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Sunday, April 3, 2016

En Viager

 

Andre-Francois Raffray thought he had a great deal: he would pay 90-year-old Jeanne Calment 2,500 francs (about $500) a month until she died, then move into her grand apartment in a town Vincent van Gogh once roamed.

That was in 1965. Come Christmas 1995, Mr. Raffray died at age 77, having laid out the equivalent of more than $184,000 for an apartment he never got to live in, because on that same day, Jeanne Calment, then 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.

She didn't worry about losing income. Although the amount Mr. Raffray already paid was more than twice the apartment's current market value, his widow would be obligated to keep sending that monthly cheque. If Mrs. Calment outlived her, too, then the Raffray children and grandchildren would have to pay.

Buying apartments "en viager", or "for life," is common in France - for more information, click here. The elderly owner gets to enjoy a monthly income from the buyer, who gambles on getting a real estate bargain -- provided the owner dies in due time. Upon the owner's death, the buyer inherits the apartment, regardless of how much was paid.

I remember having read about M. Raffray's dumb deal in late 1997 when Jeanne Calment finally died, aged 122. I was reminded of it when I watched the movie My Old Lady which is about a viager deal which, thankfully, did not drag on for thirty-two years.

Perhaps other Western countries, saddled with a cash-strapped ageing population living in million-dollar mansions, could adopt the French system instead of leaving it to big banks to offer so-called reverse mortgages which are heavily loaded in favour of the banks (euphemism for 'rip-off').