French Real estate: How the life annuity system works in France

The life annuity system in France :

Writing the viager contract

The drafting of the viager contract is an important step in the practice of viager in France. The contract must be drafted by a notary and must include specific clauses that define the obligations of both parties. The contract must specify the amount of the lifetime annuity, the duration of the annuity, and the conditions of payment. The contract must also specify the conditions of transmission of the property in case of the seller’s death.

Payment of the lifetime annuity

Once the viager contract is signed, the buyer must begin paying the lifetime annuity to the seller. The payment of the annuity must be made in accordance with the terms of the contract and can be made monthly or annually. It is important that the buyer respects their payment obligations to avoid any legal disputes.

Transmission of the property

The transmission of the property in case of the seller’s death is an important issue in viager in France. The viager contract must specify the conditions of transmission of the property, according to the seller’s wishes. The seller may choose to transmit the property to their heirs, or to bequeath it to the buyer for an additional payment. In all cases, the contract must specify the modalities of transmission, as well as the rights and obligations of the buyer and the heirs.

Fiscal rules of buying in viager

Property tax

It is the responsibility of the buyer, as the owner occupying the property, to pay the property tax as well as the tax for the removal of household waste.

Residential tax

When it comes to an “occupied” viager, it is the buyer’s responsibility to pay the residential tax. On the other hand, for a “free” viager, the payment of the residential tax is the seller’s responsibility if they occupy the property.

Wealth tax (IFI)

The wealth tax (CF ARTICLE (…)) is a French tax that applies to real estate properties worth more than 1.3 million euros. In the case of buying in viager, the buyer may be exempt from the IFI if the value of the property is less than 1.3 million euros. However, if the value of the property is more than 1.3 million euros: the buyer of an “occupied” viager must declare the value of the bare ownership of the property to the IFI, and if the viager is “free” they must declare the full ownership.

Notary fees

Notary fees are fees related to the drafting of the viager contract and the transmission of the property. These fees include registration fees, contract drafting fees, and notary fees. Notary fees are generally paid by the buyer but can be shared between the buyer and the seller.

Buying in viager is a legal practice that offers interesting tax advantages for the buyer. However, it is important to respect the fiscal rules in force in France to avoid any legal disputes. When choosing to acquire in viager, it is strategic to engage a specialized lawyer to be accompanied in all stages of the purchase.