What is a Viager?

A viager is a type of real estate agreement that is commonly employed in France. The basics of this type of agreement allow a property owner to sell that property in return for the privilege of continuing to occupy the premises and receive annuity payments for the remainder of his or her life, based on the sale price. Similar real estate strategies are used in other nations around the world, including plans that are known as reverse annuity mortgages or charitable remainder trusts. While there are advantages associated with the creation of a viager, there are also some potential liabilities.

One of the most obvious benefits of the viager is that the seller is able to create a steady source of income that can be used to meet personal living expenses. At the same time, there are no worries about finding somewhere else to live. With this type of real estate arrangement, the seller is free to continue living in the home for as long as he or she lives. In the interim, the former owner is receiving the monetary benefits garnered from the sale in the form of regular annuity payments.

For buyers, a viager represents a way to acquire a piece of property without having to manage the entire payment in one lump sum. As long as the buyer can manage to pay what amounts to a down payment and then keep up monthly payments to the seller, the plan guarantees ownership of the property once the seller passes away. In some cases, buyers enter into viager arrangements based on projections that the seller will pass away well before the total sale price has been disbursed. Since the strategy does not commit the buyer to continue making payments to the seller’s survivors or heirs, title to the property is fully transferred to the buyer at that time, and the property is now free for use in any way the buyer desires.

The use of a viager may not be beneficial for all sellers. Someone who has a relatively short life expectancy would probably gain more benefit from selling the property outright and placing the proceeds into some sort of interest-bearing account. Depending on current tax laws, this would allow the seller to defer taxes until the funds are withdrawn from the account, keeping the amount of taxes paid annually within reason. At the same time, the seller would be in a position to leave behind some type of inheritance for his or her heirs, or funds that could be used to settle end-of-life expenses.

There is also some danger to the seller in situations where the buyer in a viager real estate deal defaults on the regular annuity payments. When the buyer is an individual, the seller will need to take legal action to recover sole ownership of the property, typically by securing what is known as a freehold deed. In situations where a corporation is involved and that business declares bankruptcy, the process of recovering a solid title to the property can be much more complicated. In the interim, the seller may be unable to continue residing on the property, and must live without the income from the annuity payments.