Types of annuity contracts – essential conditions, obligations of the parties, the procedure for concluding and terminating

The content of the article

• What is rent?
• Types of annuity contract
• Permanent annuity agreement
• Life annuity contract for an apartment
• Dependent of life maintenance contract
• Parties to the rental agreement
• How to draw up an annuity contract
• Rules for registration
• Sample contract
• How to get a rent for life
• Essential terms of the annuity contract
• The amount of rental payments
• Contract term
• Ways to ensure the rights of the recipient of rent
• Pros and cons of rental agreement
• Taxation
• How to terminate a rent

Well-known options are used to acquire property: purchase and sale, gift, inheritance. There is a less common way to conclude a transaction for the re-registration of property – to sign an annuity contract, under the terms of which you can pay the acquisition cost in installments for a long period. Such an agreement has many nuances, and it is necessary to understand them in detail..

What is rent?

In the translation, the word rent has many meanings, it expresses the economic meaning of the word – to return and give. The conclusion of a rental agreement involves the participation and obligations of two parties:

1. One party, which becomes an annuity recipient after signing the agreement, is obliged to transfer the property into ownership of another person.
2. The second party is called the payer, it receives property and is obliged to pay a certain period of rent or to maintain the former owner as compensation for the value of the property.

Such agreements are regulated by the Civil Code of the Russian Federation. An annuity contract has its own characteristics:

1. A change of ownership of the property takes place, but the payer does not have the right to dispose of the property, because an encumbrance is imposed on it – a pledge is drawn up.
2. Settlement for acquired property is by installments. For these two features, the transaction resembles mortgage lending. The difference is that even low-income citizens who do not fit the requirements of banks can register their property and new owners do not need to pay interest.
3. The lessee continues to live in the premises, which became the property of the other party.

The subject of the transaction is considered to be individually defined property, it may include:

• real estate;
• movable;
• money;
• securities.

Mostly, the annuity contract is drawn up for the purchase of housing. Sometimes such a transfer of ownership is the only option:

• obtaining residential real estate for persons with low income;
• improve financial condition for single elderly people.

Types of annuity contract

The method of obtaining compensation for the acquired property is provided for by the terms of the document. There are forms of rent:

• in the form of a monetary amount;
• in the form of the provision of services;
• combined – depositing money and providing services.

The classification of rental agreements is based on signs of differences in the duration of the concluded transactions and methods of compensating for the value of the property. The following types are distinguished:

• permanent annuity;
• life annuity;
• dependent maintenance.

Permanent annuity agreement

This type has no restrictions on the period of rental payments and is unlimited in nature. The terms of the agreement may provide for the assignment of the rights of the renter to a third party. The agreement can be terminated upon the proposal of one of the parties and by mutual consent and the rental payments shall be replaced with a buyout. Settlements for such a transaction may be made in cash, combined form or by the method of providing services.

Life annuity contract for an apartment

The conditions of this method of changing the owner of the apartment include:

1. Exclusively cash settlement.
2. Payments are made under the terms of the agreement on a monthly basis or at the end of the quarter.
3. The term of the contract is limited to the recipient’s life, after his death, rental payments are terminated.

Dependent of life maintenance contract

Such an annuity agreement is similar to the previous type – the end of the rental payment period is considered the day of death of the renter. There are features of the relations of the parties in this case – compensation for the value of real estate occurs by providing the lender with services that provide full maintenance and care for him. This is for example:

• nutrition;
• buying clothes;
• treatment;
• apartment repair.

Parties to the rental agreement

Two parties take part in such a deal:

1. Recipient of rent. By agreement, he is a rental lender, his purpose is to generate income. A recipient of any form of payment for property may be an individual or non-profit organization.
2. Rent payer or rental debtor. Its purpose is to purchase property in installments of payment for a long period. Under the law, individuals and legal entities can act as payers.

How to draw up an annuity contract

A properly drawn up annuity contract is a guarantee of securing the property rights of both parties. Parties must provide all the nuances:

1. In order to exclude the possibility of declaring the transaction invalid, the debtor must take care of the receipt by the creditor of a medical opinion on his legal capacity.
2. You can avoid misunderstandings between the parties in the future if you immediately determine the timing of payment.
3. In the case of concluding an agreement on life-long dependent maintenance, it is necessary to draw up a detailed list of all services proposed as compensation for real estate.

Rules for registration

To conclude a transaction, the parties need to perform the following actions:

1. The owner of the property must collect documents for the apartment: on the right of ownership, certificates of registration of residents in it. Still need to get a certificate of cadastral value of the object.
2. Only a written agreement is considered legal. With an example sample of a document, you need to contact a lawyer: he can advise you to register the missing details. After drawing up the final version of the agreement, you need to get a notary certificate.
3. A rental transaction involves the alienation of property, therefore state registration is mandatory for it, otherwise the agreement will be invalidated.

Sample contract

A rental agreement is not a document approved by law. It is compiled in an arbitrary form and contains:

• passport data of the rentee and renter;
• data on the subject of the agreement – property and its value;
• transaction duration and method of payment for property;
• the right to buy from the debtor or transfer the right of the creditor or debtor to the heir may be provided.

How to get a rent for life

A feature of this type of transaction is that after its conclusion, the renter continues to live in his former property. An apartment under an annuity contract becomes the property of the renter, but he does not have the right to live in it and dispose of the property without the consent of the previous owner. The decorated rent of an apartment with a life-long residence means that the renter acquires the right to dispose of the apartment after:

• renter’s death;
• redemption, if provided for by the terms of the agreement or the debtor notified the creditor of his desire three months before the termination of payments.

Essential terms of the annuity contract

Mandatory conditions, without which it is impossible to draw up a document, and it will be declared illegal, are:

• parties to the transaction – rentee and renter;
• subject of agreement – movable or immovable property and its characteristics;
• determination of the type of contract and form of payment;
• debtor’s obligations to pay compensation for the property of the creditor.

The amount of rental payments

Before concluding a transaction, the parties must determine the amount of compensation for the acquired property. The legislation provides for regulation of the size of payments and their mandatory indexation. Please note that:

• the amount of rental payments per month should not be less than the minimum wage for life annuity;
• the lower limit of the cost of services per month in monetary terms is limited by the size of two minimum wages for life-dependent maintenance.

Contract term

The concluded transaction involves the long-term nature of the rental contract. The relationship between the renter and the renter, according to the law, can be terminated only after the death of the former owner in the case of life annuity or lifelong maintenance. With constant rental payments are perpetual.

Ways to ensure the rights of the recipient of rent

To fulfill the obligation of the debtor to the creditor, the legislation provides for ways to influence the new owner of the property. When concluding a real estate transaction, a mortgage agreement is drawn up and an encumbrance is imposed on the property. In the case of movable property, it is envisaged that the debtor pays a deposit or draws up a guarantee, insurance of re-registered property. Failure to fulfill the stipulated obligations by the renter may become the basis for the termination of the contract and the loss of ownership of the property.

Pros and cons of rental agreement

The agreement is characterized by aleatorism (riskiness) – its conditions contain risks for both parties:

1. The creditor and the debtor may not receive compensation for their property costs due to the uncertainty of the term. It happens that the lender dies quickly, and the debtor receives an apartment for minimal payments. It happens the other way around – the renter outlives the renter and even his heir.
2. Damage or loss of property does not exempt the debtor from further payments, it can only require termination of the transaction.
3. The payer cannot live in the acquired apartment or alienate it.
4. There is a risk of fraud on both sides. Sometimes retirees seek to conclude a deal to generate income, and then they look for a reason to terminate it. It happens that the renter in bad faith cares for an elderly person and wants to bring his death closer.

Taxation

When making a rental transaction, the rules of the law that apply to the sale and donation are used. The case when a new owner acquires property in exchange for a fee is equated to a sale. The payer receives the right to a property tax deduction, the amount of which is equal to the amount of acquisition costs.

For the renter, the amount received for the renewed property and in the form of subsequent periodic rental payments is considered income and is taxable. For tax purposes, the total amount of income is reduced by tax and property deduction and multiplied by 13%. The property deduction (1,000,000 rubles) can be replaced by the sum of the costs of acquiring the property, if there are confirmations (checks, receipts).

Upon receipt of real estate for rental payments, the provisions of the law on the gift contract apply for free. The taxpayer will be able to avoid taxation if the creditor is a close relative. In all other cases, re-registered real estate is considered income received in kind and is taxed at 13%.

How to terminate a rent

At the notary only voluntary termination of the transaction is possible with the mutual consent of the creditor and the debtor. In other cases, termination of the agreement is possible only through a court. The reason for the cancellation of the transaction in court may be the recognition of the legally incapable recipient or, if it is established that the renter has failed to fulfill his obligations. To eliminate the risk of claims from the renter or his relatives to the debtor, he must protect:

• a medical report on the capacity of the creditor at the time of the transaction;
• checks, receipts confirming the renter’s expenses on the renter’s maintenance.