Lifetime annuity and conditions for it

For older people who own only one apartment, this is one of the few ways to start receiving income from it and a stable increase in monthly pension payments from the state.

By the way, rent is very popular in large cities, and you can buy apartments this way in almost any city in Russia. The main thing is to find a person willing to transfer the apartment to you under a contract.

The official website of our company presents a catalog of Sochi apartments available for purchase in cash, using mortgage funds or maternity capital. The staff of AN Vincent Real Estate will be happy to advise you on all issues related to purchase and sale transactions!

Apartment rent agreement - what is it?

First of all, we suggest you understand the terminology. Rent is the transfer of ownership of real estate in exchange for an obligation to provide maintenance to the owner for a certain period.

There are three main types of rent:

1. Rental agreement for an apartment with lifelong maintenance;
2. Permanent annuity agreement;
3. Lifetime maintenance agreement with dependents.

On the territory of the Russian Federation, the first type is the most popular and widespread. In this case, the money is paid throughout the life of the annuity recipient - the owner of the apartment. After the death of the owner (recipient), the contract terminates and the property becomes the property of the person who paid the rent.

A permanent annuity agreement implies unlimited payments of funds. If the payer dies, the payment obligations are inherited.

As for dependent rent, the payer can either transfer assistance to the apartment owner in the form of cash payments, or satisfy his needs in another way. For example, regularly buy necessary medicines, products, and provide spa treatment.

Back to Contents

Transaction with an apartment under a rental agreement

There are several ways to purchase real estate: simple purchase, purchase using mortgage lending, purchase of real estate from a developer, participation in social programs. However, there is another way that many people who want to acquire their own home are not aware of. You can buy an apartment under a rental agreement.

lawyer Komissarov Andrey Fedorovich, founder of the Komissarov and Partners board, talks about the features of this real estate transaction, its risks, advantages and nuances of registration.

What is an annuity agreement?

UN is an agreement under which one party transfers ownership of property to the other. According to Part 2, Ch. 33, art. 83 of the Civil Code of the Russian Federation, for this the transferor receives a periodic payment from the new owner - rent. It can be a sum of money or certain services. A third party may also be the recipient of the annuity. The Civil Code of the Russian Federation is the main document regulating the relationship between the payer and the recipient of the rent.

As Andrey Komissarov said, the age of the annuitant is not limited by law. Elderly people, those with limited means, those left without the attention and care of relatives, and the disabled are more likely to sign this agreement. They transfer title to real estate in exchange for regular cash payments, services, or maintenance for the rest of their lives.

The amount of monthly cash payment is equal to the minimum wage (in accordance with annual indexation). You also need to pay utility bills.

Types of annuity agreement

There are three types of this agreement:

• permanent annuity agreement;
• life annuity agreement;
• lifelong maintenance agreement with dependents.

The most unfavorable type of transaction for the buyer in the real estate market is considered to be a permanent annuity agreement. After all, it implies payment not only to the rental creditor, but also to his heirs (after the death of the former owner). Therefore, buyers do not agree to a permanent rent; they are more interested in two other options, which lawyer Andrei Komissarov spoke about in more detail.

Lifetime annuity As part of the agreement, the annuity lender receives a monthly set amount of payments (exclusively cash). The payer makes payments throughout the life of the annuitant. Also, upon concluding an agreement, the lender must receive from 25% to 40% of the market value of his apartment.

An annuity with lifetime maintenance It differs in the type of annuity itself. Its role is, first of all, to support the creditor and his dependents. That is, the rent payer provides him with housing, food, clothing, care, and health care. Elderly people insist that the rent agreement must include the obligation to organize funeral services after their death. Dependency under the contract can be replaced by regular payments of money.

How does an annuity agreement differ from a purchase and sale agreement?

Firstly, notes Andrey Komissarov, the rent agreement must be certified by a notary. State registration is sufficient for purchase and sale.

The second difference is the nature of the consideration. At the time of conclusion of the transaction, it is unknown how much rent the lender will receive and how much the payer’s costs will be. It is possible that one of the parties to the agreement will receive a smaller amount of consideration than that provided to it by the other party.

Buyer's risks

Having experience in supporting real estate transactions of various types, Andrey Komissarov recommends paying special attention to the risks to which the buyer is exposed when drawing up a rental agreement. After all, this agreement belongs to the group of risky contracts.

Among the main risks, lawyer Komissarov identifies the following:

• indefinite waiting period for the opportunity to move into a new home - despite the fact that, according to the agreement, the renter receives ownership of the property, he cannot move into the apartment while its former owner is alive (it is not known how many years the lender will live - 5, 10 or 30 );
• the annuity recipient may terminate the contract if he considers that the payer did not fulfill his obligations in good faith; the other party to the agreement will need to prove the opposite in court - it is extremely difficult to do this without the services of a lawyer (especially in the case of an annuity with lifelong dependents);
• if in court the annuity recipient manages to prove that the payer violated the terms of the agreement, then the latter will not be able to return the funds already paid to the creditor (according to Article 605 of the Civil Code of the Russian Federation);
• the possibility of personal disagreements between the parties turning into legal conflicts;
• in the event of the death of a pensioner shortly after the conclusion of the contract, a shadow of suspicion may fall on the debtor;
• In the event of accidental loss of property or damage to it, the buyer is obliged to continue rent payments. How can a payer protect himself? Items that must be included in the content of the rental agreement Such a number of risks requires competent legal support for real estate transactions under the rental agreement. “To ensure maximum security for the paying party of this type of real estate transaction, the documents must contain a detailed description of the responsibilities of the rent payer,” says Andrei Komissarov.

These are points such as:

• procedure for paying utility bills;
• schedule for purchasing food and medicine;
• cooking mode;
• cases in which the annuitant is cared for at home;
• cases of medical care and hospitalization.

It would not be superfluous to determine the equivalent volume of content in rubles. To prevent the rentee from referring to any pre-existing oral agreements, a clause is included in the agreement that makes them invalid from the moment the signatures of the parties appear in the document. Consulting experts on real estate transactions recommend stipulating in the agreement the procedure and method for accounting for the services provided by the rent payer.

Lawyer Andrei Komissarov advises introducing into the contract the possibility of fulfillment of duties by third parties at the expense of the buyer of the property. This will help, in the event of a quarrel with a creditor, to continue to provide the services specified in the documents without aggravating the conflict.

It is also worth indicating the size of the redemption value of the property. If the rent recipient proves in court that the other party has violated the contract, then, in accordance with clause 2 of Article 605 of the Civil Code of the Russian Federation, he has the right to demand payment of the purchase price of the apartment to him. Indicating it in the agreement will help the payer avoid unnecessary expenses.

In conclusion, the lawyer recommends not to neglect the help of a specialist in accompanying the transaction - in this case, the buyer will get the apartment at a favorable price, and the risks of a difficult transaction will be minimized.

Advantages and disadvantages

Rent, as one of the ways to purchase real estate, has its advantages and disadvantages. Below we will analyze each aspect in detail.

Benefits for the owner:

• Living in your own apartment without moving or relocating;
• Receiving monthly subsidies or necessary care;
• The possibility of terminating the transaction through the court if the payer does not fulfill its obligations. In this case, he will not have to return the money he spent.

Benefits for the rent payer:

• Rent, in its essence, is somewhat reminiscent of interest-free installments. At the same time, you can buy an apartment on very favorable terms;
• Ownership rights pass to the payer immediately after the execution of the rent agreement.

Now about the disadvantages. For the apartment owner, the only disadvantage is that the person paying the rent may turn out to be unscrupulous - he will not pay money or bring food or medicine. In this case, of course, the contract can be terminated, but you will have to go to court.

The payer, in turn, cannot fully dispose of the apartment as long as the rent recipient lives there. Without his consent, the apartment cannot be sold, donated or rented out. In addition, after the transfer of title to the property, the payer is also responsible for paying utility bills and repairing the apartment in case of damage.

Back to Contents

Tax Consequences of a Lifetime Annuity Agreement

A life annuity agreement establishes the procedure for maintaining a needy person at the expense of his or her existing property. Payments are made regularly based on a clearly defined schedule. A life annuity terminates upon the death of the recipient. From the moment of death, all obligations for maintenance or other assistance to the owner are completed. Additional clauses specified in the contract related to the moment of death must be strictly fulfilled.

Personal income tax of 13% is assessed on the entire amount of maintenance ; it is recognized as the income of the individual recipient (clause 1 of Article 224 of the Tax Code of the Russian Federation). The responsibility of the rent payer is to pay for utilities, electricity, gas, etc. – this cost is not included in income. The procedure for payment of tax by the recipient is regulated by Art. 228 of the Tax Code of the Russian Federation, the recipient also has the right to use standard tax deductions.

Upon the death of the beneficiary, all encumbrances placed on the property are released, after which the payer becomes the full owner. In the event of the death of the payer, the law does not provide for termination of the contract, therefore, the heirs of the deceased, receiving his property, also receive responsibilities for maintaining the dependent (read about in which cases termination of the annuity contract is possible in a separate article). If the heirs refuse to accept the rights to the encumbered property, the inheritance becomes escheated and becomes the property of the state. Responsibilities for maintaining a dependent are transferred to the state § 1 Ch. 33 Civil Code.

After the transfer of ownership of real estate to the payer due to the death of the recipient, the tax for receiving the property by the payer is not paid, since this property, which became the property during the transfer, is not classified as income. The new owner of the property must pay land and property taxes.

Our website has many useful publications on various types of annuities. We also talk about whether it is possible to challenge a rental agreement and how to do it correctly.

What are the payer's responsibilities?

The payer’s obligations, first of all, depend on what kind of rent agreement was concluded between him and the owner. In a situation where a life annuity agreement is drawn up, the annuity debtor is responsible only for regular payments in the amount agreed in advance.

If a maintenance agreement is concluded with a dependent, then in addition to payments, the debtor must also provide the annuity holder with essential products, medicines, and also satisfy various household needs - cleaning, going for a walk, and providing medical care.

Experienced lawyers say that the second type is the most problematic. Most often, an annuity is concluded with a person of retirement age or older. It is sometimes very difficult to come to an agreement with them. In addition, they are characterized by suspicion and confidence that they are trying to deceive them and leave them without an apartment. Sometimes rent recipients themselves interfere with receiving assistance - they stop answering calls, do not open the door when payers bring food.

The Civil Code of the Russian Federation does not stipulate in any way the size and number of payments for rent. There is no connection between payments under the contract and the market value of the property. It also happens that the debtor has to significantly overpay.

The only aspect on which the amount of payments may depend is the cost of living in a particular region.

Back to Contents

Redemption and redemption price constant

Redemption of annuity is a situation in which the payer, instead of constant regular payments, must pay the recipient a one-time payment established in accordance with the agreement (Article 592, Article 593 of the Civil Code of the Russian Federation). If there is no clause in the contract on the amount of the redemption price, the redemption must be carried out at a price equal to the amount of annual payments for rent (clauses 2 and 3 of Article 594 of the Civil Code of the Russian Federation). If there is no clause on the amount of the redemption value of the property transferred free of charge, the price for the redemption is formed taking into account the price of the property and the annual rent payment (clause 2 of Article 594 of the Civil Code of the Russian Federation).

Possible risks

Buying an apartment under a lifetime annuity agreement also has its risks. For the owner of the apartment - the recipient of the rent, the most important risk is the dishonesty of the payer, who may not fulfill his contractual obligations. As we said above, the contract in this case can be challenged, but not everyone has the opportunity to go to court. This may be due to various situations, including incapacity.

There is always a risk of overpayment for the rent payer. In addition, the owner may suddenly have some distant relatives who will try to challenge the agreement and terminate it in order to enter into the inheritance themselves.

Back to Contents

Capitalized annuity

Under market conditions, land gradually acquired the form of a commodity. It becomes an object of economic turnover, which means that the owner of the land plot and its price can change at any time.

The value of land, like any product, is divided into consumer and market. At the same time, consumer value indicates the profitability of using land, and market value reflects the selling price of land on the open market. The market value itself is called capitalized rent. In other words, the amount of income from land converted into capital.

Factors Affecting Capitalized Annuities

1) Supply and demand.

Acting as a commodity, land is endowed with certain quantitative and qualitative characteristics that allow it to satisfy various requirements. Depending on the set of characteristics, a certain level of supply and demand is established for the land. It is these two key factors that determine the price of land (or capitalized rent). The better the demand for land, the higher its price will be and vice versa, the lower the demand for land, the lower the price. In each specific region, there is a different demand for land depending on various factors:

• Social;
• Climatic;
• Demographic;
• Natural;
• Economic, etc.

2) Cost of grown products.

An important feature of the earth is its limited nature. That is, the amount of land that is offered to be purchased on the market has clear boundaries, so capitalized rent is determined by the level of demand - the cost of products produced on the land. For example, if the cost of millet grown on land decreases significantly, then the demand for this land will decrease several times, and consequently, its capitalized rent will also decrease in order to establish market equilibrium. Thus, the price of land directly depends on the cost of the products grown on it.

3) Development cost

If the land plot is used for commercial construction, its capitalized rent is affected by the following characteristics:

• Plot size;
• Shape of the site;
• Possibility of using the adjacent territory;
• Contours and topography;
• Prestige of the location;
• Environmental indicators of the territory;
• Driveways;
• Level of development of social infrastructure, etc.

The better the characteristics of the land, the more expensive the building and therefore the capitalized rent will be.

Formula for calculating capitalized annuity

Before selling a plot of land to the owner, it is necessary to calculate the opportunity cost. That is, a sum of money equivalent to what the owner would receive from renting out the site. It is calculated as the income that the owner will receive from the sale of land deposited in the bank at interest. Thus, the capitalized annuity is equal to the discounted value of the implied annuity amount.

From renting land, the owner receives not only rent. Land rent combines rent, depreciation on agricultural assets and buildings located on the land, and interest on capital employed. The owner's investment in building facilities, infrastructure, or improving crop yields on the leased land means that depreciation and interest account for the majority of the lease. Therefore, owners invest practically nothing in the land, unlike tenants.

The owner of the land plot and the tenant pursue opposite goals: the tenants want to increase the period of validity of the lease agreement, and the owner, on the contrary, wants to shorten it. The tenant invests his funds in improving the characteristics of the land, expecting to recoup them during the lease. Western countries practice lease agreements for periods of up to 99 years. Over such a period of time, any structure is almost completely worn out.

Example of capitalized annuity calculation

The annuity amount increased from 1500 to 4500 dollars, and the interest rate during the same time decreased from 5 to 3%. How and by how many times did the capitalized land rent change?

1) First, let's calculate the amount of capitalized annuity before changes:

Kr1=1500*100%/5= 30 thousand dollars

2) Then calculate the amount of capitalized annuity after the changes:

Kr2=4500*100%/3=150 thousand dollars.

3) Now let’s calculate how many times the size of the capitalized annuity has changed:

∆=150/30=5

Conclusion: thus, the size of the capitalized annuity increased from 30 thousand dollars to 150 thousand dollars (increased 5 times).

Conclusion

Land is a special object of market relations. An ideal land market forms and maintains a specific attitude towards land, as a special object of purchase and sale, endowed with many different properties. However, the modern buyer of a plot of land seeks to buy it not because of the characteristics of the soil, but for the sake of obtaining rent - the annual income that the land creates.

Capitalized rent is the price of land, since for the owner, ownership of a land plot is tantamount to ownership of capital, which allows, as a percentage, to provide income corresponding to the rent. The amount of capitalized rent is influenced by a number of factors, such as current demand, the cost of grown products, constructed structures, etc.

How to conclude a rental agreement for an apartment and what should be included in it?

Many years of practice show that the annuity agreement must be drawn up together with an experienced lawyer who will control all the nuances and not lose sight of anything. The terms of the agreement must be correctly written and presented in a language accessible to the parties.

To conclude a contract, the following documents will be required:

• Passports of the parties and their copies;
• Title documents for the apartment;
• Extract from the house register;
• A copy of the FLS for the apartment;
• Application for transfer of property rights.

In addition, when concluding a rental agreement, the owner of the apartment must obtain a certificate from a psychoneurological dispensary declaring him capable and sane.
This is necessary in order to protect the payer from suddenly appearing relatives. Back to Contents

Be alert - collect receipts!

Many of the buyers of apartments under rental agreements who entered into them about ten years ago are still in limbo. While conscientiously fulfilling their duties, to this day they do not know what awaits them next, because their charges may have a variety of complaints.

For example, the agreement was concluded on the condition that the renter would carry out repairs in the apartment, that is, maintain the purchased housing in decent condition. For several years he paid rent, paid rent and, as necessary, repaired something (re-painted wallpaper, changed plumbing). What kind of repairs are supposed to be carried out, what should change in the apartment, for what amount, was not specified in the contract. But a few years later, the grandmother wanted the apartment to be completely renovated.

The repair was carried out by a team of craftsmen. At that time, the pensioner was resting in a sanatorium, where, again, the rent payer sent her. However, upon returning, the grandmother was dissatisfied with the results of the repair, after which she announced that she would sue to terminate the contract. Moreover, long ago my nephew began to visit his grandmother and was interested in further views on the available square meters...

The life support agreement with a dependent must stipulate the amount for which the annuity payer is obliged to buy food. One of the payers made purchases for five years and collected receipts. However, due to inflation, over time I began to buy cheaper products in order to meet the agreed amount. This did not suit the pensioner. The rent payer is not going to revise the amount allocated for the purchase of products specified in the contract. The question of terminating the contract again arose.

Lifetime rent of an apartment - what is it? How to draw up and conclude a life annuity agreement

So who and in what cases has the right to conclude this agreement? All apartment owners. The main thing is that it belongs to only one person. In addition, the property specified in the annuity should not pass to anyone by will. It is also impossible to conclude an agreement when an apartment is included in the lease or when it is arrested/confiscated.

In the end, when this agreement is also accompanied by direct content, some “buyers” will have a hard time. You will have to completely look after a complete stranger and provide for him in every sense. Although not everyone is lucky with relatives. Sometimes caring for a stranger can be much more enjoyable. Much depends on the homeowner. In any case, it's up to you to decide. Are you interested in lifetime rental of an apartment in Moscow or another city? Have you decided to take this step? Then you need to prepare for this moment.

We recommend reading: Details for Paying the State Duty for a Russian Passport for 45 Years

Lifetime annuity, lifelong rental agreement for an apartment 2020

The size of the lifetime annuity is determined in the apartment lifetime annuity agreement for 2020 in the form of a sum of money periodically paid to the annuity recipient during his life. The amount of life annuity determined in the contract per month must be no less than the minimum wage established by law. When the minimum wage increases, the size of the life annuity increases accordingly.

In accordance with Art. 596 of the Civil Code of the Russian Federation, lifelong annuity can be established by a lifelong apartment rental agreement for the life of the citizen transferring the property for payment of rent, or for the life of another citizen specified by him. It is possible to establish by agreement a lifelong rent of an apartment, payments in favor of several citizens, whose shares in the right to receive rent are, as a rule, considered equal. For example, spouses transferred residential premises belonging to them under the right of joint ownership under a rental agreement. Moreover, in the event of the death of one of the annuity recipients, his share in the right to receive annuity passes to the surviving recipients, and in the event of the death of the last annuity recipient, the annuity obligation is terminated.

Our mission is to create favorable conditions and improve the life of a modern pensioner.

The Moscow City Rental Center was founded with the support of the Moscow government in 2008. The main direction of our activity is improving the standard of living and level of social satisfaction of pensioners in Moscow and the surrounding Moscow region. Our team is professional lawyers who are ready at any time to provide timely advice, as well as real assistance regarding issues of termination and conclusion of annuity agreements.

Currently, an annuity agreement is becoming increasingly popular and is the most effective way to improve the quality of life of a pensioner. We offer you two types of agreement:

• Lifetime annuity agreement. This type of agreement preserves the pensioner’s right to live in an apartment and is suitable for pensioners who want to improve their financial situation through rental payments.
• The lifelong maintenance agreement with dependents also provides for the preservation of the right to reside in the apartment, monthly rent payments, and most importantly, guaranteed home care, including the provision of a nurse and the purchase of necessary medications.

By concluding an annuity agreement with us, you acquire reliable support, protection and support upon request.

Lawyers of the Moscow City Rent Center conduct FREE consultations for pensioners by phone, where they will answer in detail all your questions:

• About the life annuity agreement
• About the maintenance agreement with dependents
• How to renegotiate an annuity on more favorable terms
• Explain all the nuances of concluding contracts
• They will explain why the contract is drawn up by a notary
• And much more.

The company has a patronage service on staff. All caregivers have a medical education, many years of work experience and, if necessary, will provide the necessary assistance. The provision of services meets modern standards and is not inferior to the standards of European countries.

Depending on the requirements of the wards, care is divided into several types:

• A nurse for a few hours - as a rule, visits those wards who do not need round-the-clock care.
• Live-in nurse – is in the house around the clock and provides constant care for the ward.
• Night nurse – stays with the patient at night, and if his condition worsens, he can provide emergency assistance.
• Inpatient nurse – provides care for a patient who is undergoing inpatient treatment in a hospital department.

Send a request for a FREE consultation and we will call you back:

Sample contract

12. In accordance with Article 558 of the Civil Code of the Russian Federation, this Agreement is considered concluded from the moment of its registration in the Office of the Federal Service for State Registration, Cadastre and Cartography in Moscow (Rosreestr). After the state registration of this Agreement and the transfer of ownership rights, the rent payer becomes the owner of the specified apartment and assumes responsibilities for paying real estate tax, expenses for the operation and repair of the apartment, house and local area in proportion to the occupied living space. The rent recipient, in order to secure the obligations of the rent payer, acquires the right of mortgage on the above-mentioned apartment.

18. Contents of Article 288 “Ownership of a residential property”, Article 433 “Moment of conclusion of the contract”, § 1 “General provisions on rent and lifelong maintenance” and § 3 “Lifetime annuity” of Chapter 33 of the Civil Code of the Russian Federation and Article 35 “ Possession, use and disposal of the common property of spouses” of the Family Code of the Russian Federation was explained to the parties by the notary.

26 Jan 2020 etolaw 301

Share this post

Related Posts
• An Apartment Converted to Non-Residential Premises Will Be Much More Expensive
• How to Obtain Low-Income Family Status in Perm in 2020
• Find out the heating debt on your personal account in Omsk
• Is it possible to top up a Single Personalized Discount Ticket Online?