You are planning to sell your apartment with the viager clause. This is a guarantee of receiving a life-long pension, and thus additional money, while still living at your own place! What are the advantages and conditions of such a sale? Let us have a closer look.
In Switzerland, selling your property with the viager clause is becoming increasingly more frequent. The much longer lifespan and the opportunity to remain at home as long as possible owing to appropriate medical assistance and care make selling the property with the viager clause increasingly more attractive. In fact, this is a particularly interesting solution to obtain additional pension and stay at your home as long as possible. In this sort of contract, the seller (creditor) sells the property to the buyer (debtor) and, in return, receives a previously agreed amount paid upon contract conclusion, usually corresponding to 20% to 30% property value estimated while applying a discount due to the fact that the buyer will only be able to use the property after the seller’s death, as well as a life-long pension. Therefore, the seller keeps the inalienable right to remain at home until one’s death, and the buyer will not be able to fully use the property until then. The sale contract is signed before the notary public. The seller may also decide that he or she wants to receive the funds at once, while keeping the opportunity to use it as long as he or she lives. In such a case, the property price will be lowered by 30% to 50% of its market value.
This is by far the greatest majority of such transactions. The seller sells its property at a price lower than the market price, and keeps the right to live it until his or her death. The discount applied to the market value is calculated considering the estimated length of the seller’s (creditor’s) life, value of the property, and the discount rate. The discount can total from 30 to 40% of the market value of the property. In such a case, we speak of the value of an occupied property. The buyer is the property owner, but cannot use it.
This is a less frequent case. Upon contract conclusion, the seller receives a specific amount and a life-long pension, usually higher than in the case of viager with property use by the seller. The buyer may dispose of the property, which can be lived in or rented. The selling price is based on the market value of the property and depends on the age of the seller. The older the seller, the higher the price.
=> In both cases, if the buyer fails to pay the due pension, the sale will be cancelled. If the buyer dies before the seller, the buyer’s heirs must continue to pay the pension. It must be remembered that the life-long pension can be paid to two people, for example in the case of married couples. In such a case, the pension is paid until the other (second) person dies. Life-long pension for two is a way to secure the living spouse.
Depending on the canton, there may be differences in taxation related to such contracts. The seller may have to pay the tax on profit from real properties. The selling price of the property is calculated on the basis of the amount paid upon contract conclusion and the capitalised pension. The value of the right to inhabit the property must also be declared, as well as the life-long pension received in the current year, at the rate of 40%.
Properties can be sold with the viager clause at any age. However, in order to find a buyer quickly, the older the seller is, the more probable it is to find a buyer, and the higher the amount paid upon contract conclusion, as well as the amount of the pension itself. For moral reasons, speculations regarding the age to be lived by the seller used to slow down popularisation of such contracts.
The amount paid upon contract conclusion should allow for paying off the mortgage. Therefore, the seller must make sure that the amount is sufficient.
Selling properties with the viager clause is becoming increasingly popular. Some phases and terms are very technical (such as methods of calculating the discount and market value of the property, negotiations with the seller regarding the amount to be paid upon contract conclusion and the amount of the pension), which makes this sort of operations very complex, requiring professional assistance. Lookmove has established cooperation with real estate specialists dealing with viager in Switzerland. They will be able to provide you with detailed information, and can assist you in selling your property with the viager clause.
CONTACT AN EXPERT IN REAL ESTATE TRANSACTIONS WITH THE VIAGER CLAUSE