Selling a life annuity requires certain precautions to avoid the risk of non-payment of the annuity. As well as selecting the right buyer, certain guarantees must be put in place.
Securing the payment of the annuity is all the more important when it forms an additional income that is essential to maintaining the creditor's lifestyle.
To ensure the security of the life annuity vendor, the purchaser must be carefully selected beforehand. A ruling by the Paris Court of Appeal on 25 February 2010 held that an owner is not at fault if he refuses to sign a promise to sell with a buyer presented by a duly appointed estate agent, provided that the future buyer's financial situation is not clearly known.
As well as looking at the buyer's assets, it is also important to know the future tenant's occupation. If the purchaser is likely to be involved in insolvency proceedings as a result of his or her profession, the payment of the annuity could be called into question temporarily, as could a possible resolution, if he or she finds himself or herself in liquidation or receivership.
After checking the buyer's profile, it is essential that the life annuity deed of sale includes guarantees for the payment of the life annuity.
Under the terms of article 1977 of the French Civil Code, the person in whose favour the life annuity has been set up in return for a price may request that the contract be terminated if the settlor fails to provide the security stipulated for its performance.
This security may consist of a mortgage or a surety. To be able to invoke article 1977 of the Civil Code, the security must be provided for and required in the deed of sale.
In addition, it is important that the deed of sale includes a resolutory clause under which the creditor may cause the sale to be rescinded ipso jure in the event of non-payment of a single instalment of arrears on its due date and fifteen days or one month after formal notice or an unsuccessful summons to pay. Resolution (= cancellation) of the sale is automatic in this case and does not depend on any court ruling.
Rescission results in the return of the property to the creditor, who does not have to repay the annuities already received.
Finally, the deed may provide that the creditor reserves a vendor's lien if the life annuity represents the sale price of the property. This lien is a real guarantee very similar to a mortgage.