When selling a house on an annuity basis, owners receive a regular annuity instead of a purchase price - often for life. With a right of residence (Section 1093 BGB) or usufruct (Sections 1030 et seq. BGB), the owner can continue to live in the house; without a right of residence, the pension is usually higher. The ongoing payments are generally taxed according to the income share (§ 22 EStG).
What does selling a house on an annuity basis mean?
When selling a house on an annuity basis - also known as annuitization of real estate or life annuity - the property is not sold for a one-off payment, but for recurring annuities. The following are common:
- Life annuity: Lifelong payment until the death of the person entitled to the annuity, often combined with house sale with right of residence.
- Time annuity: Limited payment over an agreed term (e.g. 10-20 years).
- Combination: One-off payment plus ongoing annuity for liquidity in old age.
To give buyers and sellers planning security, rights (right of residence/ usufruct), securities and adjustment clauses are notarized and secured in the land register.
House sale on a pension basis with right of residence
Selling a house on an annuity basis with a right of residence protects lifelong living in a familiar home. The right of abode is entered in the land register with first priority and reduces the immediately usable value from the buyer's perspective - the annuity is correspondingly lower. Advantages:
- Secure living in old age without ownership obligations
- Legally clearly defined use (§ 1093 BGB)
- Calculable pension as a monthly supplementary pension
House sale on an annuity basis without right of residence
Selling a house on an annuity basis without a right of residence allows the buyer to use the property for their own purposes or rent it out at an earlier date. As no right of use reduces the market value, the pension amount is generally higher. This is suitable for owners who want to move anyway or move into a care facility.
Right of residence vs. usufruct - differences, taxes, value
| Criterion | Right of residence (§ 1093 BGB) | Usufruct (§§ 1030 ff. BGB) |
|---|---|---|
| Use | Own residence; no letting without agreement | Living and renting with profit possible |
| Reduction in value | Moderate | Greater (greater interference with buyer's use) |
| Obligations | Ancillary costs, minor repairs depending on contract | Maintenance/management obligations possible |
| Taxes (letting) | No letting without additional agreement | Rental income may be taxable for the usufructuary |
Both rights are secured in the land register. The decisive factor for the amount of the annuity is the extent to which the usability of the property is restricted for the buyer.
Buying on an annuity basis - how it works
To purchase on an annuity basis, the market value is first determined. The present value factors for residential rights/usufruct and the expected duration of the annuity are deducted from this. The result determines the one-off payment and/or monthly annuity. Contract elements:
- Annuity start, amount, duration (lifelong/temporary annuity)
- Value protection (indexation)
- Ranking in the land register (first priority for rights/collateral)
- Security: land charge, reversion clauses, guarantee period
Purchase on an annuity basis within the family
von Poll Immobilien GmbH is a company steeped in tradition and, with over 400 stores and more than 1,500 colleagues, is one of the largest real estate companies in Europe. The head office of our company is located in Frankfurt am Main. Our clients are owners and prospective buyers of properties of stable value in prime residential and commercial locations.
