The Life and Death of the “Viager”

“Viagers” seem to be the hot topic recently, although there’s no special reason it should be of particular interest at this time. We have clients in Nice for whom we are searching for a viager property and I have an email from a reader who has an eco-friendly house in Le Perche, two hours west of Paris, that she would like to sell as a viager. Coincidentally yesterday, when I opened the “Journal du Nouveau Paris Centre” No. 2 September-October 2019 edition, there were two big ads for agencies in Paris that specialize in viagers. I’d never seen that before, or at least noticed them until now.

A viager is a life annuity property that has benefits for both seller and buyer with a risk for the buyer, but a potentially large gain. Put very simply, a viager property is one where instead of asking the market value for a property, the seller is instead paid an initial down-payment (termed the “bouquet”) averaging approximately 30% of the property market value. On top of this, the selleris paid a monthly annuity or pension (called the “rente viagère”) for the duration of their lives and in return, the seller retains a “lien” or “droit d’usage” (rights of usage) over the property.

Viager properties are probably one of the more unusual ways to invest in French real estate. There are a number of different systems through which you can buy a viager property, but the key feature is that the transaction is usually with an older or elderly person who wants some extra or guaranteed income for their retirement.

While the price of the bouquet is determined based on the market value of the property, determining the right level for “rente” payments can be more complicated. The most important factors are the age and gender of the seller, as these have the greatest impact on life expectancy (and consequently the estimated duration of the viager contract). Another factor is the price of the bouquet. If the bouquet is large, then the rente will be reduced, and vice versa. While the contracting parties may legally freely determine the amounts of the bouquet and rente, all viager transactions are closely monitored by a supervisory body at the French Ministry of Economics and Finance (the “Comité Répressif des Abus de Droits”).

In some ways, the viager transaction is like a reverse mortgage, but with two major differences! Firstly, the transaction is between individuals — there are no banks involved. Secondly, unless specified, the annuity is not for a fixed term, it is for the life of the seller.

The most common viager property transaction is the viager “occupé,” where the seller is entitled to retain their tenancy of the property. This system has benefits for both seller and purchaser: the seller has the option to stay in their own home and earn extra money for the rest of their lives. For the purchaser there is the opportunity to purchase a property in France without having to pay the market value upfront, but with the potential of realizing significant capital gains — sometimes well in excess of the average capital returns for the area.

Another less widely available, but very desirable, way of buying a viager property is where it is being sold as a viager libre (and no, that isn’t a type of cocktail!). The viager libre is one of those rare and fabulous things that actually almost sounds too good to be true. There is still a bouquet (deposit) and rente (annuity) to pay to the seller, but unlike the viager occupé (occupied), where the seller has a lifetime right to occupy the property, the viager libre is sold “empty.” This means that you, as the purchaser, are able to live in or rent out the property and thus there is an income potential from the rent, as well as the capital growth, of the apartment.

For example, there was a viager libre ground floor apartment for sale in the 7th arrondissement, advertised with a bouquet of €240,000 and a monthly rente payable to the sellers (a husband and wife in their late 80s) of €680. The apartment had a current market value of about €330,000, and it was leased for about €1100 per month. It is not hard to see how this might make a good investment! However, this apartment was on the market for exactly four days before it sold, so you have to be prepared to move quickly to snap up one of these properties!

Of course the trick here is also to pick and choose apartments that have the most appeal as rentals, and the most potential for long term capital growth. I believe that only “jewel” type properties are worth the risk — the kind that have every advantage. Location and ease of access are critical. Viager properties are available throughout France, and in almost every price range, from the smallest studio apartment in Paris to a waterfront mansion on the Côte d’Azur. In areas where there is a large retirement community, such as along the Riviera, they are abundant.

I once owned a viager, which will be the subject of a book (if I ever get the time to finish it!) In the case of the property I purchased, which was in my own building, the situation was quite a bit different and ‘almost’ doesn’t qualify as a viager. The original purchaser died before the viager did and because his heirs failed to pay the taxes, the lien fell into the hands of the State. As the second buyer, I negotiated with a State agency, purchasing the property at about half of the market value, but still the viager retained his rights of usage, even though he had moved out long ago to a relative’s home in the west of France. To obtain the rights of usage, I sought out the elderly viager who had been moved to a retirement home, offered the relatives a sum of money in exchange for the rights and eventually acquired the property. (To read the entire five-year long story, visit Viager with a View) 

The effort was well worth it for me — not only was it a successful rental property for several years, but an appraisal reported its value three times my investment — that facilitated an equity release loan that paid 100% for the purchase of my apartment in Nice!

Many people believe that viager properties are best when considered a long term investment — sometimes 20 or 30 years, depending, of course, on the age of the seller. There is the famous story about Jeanne Calment. She was the oldest living human, who lived to the age of 122 and outlived her Notaire, Andre-Francois Raffray. He purchased her apartment in 1965 when she was 90 years old, promising to pay her 2,500 francs per month until Jeanne died. He ended up paying twice the market value for the apartment before dying himself in December of 1995 at the age of 77, leaving the debt to his widow and family. She outlived them all!

Clearly, there are risks, particularly when purchasing a viager occupé (occupied). You never know how much you might end up paying for the apartment!

A bientôt,

Adrian Leeds
Adrian Leeds Group

(in her viager)

Respond to Adrian

 P.S. If you are interested in learning more about buying or selling a viager, contact us at [email protected].