How is the annuity of a viager sale calculated?

Step 1: establish the property's market value

Every annuity calculation starts from the property's market value, that is, its price free of any occupancy. It is established as for an ordinary sale: comparison with recent sales of similar properties, the home's characteristics, its location. Public sales databases, such as the property transaction records published by the French tax administration (DGFiP), help ground this value in evidence. A serious appraisal is essential: a wrong starting value skews the whole calculation and can weaken the contract.

Step 2: deduct the value of the occupancy (occupied viager)

If the seller keeps a right of use and habitation, its value is deducted from the market value to obtain the occupied value. Two methods coexist. The economic method capitalizes the property's rental value over the expected occupancy period, derived from the INSEE life expectancy tables.

The tax reference values the usufruct according to the scale in Article 669 of the French General Tax Code, based on the occupant's age, with the right of use and habitation valued at 60% of the usufruct's value (Article 762 bis of the same code). These scales are designed for tax assessment, registration duties and land registration tax for Article 669, gift and inheritance tax for Article 762 bis; to set the price, the parties remain free to use whichever method they prefer.

Step 3: convert the capital into an annuity

The occupied value, minus the bouquet paid upfront, gives the capital to be converted into an annuity. That capital is divided by a coefficient derived from the seller's life expectancy, taken from the INSEE mortality tables and incorporating a rate of return. Notaries and viager professionals rely on conversion scales, such as the Daubry scale: these are practitioners' tools with no regulatory force, Article 1976 of the French Civil Code leaving the parties free to set the rate of the annuity.

For an equal value, the annuity is therefore higher if the seller is older, if the bouquet is small or if the viager is free.

Indexation and revaluation of the annuity

The deed almost always includes an annual indexation clause, most often linked to an index published by INSEE, to preserve the annuitant's purchasing power. In the absence of such a clause, life annuities set up between private individuals benefit from the statutory increases provided by French Law No. 49-420 of 25 March 1949, whose coefficients are revised each year in the budget act.