What is a real estate sale in life?
A contract that allows one to inherit oneself
A real estate sale in life is a contract that allows the owner to receive a rent for a property he sells and in which he continues to live.
The sale in life (from the old French "viage" meaning "old life time") is defined by Article 1964 of the Civil Code, so it is a random contract in the legal sense of the term. The rent and the "bouquet" concretizes a way of inheriting oneself.
As part of such a sale, the debenture seller (the buyer) pays a life annuity and a bouquet to the annuitant (the seller) for the duration of his life. The life annuity allows, when one is owner of a real estate, to sell his good while continuing to live in it, it is a way of inheriting oneself.
The legal contours of the life
The Right of Use and Housing
Legally, life is the division of the right of ownership into two separate rights held by two separate persons. Thus, the right of use and habitation as a personal right is attached to the annuitant while the rent and the bare ownership are attached to the debirker.
One of the specificities of the life annuity is the Right of Use and Housing. This right allows you to use and stay in the home with your family. It is a personal right that is not seizable. The DUH forbids its holder to assign, mortgage or rent the property. In addition, the DUH entails a generally rental support by its owner. Finally, the DUH can be abandoned if its holder receives a price supplement.
The possible beneficiaries of the life annuity
The life annuity can certainly be for the sole benefit of the seller but it is not the only option. In fact, with regard to a common good, an annuity can be constituted for the benefit of both spouses (in the form of two annuities or a single reversible annuity). Similarly, in the context of a Civil Family Real Estate Company, the annuity is constituted for the benefit of the seller on the head of a third party.
The obligations of the seller / purchaser
A sale in life entails irrevocably obligations for both parties. The seller must deliver the building guaranteeing both hidden defects but also a peaceful property to the buyer. In addition, the seller is obliged to justify his regular existence.
At the same time, the purchaser must assume the expenses incumbent on the owner as well as the payment of the annuity payments.
Who can sell or buy property for life?
Any natural or legal person has the right to sell or buy property, and the presence of heirs is not an obstacle to the process. Nevertheless, precautions must be taken. Thus, in the context of a sale in life to successors in direct line, we must pay attention to the presumption of disguised donation. Similarly, special attention should be paid to vulnerable people and the abuse of rights for legal persons
Who sells for life? Typical profiles
People wishing to receive income for life are the main sellers in life. Women "not contributing" as well as parents whose children can not afford future medical expenses are the two typical profiles of such a sale. In addition, the annuity is generally life-long, that is to say that it is indexed but also weakly taxed.
A sale in life can also be explained by the desire to receive capital, the desire to reduce the weight of the charges or the desire to transmit to a spouse without inheritance rights.
Challenges of buying in life
People who buy life annuities want to receive income in the long term but also to obtain property or a term capital. A sale in life can also invest less than the price of the property in full ownership without bearing too many expenses.
The conditions of validity of the life annuity contract
For the contract to be valid:
• consent must be free
• the object and cause must be lawful
In addition, the annuity may relate to one or more persons. It should be noted that there is no risk when:
• the operation is financially unbalanced or the seller knows that it reaches the day of the signature of an illness, that the death occurs within 20 days from the day after the date of the signing of the sale
• that death is the direct consequence of this disease
• that the investor was aware of the poor state of health of the seller who died within two months of the sale in life
The natural extinction of the life
The life annuity naturally ends when the occupant dies or the occupant finally leaves the dwelling. This natural end results in the recovery of the DUH by the investor who becomes the full owner of the property. Thus, it is preferable to provide in the sales contract the payment of an increased pension or a cash payment in the event of permanent departure of the occupant.
If the debower investor of the life annuity dies:
In the event of the death of the investor débirentier, his heirs succeed him in his rights and obligations (they must continue to pay the pension). In addition, his heirs may also sell the life annuity to a third party.
The valuation of occupied life properties
A calculation submitted to the Loi de finance
The economic valuation principle for busy life is simple: the larger the bouquet, the lower the rent (and vice versa). However, this calculation is obligatorily subject to the annual revaluation: indeed, the lifetime valuation is governed by the law of Finance which applies an annexed rate.
Sell in life safely by a professional
A real estate professional will take into account the essential calculation elements in terms of:
• Taxation for the seller annuitant: the taxation of the life annuity is subject to various rectifying finance laws. This is the same tax as for life insurance contracts.
• Taxation for the investor: annuities paid enter into the annual return and may be submitted to the IFI in according to the ceiling and scale determined by Article 669 CGI.
• Taxation of the capital gain on the real estate rent: the realized capital gain benefits from a reduction as in an property sale.
Thus in a simplified way, the real estate professional in life must apply a calculation taking into account the purchase price, the estimate of the bouquet, the number of annuities paid and the acquisition costs as well as the major works.
Article written by Juliette de Charry / Sources Fnaim
Sales in life
the lifetime sale portfolio of the Cabinet de Charry