A Roof Over Your Head--With Viager
BY JOEL LEWIS
JOEL LEWIS was formerly managing editor of PRINTERS’ INK. He is spending a year in France with his wife, who is French, and two daughters.
Viager is a manner of buying and selling property in France in which the price, or a portion of the price, is paid as rent to the seller during his lifetime. It dates back about a century. Its origins are uncertain, but it probably started when a widow in one of the provinces found herself with too much property and too little ready cash to keep up the old ménage. She may have required the services of a hired hand to do the necessary chores, the farming, and the other man-work called for. So she took a trusted hand with the right qualifications and made a deal with him: if he’d do the work, he‘d be fed, clothed, and cared for. He’d receive no wages, but upon the death of his patroness he’d become the new owner of the property.
Today viager is a standard form of transaction in real estate, and for obvious reasons. As in the United States, living costs in France have skyrocketed since the war. Inflation and higher wages impose the same cruel pressures on Frenchmen subsisting on fixed incomes as on others. Pensions and government allowances have doubled in the last twenty years, to be sure, but prices overall have increased by at least ten times that much. Unless a person’s income grows proportionately, the difficulty of maintaining his home and property becomes staggeringly acute, especially if help is required, because the domestics problem in France is the same as it is in America: good domestics are hard to come by, and wages are beyond the level at which many homeowners are able to pay. Hence viager has grown rapidly since the war.
There are neither advantages nor disadvantages to the buyer or seller in viager from the tax standpoint. Monies received in viager sales are treated exactly like any income. Rents paid out on viager purchases are deductible for tax purposes as are any other legitimate expenses. However, under French law consideration is given to the taxpayer’s age, and a graduated scale of taxes grants the rentier in viager a more beneficent tax bite the older he becomes. Furthermore, a new law passed last year takes cognizance of the recent sharp changes in living costs in France. For the first time, the law permits flexibility in viager rent contracts: thus, if living costs soar, rents may be raised; if they fall, rents may be lowered. This has given new impetus to viager transactions.
There are three types of viager — Reserved, Free, and Mixed. Under Reserved, the buyer makes a down payment, called (in the typically French euphemism) a bouquet, and pays a small annual rent. The size of both payments depends on the appraised value of the property and the age of the seller (or sellers). The new owner cannot take possession of the property until the seller or sellers die. Prices are determined by actuarial tables. Free viager differs from Reserved in that the property is vacant and the buyer may use it upon purchase. The price is correspondingly higher. In Mixed viager, the seller retains for his own use a portion of an apartment, a house, or property and gives the buyer permission to make use of the remainder.
From the foregoing it can be seen that this is a most unusual business. In the physical sense, a transaction is a unique encounter in human relations. You look the seller over even more minutely than you look over the property. You try to prognosticate his (or her) life expectancy, without appearing to be too downright clinical. I made an actual call with one broker to partake of the experience, embarrassment and all. The newly built villa we inspected was a perfect jewel, but its would-be seller, a sixty-seven-year-old widow without a gray hair in her head, moved about the premises with such brisk strides and robust animation I promptly concluded she was a better prospect for a life insurance company than for a viager bargain hunter.
Viager transactions embrace all sorts of real estate, from a cottage to a château to industrial buildings. While real estate is the predominant item dealt with in viager, paintings, jewelry, furniture, and silverware are also traded.
A countess living on the Promenade des Anglais in Nice owns a valuable collection of French impressionist paintings including some Monets and Renoirs. The lady found herself in need of cash. She wouldn’t think of parting with a single picture. So she sold the collection in viager. She obtained a bouquet of $30,000 and in addition receives an annual rent of $2000. And the pictures still hang in her apartment, where she will continue to enjoy them until she dies.
An agent told me the story of a client of his who bought an apartment in viager from a Russian czarist prince, sixty-four years of age. He didn‘t think the prince looked very healthy; he was drawn, pale, and wrinkled. Well, that was thirty years ago! The buyer still keeps up with his rent payments while the prince, now ninety-four, haggard and pale as ever, goes about his business.
Another agent, on the other hand, tells of a friend of his who bought a splendid mansion in Monaco (in viager) valued at $180,000. Bouquet was $10,000 and annual rent $2000. Two years later the owner died suddenly, the buyer thus acquiring an $80,000 estate for a mere $14,000. Other agents cite examples in which lucky buyers inherited viager-purchased properties within six months.
Americans nurtured in the traditions of television mayhem and violence might well wonder if the system of viager doesn’t provide a madeto-order setup for homicide, since most sellers are lonesome, lonely people well advanced in age. (Actuarially, it doesn’t pay to consider viager if the seller is forty-five or under.) I’ve looked into this but cannot find a single instance in the annals of French crime in which a viager transaction served as the backdrop for homicide, although I did learn that a doctor wished to purchase a nice piece of property owned by a maiden aunt who lived alone in a small town. But when he realized that he was not only her nephew but her doctor as well, he thought better of the idea and dropped it.
The viager system would seem a rare admixture of the ingrained Latin love of gambling and the equally strong Gallic predilection for the sure thing — an amalgam of uncertainty and surety in which neither participant is the loser.
How much viager is speculation and how much investment? The question cannot be answered statistically. Buyers do not wear their motives on their sleeves. It is believed a fair percentage of sales are speculations. One agent numbers among his clients a wealthy Argentine lady who visits the Riviera each year. On each of her last four visits she made it a practice to buy a couple of pieces of property, perhaps, as the agent suggests, as a change from roulette or other casino pastimes. But, he says, she can afford it.