The real estate life annuity in Spain: what is it and how does it work?
The life annuity : how does it work?
Do you want to sell or buy a property in Spain ? Have you thought about buying or selling a life annuity ? Depending on your situation, this real estate transaction with very specific terms and conditions can have advantages. What are they? How does this type of transaction work? We answer you.
It is a contract, formalised by a public deed before a notary, by which the elderly person, over 65 years of age, who owns a dwelling, sells the bare ownership of the property, but reserves the usufruct of the property, i.e. the right to use and enjoy the property.
In exchange, you will receive a monthly income for the rest of your life and will be forever free of certain housing expenses (ICI, insurance, extraordinary expenses...). Similarly, if you wish, you will be able to receive an initial provision as soon as the Deed is signed.
There is also the possibility of limiting the receipt of the monthly income to a certain period of time (maintenance of the usufruct for life) or even of renouncing the usufruct in order to receive a higher income.
What is the Life Annuity?
The life annuity is recognized in the Civil Code as an important legal provision for the elderly. It offers the owner the possibility of transferring the bare ownership while preserving his right to reside in the dwelling.
On the other hand, with lifetime usufruct, certain advantages are generated, such as the fact that the interested party can rent the property and receive the income that he or she generates himself, which means that there would be shared ownership that would be reflected in the land register.
Thanks to this formula, the lifetime income is higher than that of a reverse mortgage, making it an ideal complement to retirement by providing a monthly income higher than other options on the market, thus improving the individual's purchasing power.
This monthly income that the user will receive will fluctuate according to a series of parameters such as the value of the property, the age of the usufructuary, as well as other tax factors. However, although this figure is responsible for optimizing the beneficiary's income, it should be noted that there will be no possibility of any heir rescuing this property at a later date. In the event of marriage, the life user and the Real Estate Life Annuity will be intended for both spouses.
Life annuity terms
There are a variety of real estate annuities on the market that have guarantees and characteristics that are different from others, which must be studied according to the interests, tax specificities or the location of the apartment or second home.
• Classic temporary income. In this case, the elderly person retains the usufruct of the home until the end of the term. However, the monthly rents will be collected within a predetermined period.
• Classic annuity. Under this modality, which is the most frequent and common of all, a monthly lifetime income is received in exchange for the sale of the bare ownership of the home, reserving the right of usufruct of the property throughout life.
• Life annuity outside the home. The elderly person waives the right to use the home, even if he or she receives a monthly payment higher than that of the traditional annuity. This case focuses on people who want to leave their home to move, for example, to a residence.
For its part, it should be noted that, in all previous types of income, a capital advance or an initial provision can be requested.
How to calculate the life annuity ?
The monthly income to be received increases according to the property value of the property, the age and life expectancy of the seller, the payment or not of a bouquet and its amount, the free or occupied status of the property sold as a life annuity.
In addition, a property sold as an occupied life annuity necessarily has a reduction in its land value in order to compensate for the deprivation of the right of use and habitation suffered by the buyer, which runs until the death of the seller.
Benefits and guarantees of taking out a life annuity
The buyer can stagger his payment thanks to the life annuity, similar to a loan but due to the seller, free of charge.
The life annuity allows you to build up your assets gradually over time at much more attractive rates and conditions than the traditional sale.
In the case of an occupied life annuity, benefit from a discount on the price of the property without having to resort to a bank loan. You can also take advantage of significant tax advantages.
Buying a property with a free life annuity allows a buyer to access property to live as an owner or to rent without recourse to bank credit.
The advantages of the life annuity for the seller
The life annuity is an ideal solution for all those who wish to live and enjoy their retirement with peace of mind.
This real estate transaction gives people aged 60+ the opportunity to sell their property while staying at home as much as they wish as part of an occupied life annuity.
It allows them to receive additional income for life while no longer suffering from the hassle of being a homeowner. Thus, the seller generally receives a cash on the day of the notarial signing "the bouquet", accompanied by a life annuity.
Thanks to the life annuity,
- Benefit from a lifetime income supplement and a direct financial contribution to the sale
- Protect your spouse
- Take advantage of advantageous taxation
Receive a monthly annuity, which will lead to a significant increase in the quality of life of the other party.
The tax conditions for taking out a life annuity are very advantageous because they offer a high percentage of tax exemption, which will depend on the age at which it is contracted. Between the ages of 66 and 69, the percentage will be 80% and, from the age of 70, 92%.
If the life annuity is accrued on a main residence and the co-contracting party is over 65 years of age, the sale of the bare ownership of the dwelling will have no impact on his personal income tax.
Thanks to this income, certain taxes such as property tax (IBI), community charges or home insurance are no longer paid.
To have the possibility of not ceasing to live in the house in which they previously resided, so the use and enjoyment of it will not change and the real estate assets will therefore be profitable without giving up the interested party living in the same house. .
The Resolutory Condition determined in the Public Act constitutes a great legal guarantee in cases of non-payment of rent, since the full ownership of the dwelling would be recovered without the need to return the sums already received.
The life annuity: how do you divide the charges?
The buyer/investor will be responsible for the costs of buying and selling the transaction, the monthly payments or amounts established in each transaction and the annual expenses of the property inherent in the ownership of the property (IBI, extraordinary expenses and property insurance). ). For his part, the elderly person, as usufructuary of the house, will assume the ordinary expenses of the community and the income from housing supplies (electricity, water, gas, telephone, heating, etc.).
Come and discover the life annuity with MCB Costa Blanca real estate
The life annuity is an ideal solution for all those who wish to live and enjoy their retirement with peace of mind.
Because we want to provide you with personalized support adapted to your needs, our real estate experts have a physical agency to welcome you and meet you.
In our agency, we help seniors and individuals to improve their daily lives and prepare for their future thanks to the life annuity, a social scheme that benefits everyone. Seniors receive additional income, while buyers find an ideal retirement product and a safe haven investment for the future.
Legal, tax and accounting advice in your language.
- It is essential to be accompanied by a specialist to sell or buy a life annuity property, because the signing of the deed of sale is done in the presence of a notary. Our agency will also be able to guide you in determining the amount of the bouquet and the annuity, without excluding a negotiation between seller and buyer on this subject.
A real estate project in Spain?
Contact the Spanish real estate specialists of our agency MCB Costa Blanca immobilier.
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Sell with MCB Costa Blanca Real Estate RAICV Approved Agency, API Member .
Dominique SANTI
CEO
Publié le 20/11/2024 par
Dominique SANTI
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