Viager sales can go wrong

THE SALE of a home under a viager (life annuity) is a tempting idea for many older people but there are possible risks that should be considered, especially if the buyer is a company.

One expat who got into difficulties after selling by viager is Jean Fitzgibbon, who has lived in France for more than 13 years. When her husband died in 2003 she found it difficult to make ends meet on her reduced income, she said.

“We were never that well off when my husband was alive and after he died my income went down by over 70%. I considered returning to the UK but I love it here so decided to stay, and thought I might be able to release some equity from our property to provide me with a capital sum.

“I approached my bank and although they were unable to help they suggested I consider selling my house by viager. I was able to do so within five months of it going on the market.”

Mrs Fitzgibbon took out a viager occupé where the property is sold but the seller retains the right to remain in their home for life, during which time they receive a monthly rent, as well as a single capital sum. After they die the property reverts to the buyer. The risk for the seller is that the buyer may default on rent payments, as happened to Mrs Fitzgibbon.

She sold her home in early 2005, for a sum equivalent to €110,000 and a monthly rent of €550. The buyer was a company.

“For a couple of years the rent was paid without any problems. However, last year the payments became irregular, then the cheques started to bounce. In July I received a letter saying our buyer had been declared bankrupt and I have since learned that there is nothing I can do about it,” she said.

Mrs Fitzgibbon added.“Not only do I now no longer receive any rent, but I am unable to recover freehold possession of the property. I hope eventually that the house will be sold again, but in the current market, that is not going to be very easy.”

Connexion property columnist David Yeates said viager contracts generally make it possible for the seller to recover freehold possession of the property if the buyer defaults on the rental payments.

However he added: “Where the property is held through a business that goes into bankruptcy the position is more complicated, as the automatic right to recover possession of the property does not operate.”

He said this is due to the fact French courts try to keep businesses afloat. “This can make resolving the issue long and stressful. Where the buyer is a private individual you will still have to go to court,” he said.

“But the matter should be cleared up more quickly; the court will try to decide what is fair - eg. you might get the freehold back but have to pay back some of the lump sum. You should therefore be aware of these risks before selling under viager to a company.