What it means
The word comes from the French for "for life". In a typical deal, the buyer pays an initial amount called the bouquet, which is often 20% to 30% of the property's value, and then a lifetime annuity called the rente, usually paid monthly.
The annuity is often adjusted for inflation. There are two main forms.
In an occupied viager, the seller keeps living in the home until death, so the buyer cannot use it in the meantime, and the price is set lower to reflect that. In a free viager, the buyer takes possession immediately, and the price is higher.
The price is set using the seller's age, since the older the seller, the fewer payments the buyer is expected to make. The calculation relies on life expectancy tables, but any one case can turn out very differently.
A seller who lives for 30 years more than expected can cost the buyer far more than the property was worth. For the seller, the attraction is steady income without leaving the home, and no risk of running out of money before death.
For the buyer, the appeal is acquiring property in instalments at a price that may be below its market value, with no bank loan. The risks are on both sides.
The buyer can overpay if the seller lives a long time, and the seller loses the chance to benefit if property prices rise sharply. Both parties should take independent legal and financial advice before signing, because the contract cannot easily be undone.
Arrangements with similar ideas exist in other countries, such as home reversion schemes, but the viager is distinctive because the buyer's payments are tied directly to the seller's lifetime. That link is what makes the contract both attractive and unpredictable.
In practice
Real-world examples.
Example
A widow aged 82 in Provence sells her apartment as an occupied viager. She receives a $90,000 lump sum and $1,200 a month, which tops up her pension and lets her stay in the home she loves.
Example
A young investor in Lyon buys a flat in a free viager because he wants to use it as a rental property. He pays a higher bouquet but collects rent straight away, which offsets part of the monthly annuity.
Example
A property fund with a long investment horizon buys a portfolio of occupied viagers across several cities. By holding many contracts, it spreads the risk that any single seller lives unusually long.
Formula
Calculation
Total cost to buyer = bouquet + (monthly rente x number of months the seller lives)
A buyer agrees to a viager on a home with a market value of $400,000. The bouquet is $100,000, and the monthly rente is $1,500. If the seller lives another 20 years (240 months), the total cost = 100,000 + (1,500 x 240) = 100,000 + 360,000 = $460,000. If the seller lives only 10 years (120 months), the total cost = 100,000 + (1,500 x 120) = 100,000 + 180,000 = $280,000. The buyer pays more than the market value in the first case and much less in the second.Case study
Seen in the real world.
Marguerite and Henri Duval are illustrative, fictional owners of a house valued at $500,000 in a quiet French town. Both are in their late seventies, with a modest pension, and they want to remain at home.
They agreed an occupied viager with a buyer, who paid a bouquet of $125,000 and a monthly rente of $1,800. Over the first ten years, the buyer paid 125,000 + (1,800 x 120) = $341,000, well below the market value of the house.
In the illustrative story, both sellers lived into their late nineties, and by year 22 the buyer had paid 125,000 + (1,800 x 264) = $600,200. The example shows why the buyer must accept the risk of a long life, and why the seller values the certainty of income.
Watch out
Common mistakes.
- Assuming the buyer gets a bargain, when a seller who lives longer than average can push the total cost well above market value.
- Forgetting that in an occupied viager the buyer cannot use or rent the property until the seller leaves or dies.
- Ignoring running costs, such as property taxes and major repairs, which are shared between the parties according to the contract.
Questions
People also ask.
Can the seller cancel a viager?
Generally not, since it is a binding sale, although the contract can include protections such as a right to recover the property if the buyer stops paying.
What happens if the seller dies soon after signing?
The buyer typically keeps the property after paying only the bouquet and a few instalments, which can be a bargain for the buyer.
Is the annuity affected by inflation?
Often the rente is indexed to inflation so that the seller's income keeps its value, but this depends on the contract.
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