The French installment sale explained in 5 minutes
A cousin of the French viager and a real alternative to bank financing, the vente à terme remains little known. Here are the essentials in five minutes.
1. A standard sale, paid in two stages
The French installment sale is fundamentally a standard property sale under civil law. What sets it apart is its payment structure: the price is paid in two stages. First, an initial capital payment at signing — the bouquet. Then, monthly instalments over a fixed term.
The bouquet typically represents 20% to 40% of the total. Instalments usually run over 10, 15 or 20 years (120, 180 or 240 payments). Bouquet + instalments = sale price exactly. No interest is applied.
2. Not a loan, not a viager: a direct deferred payment
- Not a bank loan: no bank involved. Payment goes directly from buyer to seller, no intermediary, no interest.
- Not a viager: instalments run over a known, fixed duration. They stop on a precise date — not on the seller's death. If the seller dies before the term, remaining instalments are paid to the heirs.
3. Free or occupied installment sale: two configurations
As for viager, two configurations exist. Free: seller leaves at signing; buyer takes possession immediately; price reflects full market value. Occupied: seller keeps a right of use during all or part of the duration; the value of this right is deducted from the price.
4. Three legal guarantees that protect the seller
- Vendor's privilege registered at the property publicity office: in case of forced resale, the seller has priority on proceeds.
- Resolutive clause: in case of payment default, the sale is dissolved by right. The seller recovers ownership and keeps sums already received.
- Indexation of instalments (typically on the French IRL index) to preserve purchasing power.
5. Taxation differs from the viager
Important point: installment sale payments are treated as a deferred payment of the sale price, not as a life annuity. The 70% allowance reserved for life annuities (article 158-6 of the French Tax Code) does not apply. On the seller's side, standard capital gains rules apply: full exemption on principal residence, allowances for length of holding on other properties.
References: French Civil Code articles 1583 and following; French Tax Code articles 150 U and 158-6. Information for guidance, please validate with your French notary.