The bizarre French property investment that waits for your tenant’s death

One of the curiosities of the French property market is the “viager” system. To the uninitiated – which is probably most people – it’s a form of equity release or life annuity whereby someone buys a house from a person, but pays them by instalments until the original property owner’s death, when they finally get the property.

Investors wanting to buy property in this way therefore need to weigh up how long they think they’ll be making payments for; someone who isn’t in good health may mean you’ll only need to make payments for a short time, getting a bargain property in the process.

En viager – which translates as “for the lifetime” – accounts for fewer than 1pc of transactions in France, yet the ghoulish fascination about betting on someone’s lifespan has made for salacious headlines and black comedy.

Last year a man was accused of choking a 92-year-old to death on a madeleine cake (could it be more French?) to more speedily get his hands on the property he purchased en viager; while in the 1972 comedy film Le Viager featuring Gérard Depardieu, a hapless family make endless attempts to knock off the owner of a villa in Saint-Tropez who ends up living until over 100.

And life can imitate art. Mention “viager” to anyone in France and they bring up the case of Jeanne Calment, a 90-year-old who sold her Paris apartment to her 47-year-old notaire (legal adviser) who agreed to pay her a monthly annuity of 2,500 francs. The notaire died at 77, but his wife had to carry on paying the instalments, and ended up paying twice the cost of the apartment until Jeanne died in 1986 at the ripe old age of 122.

So this rather begs the question about why people in France still embrace this method of buying a property?

“They don’t have equity release systems in place like in the UK, so ‘en viager’ means that the seller can stay in their house for their remaining days, have some money to enjoy life, and know that they won’t have to worry about their house being sold after their demise. It’s only really suitable for people without children to inherit,” says Joanna Leggett of Leggett Immobilier in France.

“But it’s being picked up by people in their thirties who want to invest in something, knowing that they may not see a return for, say, 10 or 15 years, but that could result in them owning a property, having paid only 40pc or 50pc of the original estimation price,” she added.

As Ms Leggett suggests, a benefit for sellers is that after their death their relatives do not have to worry about trying to sell a house in time to pay death duties.

‘We poured our money into the house, but now we want to travel’

Rather than selling their home outright and downsizing to release cash, Anneke and Manfred want to continue to enjoy their stylishly contemporary house in the Dordogne, western France, that they have spent 32 years perfecting. They are hoping to get a buyer en viager as a way to fund their hopes of travelling.

Anneke, a Dutch-born costume designer, said: “We poured all our money into the house and we are now at a point when we want to have the funds to travel while we are still active. We have no one to leave the house to.

“We have friends who have tried viager, but they had to wait two years to find a buyer, so we are realistic that it might take time.”

In a viager contract the vendor can choose how they want to receive property payments. Larger down payments – known as a “bouquet” – can be paid as a one-off, as a small bouquet and monthly instalments, or just monthly instalments.

The value of a property in en viager is calculated based on the age of the seller, and it is known as the “occupied value”. The occupied value of a home owned by someone who is 50-years-old would be more than that of a home owned by someone 70-years-old. The bouquet is commonly about 30pc of the occupied value.

Anneke, who is 76, said that they will probably opt for a large bouquet and of course remain in their house. They are listing it through Leggett Immobilier, which is starting to offer sales en viager on a case-by-case basis. Many French estate agents do offer this service, but specialist agencies and notaires arrange the contract.

Matthieu Cany of Sextant Properties said that viager can be a good solution, but not if you’re in a hurry: “Because the viager market is so tiny it is much faster to use the normal market to sell your home and spend the money wisely.”

He said his father purchased an apartment in this way with three other investors on the Cote d’Azur. The vendor was a childless 76-year-old lady, and they paid her a bouquet of €61,000 and monthly instalments of €1,100.

The life expectancy and bouquet and instalment figures are produced by a formula provided by Notaires de France (the official association of notaires), which in this case calculated 10 years of life expectancy. Sometimes a doctor might carry out a health check to help reach a life expectancy figure.

Mr Cany said: “She died 12 years later, rather than 10, and they still made a small profit when they sold it for more than they’d paid out. But for the vendor it was a win: with her small pension she couldn’t go to restaurants until she had the viager income.”

The interaction between a viager tenant and new owner is the subject of the BBC Films’ romcom, My Old Lady (2014), when a Parisian apartment is inherited by a character played by Kevin Kline, who unexpectedly finds that it comes with a 90-year-old tenant (Maggie Smith).

Romance ensues with her daughter, played by Kristin Scott Thomas, and the parties end up joyously toasting “a long life”. Not all en viager buyers would agree.