Vente en Viager - Disposing of your French Property
Sale of the property with payment via a lump sum, then monthly instalments over your lifetime, known as "vente en viager". This is normally most advantageous to people aged 65 or over.
Sale of the property via a lump sum, then payment by monthly instalments over a fixed term of years, known as "vente a terme". This method can be used by people of any age.
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In both cases, you would receive a lump sum of an amount to be agreed between buyer and seller known as the "bouquet". The remainder of the agreed price is then paid by monthly instalments, known as the "rente", either over the lifetime of one or two people (not necessarily owners of the property), or over a mutually acceptable fixed term.
The Seller will retain a mortgage over the property until all amounts due are paid; if the Purchaser does not keep up his monthly payments, the Seller can repossess the property via a very simple legal manoeuvre, and the Seller will lose the benefit of all the payments he has made to date, including the lump sum.
If the Purchaser dies, his estate must continue with the agreed payment schedule, and if it does not, the Seller can repossess the property.
The Sale Process
In France, these sales are carried out by firms of specialist estate agents, whose clients are individual investors, rather than institutions.
At the start, the Agent will, using photos of the property or a site visit, prepare a quotation for the transaction envisaged, based on the Sellers' preferences in terms of bouquet amount and term, the proposed occupation status of the property, and his knowledge of Purchasers' preferences.
The Agent will usually require an independent valuation to be carried out, and negotiations relating to the price and other terms will take place with this as a reference. In general, there will always be a discount if the property is to be sold occupied.
The Agent will ask the Seller to sign a sales mandate, which is likely to be exclusive for a least a short period. The cost of stamp duty at 5.09%, plus the Agent's fees, is payable by the Purchaser. Once the mandate is signed, and the Seller has provided the statutory tests for lead, termites, asbestos and heat use, marketing will commence.
A sale will take anywhere between one month and one year, depending on the desirability of the property, and on its location in France.
Once the Seller and the Purchaser have agreed terms, the execution of the sale takes place through a Notary. As with an ordinary sale, this takes a month to 6 weeks to complete.
Lump sum/ Bouquet
This amount can vary between 10% and 50%. Higher amounts are usually offered for very desirable properties, say in the middle of Paris. Less desirable properties will attract lower bouquets. It would be very unusual to see a property outside Paris sold with a bouquet of over 20%. When deciding on the amount of bouquet you require, please remember that there is an individual Purchaser on the other side, who will have his own requirements/possibilities.
This will always be around one third higher if the property is unoccupied.
It is possible to agree a sale where the property starts off by being occupied by the Seller, with an agreed uplift as and when he/she vacates in the future.
For a "viager", rents are normally index linked to the equivalent of RPI. For a "vente a terme", they are normally fixed, although the seller can request that payments are linked to the cost of construction index.
For a "viager", rents are based on the age of the seller, and their medical condition is not taken into account. They are set in accordance with industry-accepted tables, based on the life expectancy of men, women, or a couple, as relevant. For a "vente a terme", there are no such constraints.
Maintenance of the property
In case the property remains occupied by the seller after the sale, the rule that is usually applied is that day to day maintenance is paid by for by the occupant of the property, and any building work required is paid for by the owner. It is useful to have these various responsibilities agreed in advance in the "acte de vente", in order to avoid disputes later.
If the Purchaser wishes to undertake alterations, he will usually have to seek the permission of the Seller, as the latter will retain a mortgage on the property in case of non-payment, and they will not want to see anything done to it that might diminish its value.
The legal owner of the property pays the "taxe fonciere", although the occupant will liable for the rubbish tax. The occupier of the property on the 1st January each year will be liable for the "taxe d'habitation"
Rents payable under a "vente a terme" are treated as capital payments and are exempt from income tax. Rents payable under a "viager" are treated as income, but are subject to once for all reduction based on age at the time of sale, as follows:
The sale of your property will be subject to capital gains tax in the normal way. If it is your main residence, it is likely that it will be exempt from CGT. If it is not your main residence, the sale proceeds will be calculated as the arithmetic sum of the bouquet and the sum of the rents, and your liability to CGT will be this figure, less your total purchase costs of the property, plus invoiced renovations cost, taxed at the going rate for CGT at the time.
The contents of this web page are designed to give an introduction to the topic of "viager" and "vente a terme" sales. They are not intended to provide taxation or legal advice to any users, and should not be understood as providing such advice.
French Mortgage Limited and French Mortgage Ireland Limited hereby disclaim any responsibility for errors or omissions in the text above.
NOTE: Your home is at risk if you do not keep up the repayment on a mortgage loan or other loan secured on it. The sterling equivalent of your liability under a foreign currency mortgage may be increased by exchange rate movements.
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