A new wind is blowing through the life annuity sector! The seller of a property who wishes to remain in his home and receive immediate capital in order to carry out an immediate project or to pass on his assets in advance, can take advantage of this (very) advantageous alternative. Explanations by David Chouraki, Viager Manager at Consultant immobilier.
Sale in “bare ownership”: the new youth of life annuities
Sale in "bare ownership": the new youth of life annuities
How does a life annuity work?
David Chouraki :
In a classic life sale, the seller of a property receives additional income for life, called the “life annuity”. The annuity is paid by the buyer to the seller on a monthly, quarterly or annual basis. The amount of the annuity is defined according to criteria such as the age and life expectancy of the seller, the value of the property and the estimated rental value of the property for sale.
On the day of the sale, the seller receives approximately 30% of the total amount of the sale, called the bouquet. The balance of the sale amount will be paid as a life annuity.
Although this solution seems attractive, in that it allows the seller to obtain both an immediate capital sum and, in addition, a supplementary income, it does have one important disadvantage: the total value of the life annuity is uncertain because it depends on the seller’s lifetime. A much more satisfactory alternative can be envisaged for the seller: focus on the sale in bare ownership.
Selling bare ownership: instructions for use
David Chouraki : Unlike the classic life annuity sale mentioned above, where there is some uncertainty as to the total value of the property, the “bare ownership” sale puts all the cards on the table: each of the parties knows in advance what the total amount of the transaction is, the bouquet being the only capital to be paid on the day of the deed. For example, the seller of a property (ideally over 70 years of age to avoid too great a discount) will be able to claim up to 80% of the market value of the property on the day of the sale. This formula will allow the buyer to remain in his or her own home and thus maintain his or her lifestyle. Better still, thanks to the substantial capital obtained immediately and in a single payment, the seller will be able to improve the quality of his daily life, to adapt his flat to the ageing process, to carry out personal projects, to buy a second home, to help his relatives or to reorganise his estate in advance.
What are the other benefits of this operation?
David Chouraki : This formula has advantages for both parties to the sale. For the sellers, this transaction allows for significant relief from the IFI insofar as the basis for calculating the said tax will be 30% of the market value from the age of 70, then 20% from the age of 80. For purchasers, the sale of bare ownership allows them to build up their assets by acquiring a property at an attractive price, with the help of bank financing. Finally, a win-win formula for both parties.
|TYPE OF LIFE ANNUITY|
|Right of Use|
and Dwelling Rights (DUH)
|Benefit||You continue to “use your property”.|
and stay at home for ever
during your lifetime
|Commitment to pay|
of a price supplement
filled in at signature
(in case of abandonment of the DUH)
|2 possibilities :|
– Renting out your home of your home. You
benefit from additional income
– Redemption of the usufruct at a market price
What types of housing are in demand?
→ House, flat or building owned by a natural person or in an SCI
(in the case of an SCI, the right to the property must first be attached to a natural person)
→ located in the heart of a large city (> 30,000 inhabitants) or in a dynamic region (coastal, tourist) of France?
→ with a market value of over €500,000
8 benefits of selling your home as a life annuity?
Organising your estate. Optimise your taxation and free yourself from the management of your property assets…
Streamlining legacy management. To avoid a future situation of undivided ownership for your successors and heirs
Increase your purchasing power and enjoy life
Protect your spouse in the event of an accident
Making donations to your children, grandchildren, relatives or associations
Financing a solution for assistance or maintenance at home
Benefit a capital and the resulting additional income
Refunds your debts and pay off your loans
Why sell bare ownership
You do not have an intuitive relationship with the buyer and are therefore not under any pressure.
You have the assurance of being able to stay in your own home with complete peace of mind!
An independent expert to evaluate your property
You benefit from an objective market price carried out by an RICS-certified real estate expert, who respects a code of ethics and uses a valuation methodology. He delivers a complete report on the valuation of your property, for which he is responsible (not to be confused with an estimate made by an estate agent).
Transparency and legibility of the price
We have an economic approach to the valuation of your property. We pay you at the signing of the notarial deed, its occupied value corresponding to its full ownership value (appraisal value) minus the “use value” of the life interest that we grant you (DUH or Life Usufruct).
A payment of 100% of the capital price at the time of acquisition
When you sign, you receive a capital sum that is totally tax-free*, allowing you to fuel your life plans, improve your quality of life and your purchasing power. We do not pay any annuities, so there is no uncertainty about future payments.
Coverage of major works governed by Article 606 of the Civil Code (roofing, restoration…)
You only have to pay the current charges, like a tenant, so there are no nasty surprises!
* if it is your main residence
BARE OWNERSHIP IN 10 POINTS
① I have no children…
Nothing changes in my daily life and yet everything changes, you get a capital to make new projects and thus fully enjoy life.
② I want to help my children and grandchildren…
The funds available immediately allow you to help them when they need it. As a result of longer life expectancy, we inherit from our parents when our lives are already over.
③ I don’t want to be a burden on my children…
I am securing a capital sum to take care of my future dependence and avoid my children having to bear the burden.
④ I plan to move to my second home…
Bare ownership allows you to stay in your main residence for as long as you wish and to sell it at a later date to finance your life projects.
⑤ My second home is expensive…
You are attached to a property but you know that none of your children will take it over? Do maintenance costs sometimes jeopardise your plans? Bare ownership allows you to combine the two.
⑥ I have already given the bare property to my children…
You keep the usufruct, your children have the possibility to sell the bare property and thus benefit from a capital which will help them in life without anything changing for you.
⑦ I have a property portfolio that has increased in value considerably…
You are lucky enough to have a property portfolio that has risen sharply in value with the market. Bare ownership allows you to take your gain without paying capital gains on your main residence and to reduce your property wealth tax (IFI) while remaining in your home.
⑧ I am a landlord and want to keep my rental income…
You can buy the bare ownership of your property and thus reduce your taxation on real estate wealth. You receive a capital sum and you keep the usufruct and the associated rental income for the rest of your life.
⑨ I am an owner but still in debt…
Bare ownership offers you the possibility of repaying your loan
your loan and pay yourself a capital sum. This increases your purchasing power and gives you extra cash for new projects.
⑩ I want to be able to afford to stay at home…
We age best at home, but home help is expensive. With bare ownership, you benefit immediately from a capital that allows you to put money aside and secure yourself in the future.