[Continued from yesterday’s Part 1.]
By: David A. Smith
In exploring the en viager model of tenure, prompted by a story on BBC News (1 July 2015), we’ve established that en viager, aside from being an antiquated legal form that survives in French law (and is enjoying a revival driven by demography), also creates a synthetic family, with the elderly seller/ tenant standing in for the auntie or mother of the buyer.
Caring for aging parents is wired into human beings.
All of us are related, or so we say!
So is greed:
It’s a sign of the inherent tensions in the system that any death involving a viager is automatically investigated by the police, to clear up any suspicions.
Earlier this year, a man was charged with attempting to poison his 85-year-old viager tenant, by putting medication in her mineral water. He denied the charges.
Here’s to back stories
It will probably contribute to a significant change in composition of the neighborhoods in France’s best cities, like Paris – and I wouldn’t be at all surprised if some enterprising French were buying them up with a view to eventual Airbnb-ing.
“Eighty per cent of French personal wealth is held in property,” Nahon says. “Liquid assets account for very little.” So when the coffers run dry, the viager system is an appealing way out of trouble.
Given the absence of alternative hybrid-tenure models as mentioned above, it makes good sense.
Genevieve Deloche is 71 and has just agreed a viager deal on her apartment in the 20th arrondissement of Paris.
Away from the tourists but comfortably in town
It’s a peaceful, one-bedroom place, with a courtyard full of greenery, a large basement and a garage.
“It sold very quickly. Too quickly!” she says. “Within three months. It was a shock.”
If I understand things correctly, the price of an en viager house price is set by the seller or the market, but the timing of payments – the 30% bouquet, the monthly stipend based on annuitized charitable remainder trust principles – are set by formula. So yes, Ms. Deloche, perhaps your flat did sell too quickly – or maybe you’re healthier than the market actuarially expected.
After living there for twelve years, she says it was time to consider a viager buyer because she had no children –
There’s the inheritance and escheat-avoidance motivations in a nutshell.
– and turning seventy meant there were no tax barriers to receiving a lump sum.
I presume that’s a provision of French law akin to our IRA treatments, except as applied to
She doesn’t particularly need the down-payment, she says, but the monthly stipend will go towards “having fun” – trips to the theatre, travel and eating.
That’s a wonderful use of the illiquid equity; enjoy your life while you’re still cognizant and mobile enough to do it.
I sure hope to live a long time!
With her frequent laughter, jokes and energy, Genevieve isn’t quite the image of an ailing 71-year-old that her prospective buyers might have expected.
“Typically, sellers are 70-80 years old, and female,” says Mikkael Ferrand of Viager 75, an agency based in the Paris’s smart 5th arrondissement.
Don’t get too attached to the renter, keep your eye on the property
Gender difference is real: both that for many of the older generation, women live a little longer than men (whether biology or work and life cycles is beside the point), and because if this, if an elderly man outlived his wife, he would readily be able to marry another one.
GREEDY, (background): Michael J. Fox, Nancy Travis, Colleen Camp, Joyce Hyser, Ed Begley Jr., Siobhan Fallon, Jere Burns, (front): Kirk Douglas, Olivia d’Abo, 1994. ©Universal Pictures
I’m giving my money to the one who truly loves me
“They come from a generation where they haven’t worked, their husband has died and they have a tiny pension. Sometimes they get landed with a big renovation bill for the building –
That is, a condo or a co-op – and both cases illustrate the ongoing challenge of elderly aging in place in an owned multi-family building: they can be asset-rich and cash-poor – so en viager is thus likely to arise only in high-value urban environments (like Paris) because those are the places with multi-unit buildings of sufficient value that people will buy them.
– or something, and selling en viager is the only way they can pay the bills and still stay in their home.”
Ironically, though we think of family as closer than strangers, en viager transactions demonstrate that the synthetic family formed by a buyer may be more comforting than the actual serpent’s teeth of thankless adult children.
En viager it is, then!
It’s also a way of having more control over your inheritance, says Genevieve Deloche. “You can pass on your children’s inheritance to them early, at a time when they actually need it, and avoid inheritance tax too. It’s also ideal for those who don’t get on with their kids – because they can take the inheritance away.”
While again implied, not stated, this suggests that under French law the adult children of an elderly decedent can overturn her will and demand their blood inheritance; if so, en viager is a revenge in life, a means of spending the inheritance on oneself, or passing the proceeds to another extra-familial relative.
In around 10% of cases, says Stanley Nahon, the first children learn about a viager deal is when their parents die – and it can leave them very disappointed. But such secrecy is rare, and many children encourage their parents to release the capital tied up in their home, as a way to support themselves in old age.
I thought I was inheriting a flat; instead I’m inheriting a burden
“Buyers, too, often see it as an ethical investment,” he says, “because it allows the elderly to stay on in their own place and avoid moving to a retirement home.”
Have I the right to sell my inheritance?
A legacy bequest is the last gift elderly parents bestow upon their children, and it does raise the question – in moral children, anyhow – what did I do to earn this? What use of the money can honor the memory of my late mother? An en viager stands that morality on its head and tells the living children, I spent your inheritance on myself.
And yet you incessantly stand on your head–
Do you think, at your age, it is right?”
“In my youth,” Father William replied to his son,
“I feared it might injure the brain;
But, now that I’m perfectly sure I have none,
Why, I do it again and again.”
To many an adult child, that implied rebuff from beyond the grave – a secret held until it was irreversible – must sting.
But the children of the buyers can also be in for a shock, if they inherit their parents’ viager contract. Unless they keep up the regular monthly repayments, the whole investment will be written off, and the original owner-tenant will be free to sell their property again.
Property brings out the worst in families; and sometimes the best, and it has made for great drama and black comedy, via the inheritance angle (Kind Hearts and Coronets), tontines as partnerships with no transferability (The Wrong Box):
I just need to outlive my brother by one hour … or be thought to have done so
[Side note: Tontines, originally created as a pre-corporate capital-subscription mechanism akin to limited partnerships, later evolved into microcredit and microsavings cooperatives in emerging countries and are still used for that purpose today. – Ed.]
A film released last year focused on just these kinds of tensions, with Maggie Smith playing a dowager lady ensconced in a viager deal, and Kevin Kline the penniless son of the deceased buyer, who turns up in Paris hoping to sell his inheritance.
Propinquity can foster friendship, especially if those living in proximity have age-and-gender relationships that echo familial forms (auntie-nephew, mother-daughter). The elderly have memories and time, and want someone with whom to share them.
Contrary to the scare stories, brokers say, positive relationships often develop over the years between buyers and sellers. They may meet for tea once a year, or send over a box of chocolates.
“It was important to like the person buying my flat,” Genevieve Deloche tells me. “To have good relations, be able to laugh a bit.”
A home is an exoskeleton around a self, a soul; when one sells it, even if one remains living in it, the buyer stands in loco filis, and it would be a rare old lady indeed who developed no maternal feelings for her eventual buyer.
Maggie Smith in My Old Lady
Handout
“I think of you as my son.”
“I think of you as my tenant
Isn’t it strange, I ask her, to meet someone who’s gambling on how long you’ll live?
“Yes, it’s true, but I don’t care.” she says. “It’s hardly a reason to jump under a car.”
One broker told me about cases when the buyer’s gamble spectacularly failed, with sitting tenants still going strong at 102 or 103.
Something in all of us makes us root for living long and prospering in old age, so the tale of the world’s oldest viager is itself sweet:
Jeanne Calment, age 50, in 1925
In 1965 Jeanne Calment, aged 90, sold her apartment in Arles to her lawyer, Andre-Francois Raffray – a man half her age. It was a viager deal, and Raffray agreed to pay her 2,500 francs (about $500) per month.
Ms. Calment in 1897, with a century of living before her
But Calment went on to become the world’s oldest living person, dying 32 years later at the age of 122.
Raffray himself died two years before her, on Christmas Day 1995.
Ms. Calment in 1992, age 117
“On the same day, Jeanne Calment, now listed in the Guinness Book of Records as the world’s oldest person at 120, dined on foie gras, duck thighs, cheese and chocolate cake at her nursing home near the sought-after apartment in Arles, northwest of Marseilles in the south of France,” the New York Times reported, a few days after Raffray’s death.
“She need not worry about losing income. Although the amount Mr Raffray already paid is more than twice the apartment’s current market value, his widow is obligated to keep sending that monthly check. If Mrs Calment outlives her, too, then the Raffray children and grandchildren will have to pay.
“‘In life, one sometimes makes bad deals,’ Mrs Calment said on her birthday last Feb 21.”
Ms. Calment at 120
She lived to 122, and died in August, 1997.
Vive le viager!
