Viager, where a person sells their home for a reduced price in exchange for the right to live in it until they die, makes up just 1% of property sales each year – about 4,000-5,000 sales, mostly in Ile-de-France and the sunny south where property prices are high.
France has 16million over-65s and the new Viager Mutualisé can give many a cash lift to allow them to live more comfortably by taking money out of their home, while giving buyers the security of a rising property price.
Traditional viager has key drawbacks. One is that few people like the idea of betting on an old person dying early so they can have the property before having paid the full price.
Another is buyers’ fear of buying from someone who, with increasing life expectancy, does not die ‘when’ expected, making any sale costly or even financially ruinous.
This is called the ‘Calment risk’ after France’s oldest person, Jeanne Calment, who lived to the ripe old age of 122, more than 30 years after selling her house in viager to her notaire, who died before she did and had paid more than twice the property’s value.
For the homeowner looking to sell, there is, in addition to the thought that someone wants them to die quickly, the fear that they will not be paid the full price for their property.
Viager mutualisé could end these concerns and make viager more attractive allowing older people to use the money as they see fit, whether for holidays, a carer or gifts to family.
Eric Guillaume, of Virage-Viager, is a pioneer of Le Viager Mutualisé where investment funds are put together to invest large sums – of around €50-€100million – that will buy hundreds of properties and mutualise or ‘spread’ the risks.
Buying 500 properties means that one person living longer than expected is balanced by others who die early – and, from past evidence, can give an average return of 4-5% for the fund.
Mr Guillaume said sellers also gained as they were paid the whole discounted price in one transaction so could use it as they wished.
Previously aimed at pension funds and similar, it was now possible for individuals to get involved as they can invest in a type of assurance vie that is part of a property investment fund.
In traditional viager, the home is sold for a reduced sum to cover the time the seller will continue to live in it. Based on insurers’ mortality tables, it starts at a 30% discount, about 40% for a seller in their 80s and 50% for a seller in their 70s.
The buyer pays this sum in two parts: a lump sum called the bouquet and the remainder split into monthly rente that is paid until the seller dies.
Many sellers aim to get a high rente and a lower bouquet but sellers have a real fear that a buyer will stop paying the rente. Mr Guillaume said this was a disaster for old people as their only recourse was legal action and they “do not want to start costly legal action in their late 80s or early 90s”.
By making a single payment, viager mutualisé ended this concern.
Mr Guillaume said: “With these funds we can buy 400 properties at about €100,000 each, for example, all different and in all parts of France, not just Paris and the south.
“Investors buy properties that will grow in value, so the area needs to be popular; that means they will look at Sarlat or Ribérac in the Dordogne but probably not Périgueux, and possibly Bordeaux but not a smaller town.
“Once the funds have been raised we will choose sellers of properties that meet the investment strategy of the fund. So, if it wants to recover 80% of its investment in 15 years it needs to find sellers who are aged 80 and over.
“We have an agency, Soluvia, where people who are interested in selling this way can register their interest.
“The seller has a buyer who is solvent, not interested in living in the home and who will take on much of the financial responsibility for the property. The seller has just rental charges and taxe d’habitation to pay as taxe foncière, major renovation and energy efficiency works, and property insurance are paid by the buyer.
“Sellers also get a tax benefit: as they are selling their main home there is no tax to pay on the bouquet and no income tax to pay on the rente.”
Seller ‘delighted’ with decision
Opting for viager mutualisé has given Dr Paulette Amat money, saved her expenses and allowed her to enjoy her retirement... with two cruises this year.
She is delighted with her decision: “I did it in 2017 after reading about it and getting it checked by my finance lawyer and a notaire. Both said it was ‘fantastic’ but I took about nine months to decide. Other viager options were not right.
“My flat is in the 8th arrondissement in Paris and I had a visit from an architect to check it was okay and that I wasn’t an old lady losing her marbles and breeding 50 cats!
“I am only 76 so I received 54% of the value of the flat as payment for the nue-propriété. On top, I save money as monthly charges were €1,500 per quarter and are now €1,100; plus I have no taxe foncière and it seems taxe d’habitation will go too.
“The new owners use property managers who act much faster than by using the syndic. I needed a plumber and their one arrived in three hours, it would take three days via the syndic.
“I can use the money as I wish. When I die I have no children so bequests would be ‘indirect’ and face 60% tax. Doing it now in assurance vie is half that and I can enjoy my cruise holidays.”
