a confidential market. It only corresponds to just over 2% of real estate transactions. Nevertheless, as we have seen, the health crisis tends to change the situation and stimulate the life market. And this for many reasons :

However, what should you pay attention to before taking action?

Philippe Buyens. The following precautions must be taken by the seller.

Selling your property as a life annuity to your children allows you to keep the property within the family framework and to transmit an inheritance, but beyond the psychological tensions that a direct online sale can create, it is above all fiscally that you have to be careful. . Moreover, some notaries in France refuse to sell real estate as a life annuity occupied within the family framework. The disguised donation is registered in the Civil Code and the tax administration is very suspicious about the sale of life annuity between parents and children. This transaction will be immediately classified as a disguised gift, so as not to pay inheritance tax, sometimes even if you provide proof of payment of a regular annuity. This is why it is recommended to call on a life insurance expert.

Fortunately, the annuitant is well protected in these cases provided they react quickly. From the first late payment of an annuity or non-payment, he can invoke the termination clause. This clause in the deed of sale provides that in the event of failure to pay the rent, the contract of sale will be terminated automatically. This is the privilege of the annuitant seller. This allows him to avoid having recourse to justice and engaging in long and expensive procedures.

The seller can also add guarantees to the contract such as a joint surety which requires a third party to pay the rent in the event of default by the buyer. Unpaid annuity insurance can also be taken out by worried annuitants.

It should also be remembered that annuities are taxable.

What about the elements to be taken into account by the buyer?

Philippe Buyens. For the buyer, it is necessary to:

To avoid paying too much tax, some people try to buy a life annuity from direct ascendants or uncles and aunts. In this way, on the death of the ancestors, they think they can inherit the property. This is to forget that tax inspectors are familiar with this technique, which is taught to them from their first years of study. By doing this, the buyer risks a significant tax adjustment that will cause him to lose all the money he thought he was saving, and even more!

Another common mistake is to underestimate the value of the property, in order to minimize the amount of the bouquet and the annuity. This technique is also well known to tax officials.

All life contracts provide for the possibility that the annuity may be revised upwards every year. This revision is based on an INSEE reference rent index (IRL). Other indices can also be taken into account, such as the consumer price index (CPI) which takes inflation into account and makes it possible to calculate, between two periods, the variation in the prices of products consumed by households. and the residential building construction cost index (ICC).