Understand a life annuity Sales

Glossary :

• Debitor: Refers to the buyer, the one who will pay the annuity.
• Creditor: Refers to the seller, the one who receives the annuity.
• Arrears: These are the due dates that must be paid regularly by the debiritee.
• Life annuity: This is the income received by the creditor (seller) for life.

The principle of the Occupied Life annuity sales :

This consists in buying property to obtain full enjoyment only upon the death of the seller. This allows the seller to live "at home" (right of use and housing) and to raise his standard of living.

For the buyer, this makes it possible to meet multiple needs such as preparing for retirement, building a future rental property, investing without increasing taxes, buying a property for his children, investing in a future second home, avoiding bank credit and interest, etc.

The price is made up of a capital part which we call "the bouquet" which will be paid at the signature of the deed and a part in "monthly annuity", this life annuity is paid to the seller during the rest of his life.

To know: According to Article 1976 of the Civil Code, "a life annuity may be constituted at a rate to be determined by the contracting parties".

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Seller advantages :

The bouquet paid to the seller is totally tax-exempt, the annuity is tax-deductible:

• 30% allowance if the annuitant is less than 50 year old at the time of the start of annuities
• 50% if he is between 50 and 59 years old at the time of the start of annuities
• 60% if he is between 60 and 69 years old at the time of the start of annuities
• 70% if he is 70 years old or more at the time of the start of annuities

• The seller doesn't have to pay the property tax, the major works, and the fees of the property management company if any.

• The sale is recorded by an authentic deed established at a notary, which includes a seller's privilege with a resolutory clause so it is guaranteed.
• The annuity is generally indexed on the cost of living, ensuring the seller to maintain its purchasing power.

• He may release his property in advance, on his own initiative, and in return receive revalued annuities in accordance with the scale provided for in the deed of sale.

• Through the reversion of the right of use and habitation (DUH) and the entire pension to the surviving spouse. Seller can also make a donation of all or part of the bouquet to his relatives.

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Buyer Advantages :

• Investment at a reduced price, it is a very attractive medium/long term investment.
• No credit and therefore no bank interests.
• No tax on rental income because he receives no income, the right to housing is paid in the form of a discount on the purchase price.
• No risk or worry of rental management, as the tenant is the seller.
• Possibility to resell the life annuity at any time.
• Socially responsible, it completes the seller's retirement and allows him to stay at home.

The distribution of charges is contractual between parties, there is no precise rule. Generally, the seller takes charges such as heating, water, electricity and so on, as well as the residence tax. The buyer takes the property tax (except waste collection), the fees of the property management company (in case of joint ownership property), the building insurance, the main works (restoration, renovation, roof)…

The distribution of charges and repairs between the seller and the buyer is mainly based on rental law.

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The sale in free life annuity

The free life annuity means that the seller no longer lives in the property, so the purchaser benefits from immediate possession from the day the sale is signed. the main difference with the occupied life annuity sale is that he is free to live or rent, he must however pay the bouquet and annuity under the same criteria as the occupied life annuity sale, namely until the last seller dies. The seller no longer has the use of his property.

In addition to the considerable advantage of being able to use the property immediately upon signing the sale at the notary's office, the other advantages remain similar to the life annuity occupied. The difference is in the division of charges and repairs since it is no longer based on rental law.

The price is also always made up of a capital part that we call "the bouquet" that will be disbursed at the signing of the deed and a part in "monthly annuity", this monthly life annuity being paid to the seller for the rest of his life.

Whether it is an occupied life annuity sale, a free life annuity or a sale for rental investment, we consider that there is no miracle investment. It is a question of finding the right balance between return and risk.

Forward free or occupied sale

Free forward sale

Unlike the life annuity, for which the duration of the annuity is based on the hazard of the seller's life expectancy:

The free forward sale consists in the purchase of a property by spreading its payment over a fixed period agreed in advance. The purchaser takes possession of the property as soon as the deed of sale is signed and bears the costs.

The price includes a cash payment and then monthly payments over a period of time defined in the deed of sale. The number of monthly payments to be made is known. The acquisition is made through a vendor credit by notarial deed

Occupied forward sale

In occupied forward sale, the seller benefits from a Right of Use and Housing (droit d'usage et d'Habitation (DUH) ) for life or for a limited period of time (contrary to the life annuity sales principle).

In terms of charges splitting, the seller has only the current charges to pay: heating, water, electricity... and the housing tax.

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Seller advantages :

• Receipt of a cash sum and then monthly payments over a fixed period of time.
• Non-taxed monthly payments, if it is a principal residence.
• Possibility of reserving a Right of Use and Housing (DUH) for life or for a limited period of time.
• Guarantee of payment of monthly installments (seller's privilege with resolutory clause).
• Annual increase in the monthly payment.
• Guarantee for the seller's heirs that the monthly payments will be paid if the seller dies before the due date.

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Buyer advantages :

• Acquire a property for a main residence, for a secondary home or for a rental at a reduced price, or at least with payment facilities.
• Become an owner with a smaller contribution.
• Do not use a loan. Therefore, no bank interest
• Know the exact price that will be paid.
• In the case of a free forward sale, use of immediate possession of the property , to to accommodate a relative or to rent it.
• Invest with a societal dimension.
• Invest with a purchase discount in the case of an occupied sale (due to the DUH).
• Invest with a societal dimension.
• Invest with a purchase discount in the case of an occupied forward sale (due to the DUH).
  

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TO KNOW :

The monthly payment is payable until the due date:

• in the event of the seller's death before the end of the payment period, his heirs will receive the annuities due.
• In the event of the buyer's death during the contract period, the buyer's heirs will be required to continue to pay the monthly instalments until the end of the contract.