Article 590. Form and amount of permanent annuity

Conditions of permanent annuity. Photo: astrakhan.sm-news.ru

Editorial

Promdevelop editorial team

Definition of permanent annuity, legal subtleties of drawing up an agreement and fulfilling its terms, explanations from lawyers on the peculiarities of the agreement.

Permanent annuity briefly

From an economic point of view, rent is income that the owner of any property receives on an ongoing basis, giving the right to use it. In jurisprudence, this concept is associated with the drawing up of a civil agreement, according to which some persons regularly receive assistance (material, social, household, medical) from others in exchange for the use of their property.

There are lifelong and permanent types of annuity , the characteristics of the contracts differ at the legislative level. The term of a lifetime agreement ends with the death of the homeowner. The peculiarity of a permanent annuity is that it does not have a specific validity period.

Subject of permanent annuity

Payments and the subject of a permanent annuity agreement are its essential terms. The payer, if desired, can be any capable and solvent citizen. A non-profit organization can also play this role.

Recipients can transfer their right to the annuity. If the subject of a permanent annuity contract is movable property, the essential condition is the one under which the payer is obliged to insure all the risks of violation of his accepted obligations or the way in which he will ensure the fulfillment of his obligations.

By law, permanent annuity must be paid by the payer in the form of fixed payments, established by mutual agreement of the parties. The amount of the rent payment should not be lower than the regional minimum established where the property and its owner are located. In the absence of such, the all-Russian average subsistence level is taken as a basis. The subject of the agreement can be any property.

It is worth understanding what consequences will occur after the death of a citizen receiving a permanent annuity. If this happens, the right to receive payments automatically goes to the heirs or non-profit organizations if a reorganization of legal entities has occurred.

The parties also agree on the timing of permanent annuity payments. This is usually the end of the month or quarter. This point must be written as precisely as possible. The amount is indexed monthly. But help does not always come in monetary form.

The homeowner may need medical care and household assistance. The form and amount of the permanent annuity is reflected in the agreement.

Commentary on Article 590 of the Civil Code of the Russian Federation

1. According to the general rule established by Article 590, permanent annuity must be paid in cash. Its size is established by the contract. However, the contract may establish other forms of rent payment. This is the provision of things, performance of work, provision of services. The only condition that must be met is: the cost of things, work, services must correspond to the amount of money specified in the contract.

2. Constant rent should be indexed in proportion to the increase in the minimum wage. However, the contract may provide for a different procedure for changing the amount of rent depending on the economic situation.

Redemption of permanent annuity

The payer is obliged to make annuity payments indefinitely. But according to Article 592 of the Civil Code of the Russian Federation, redemption is possible, which means termination of the permanent annuity contract.

The Civil Code of the Russian Federation does not provide grounds on which this right can be exercised, so everything depends on the will of the payer.

The subject of the redemption of a permanent annuity contract is the right not to pay it anymore. But certain conditions must be met:

• the payer is obliged to declare in writing his desire to stop payments 3 months in advance;
• all obligatory payments have been paid in full;
• the contract must not contain a clause that stipulates the obligation not to exercise the right of redemption;
• the agreement should not contain information according to which it is prohibited to redeem it during the life of the recipient of a permanent annuity or at any other time.

But, despite these restrictions, at the legislative level there is a possibility when the recipient of a permanent annuity has the right to demand its redemption from the payer.

Such cases are:

• there is a loss by the payer of the ability to pay the established amount;
• payment is overdue for more than 12 months;
• failure by the payer to fulfill other obligations for which permanent annuity is paid;
• division of transferred real estate between a circle of persons or its entry into common ownership.

When exercising the right to buy out a permanent annuity, the price is determined in accordance with the contract. If there is no such clause, then it is calculated based on the sum of all the last annuity payments for 12 months.

Under what conditions can a contract be terminated?

Despite its indefinite nature, in some cases the agreement may be terminated . There are the following ways to terminate it.

Breach of obligations

Termination of the contract is possible under the following circumstances:

• late payments for more than 1 year;
• insolvency (bankruptcy) of the rent payer;
• change in ownership of real estate (for example, dividing it between several heirs);
• other violations specified in the contract.

Consentative termination

The possibility of terminating the contract by agreement of the parties must be stipulated in it. The conditions for termination are indicated - return of property (with or without taking into account depreciation and previously made payments), compensation to the recipient for lost income, etc. The possibility of changing or terminating payment in the event of unforeseen losses of property is specifically discussed.

Debt forgiveness

The recipient has the right to refuse the annuity at any time, i.e. release the payer from his obligations. This option is provided for in Art. 415 of the Civil Code of the Russian Federation. The refusal must be in writing and notarized.

Change recipient

The agreement is terminated when the right to claim the rent is transferred to a person who cannot be its recipient in accordance with the Laws of the Russian Federation.

Right of redemption

It can be produced in the following order:

1. At the initiative of the annuity recipient. He has the right to demand redemption of the property if the payer violates the obligations arising from the contract. In this case, the repurchase can be carried out voluntarily or by decision of the Arbitration Court.
2. At the initiative of the payer (Article 592 of the Civil Code of the Russian Federation). The general rules provide for this possibility. If the price is fixed by agreement, then the payer notifies the recipient in writing about the redemption 3 months before its implementation, and pays the full cost. If the price is not agreed upon, then the ransom amount is determined as the sum of the appraised value of the property and the annual rent. A prohibition on redemption may be specified in the contract, but it applies for a period of no more than 30 years.

Termination of a permanent annuity agreement by agreement of the parties or by court decision must be formalized in writing by a notary, where a copy of the Agreement is kept. The corresponding notice must be sent to Rosreestr.

Permanent and lifetime annuity

Many people confuse permanent and life annuities. But there are certain differences between them, fixed at the legislative level. They are reflected in the following table.

Permanent annuity agreement - explanation of an expert lawyer

Speaker – Alexander Doronin, Director of the law firm ROSLEX. Specialization: legal support for the activities of medium and small businesses; consulting on civil and tax matters.

Alexander Doronin, Director of the law firm ROSLEX

Concept and content of a permanent annuity agreement

To begin with, it is worth clarifying that there is an annuity agreement. A permanent annuity contract is an agreement between the parties, where one party (the annuity recipient) transfers ownership of property to the other party (the annuity payer). Accordingly, from this definition we already understand that the parties to this agreement are the recipient (rent creditor) and the payer (rent debtor).

Parties to a permanent annuity agreement

An annuity lender is essentially a person who transfers the ownership of his property to another person to obtain material benefit or income for an indefinite period of time. Rental creditors under a permanent annuity agreement can also be NPOs (non-profit organizations) or individuals.

A rent debtor is a person who accepts the obligation assigned to him to pay the rent creditor income or, more simply, rent for an indefinite period of time in exchange for receiving property in his ownership. Rent payers can be both individuals and legal entities.

Also, from the definition it is immediately clear what is the subject of these civil legal relations, namely only individually defined property, which is under the right of ownership. Criteria such as “individually determined” and “owned” are very important in determining the subject of a rental agreement. It follows from the first criterion that the property of this agreement can only be movable or immovable things, cash or documentary securities, and cannot be property rights (non-cash cash) or other rights of claim, uncertificated securities, as well as works , services or information.

Termination of a permanent annuity agreement

Termination of a permanent annuity contract may occur by agreement of the parties. In some cases, the recipient refuses to receive annuity payments or, more simply, forgives the debt. Also, according to the law, there are special cases of termination of a permanent annuity agreement on two grounds:

1. Transfer of the right to claim permanent annuity to a person who, by virtue of law, cannot act as a recipient.
2. Redemption of rent.

Let's look at the second point in more detail. According to Article 592 of the Civil Code of the Russian Federation, “the payer of a permanent annuity has the right to refuse further payment of annuity by purchasing it,” but only on the condition that this refusal was declared by the payer in writing no later than three months before the termination of annuity payment or for a longer period stipulated by the contract.

But the contract may provide that the right to repurchase a permanent annuity cannot be exercised during the life of the annuity recipient or for another period not exceeding 30 years from the date of conclusion of the contract.

The recipient of the annuity has the same rights. He has the right to demand redemption of the rent from the payer in the cases provided for in Article 593 of the Civil Code of the Russian Federation. For example, when the rent payer was overdue for payment by more than one year (unless otherwise provided by the contract), the payer violated its obligations to ensure payment, the payer was declared insolvent, or when the subject of the contract was real estate (for example, ground rent), which was received in common property.

Risks

As for risks, everything is much simpler here than, for example, with a life annuity agreement. Thus, the risk of accidental loss or accidental damage to property transferred free of charge for payment of permanent annuity is borne by the payer. This means that even though in the event of accidental destruction or accidental damage to property, the payer continues to fulfill his payment obligations, he can terminate them only in the event of redemption.

If the destruction or damage to the property was transferred for payment, then in this case the law takes the side of the payer and he can demand termination of obligations to pay permanent annuity or at least changes in the terms of its payment.”

How is rent paid?

This type of rent is paid exclusively in the form of cash, and it is transferred to the owner of the property for the rest of his life.

Typically, the contract specifies monthly payments, but they can be quarterly, and often even paid only once a year.

The amount of payment must certainly be specified in the agreement, and this condition is essential. If the alienation is free, then payments should not be less than the subsistence level, and this indicator is taken into account in the specific region of the country where the parties to the agreement live and work.

Therefore, in accordance with changes in the cost of living, the size of payments is adjusted.

If the property is accidentally or purposefully significantly changed, damaged or destroyed, then this does not become a reason for stopping payments, as indicated in Art. 600 GK.

Article 600. Risk of accidental destruction of property transferred for payment of life annuity

Accidental destruction or accidental damage to property transferred for the payment of a life annuity does not relieve the annuity payer from the obligation to pay it on the terms provided for in the life annuity agreement.

If delays are detected, then the payer must pay interest, and they can be assigned according to the agreement, which is prescribed in Art. 588 of the Civil Code, and also if this information is missing in the agreement, then the methods for calculating interest under Art. 395 Civil Code.

What is permanent annuity?

Article 588. Liability for late payment of rent

For late payment of rent, the rent payer shall pay the rent recipient the interest provided for in Article 395 of this Code, unless a different amount of interest is established by the rent agreement.

Article 395. Liability for failure to fulfill a monetary obligation
1. In cases of unlawful withholding of funds, evasion of their return, or other delay in their payment, interest on the amount of the debt is subject to payment. The amount of interest is determined by the key rate of the Bank of Russia in force during the relevant periods. These rules apply unless a different interest rate is established by law or agreement.2. If the losses caused to the creditor by the unlawful use of his funds exceed the amount of interest due to him on the basis of paragraph 1 of this article, he has the right to demand compensation from the debtor for losses in the amount exceeding this amount. 3. Interest for the use of someone else's funds is charged on the day the amount of these funds is paid to the creditor, unless a shorter period is established for the accrual of interest by law, other legal acts or agreement.4. In the event that the agreement of the parties provides for a penalty for non-fulfillment or improper fulfillment of a monetary obligation, the interest provided for in this article is not subject to collection, unless otherwise provided by law or agreement.5. The accrual of interest on interest (compound interest) is not permitted unless otherwise provided by law. For obligations fulfilled when the parties carry out business activities, the use of compound interest is not allowed, unless otherwise provided by law or agreement. 6. If the amount of interest to be paid is clearly disproportionate to the consequences of violation of the obligation, the court, at the request of the debtor, has the right to reduce the interest provided for in the contract, but not less than to the amount determined based on the rate specified in paragraph 1 of this article

What is the redemption price?

This indicator may be equal to a specific amount of funds or may depend on the value of the valuables, as well as on the size of payments or other factors.

Often it is determined by two parties and is indicated in the document itself.

If there is no information in the agreement about the redemption price, then it is usually equal to annual payments or the same indicator, to which the cost of the property transferred free of charge is additionally added.

Features of drawing up a contract

The document is certified by a notary. If the subject of a permanent annuity agreement is real estate, it must be registered with the appropriate authorities.

IMPORTANT! If the contract is not notarized, it is considered invalid.

The agreement specifies the rights of the recipient and payer of the permanent annuity, as well as their obligations. The recipient undertakes to transfer his property in favor of the payer and may demand regular payments; the payer, in turn, is obliged to regularly pay rent and has the right to demand the transfer of property.

The permanent annuity agreement specifies the amount of payments. Also, if necessary, the provision of various services and things is agreed upon. The payment period is set by the parties at their mutual request.

When drawing up the form of a permanent annuity agreement, possible risks are also taken into account. The payer should remember that all losses incurred due to damage to property are borne by him. For the recipient, the main risk is the payer's loss of solvency or late payments.

What it is?

Rent of any type is income received from capital or property provided for someone's permanent use. Essentially, this is a sum of money received within an agreed time frame without the cost of entrepreneurial effort. Rent becomes a consequence of a transaction between its recipient and the payer , formalized by an agreement.

Permanent rent implies income that is received constantly, without time limits, due to the transfer of property into the possession of the rent payer. The procedure and structure of the transaction are limited by the Permanent Rent Agreement, and its subject may be movable or immovable property.

Features of a permanent annuity - expert commentary

Speaker - Alexey Golovchenko, Managing Partner of the ENSO Law Company, President of the Institute for Development and Adaptation of Legislation, Head of the Committee for Assessing the Regulatory Impact of the All-Russian Public Organization "Business Russia".

Alexey Golovchenko, Managing Partner of ENSO Law Firm

So what is an annuity contract? When concluding an annuity agreement, the parties agree that the recipient will transfer property to the payer. For this, the payer will have to pay the recipient regular allowance or provide maintenance in another form. According to paragraph 2 of Art. 583 of the Civil Code of the Russian Federation, annuity can be permanent, that is, unlimited, and is concluded for the period of life of the annuity recipient, that is, for life.

According to current legislation, recipients of permanent annuity can be individuals and non-profit organizations created for an indefinite period.

If the life of a non-profit organization is limited by a temporary or other framework (say, by preparation for an event), then they cannot be recipients of such rent.

Commercial organizations and enterprises also cannot, because receiving rent implies living on regularly received funds not related to business activities. As for commercial enterprises, they exist by generating income from their activities.

Form, size and timing of payment of permanent annuity

The next distinguishing feature of a permanent annuity from a life annuity is its transfer by inheritance or assignment of rights. A life annuity contract is concluded for a period related to the immediate life cycle of the recipient. As for a permanent annuity, after the death of the recipient it will pass to the heirs. If the recipient of a permanent annuity is an organization, and they subsequently underwent reorganization, then the legal successor becomes the recipient. All restrictions on annuity should not contain its main feature - perpetuity .

If the payment of annuity ceases after the reorganization of the recipient enterprise, it automatically becomes lifelong. However, an enterprise can transfer the receipt of rent to another person, which does not terminate its existence.

As for an individual, it is possible to impose a ban on transferring the right to receive rent to third parties, but not by inheritance. When drawing up a contract for permanent annuity, restrictions cannot apply to everything, so that its cycle does not stop.

Payment of permanent annuity

Now about the amount of payments. The world does not stand still, everything changes, inflation is growing. All this is very risky. According to paragraph 2 of Art. 590 of the Civil Code of the Russian Federation, the legislator establishes the minimum amount of permanent rent: the cost of living per capita at the location of the property and changes in accordance with changes in this value.

Receiving payments

The next point is the procedure for receiving payments. Mostly they are provided in cash or its equivalent in the form of performing services or providing property. Unless otherwise provided by the contract, then, according to the civil code, permanent rent is paid at the end of each calendar quarter. That is 4 times a year.

Suppose that a rental house burns down. What should the rent payer do then? This risk lies entirely with him. After all, the property was transferred to him free of charge. And the annuity recipient, in general, should not care what happened to the property and whose fault it was damaged. If the property is transferred for payment under the payment of a constant annuity, then in this case the payer can initiate a change in the terms of payment or completely stop fulfilling obligations. I would like to advise the parties to insure this clause of the contract.

Termination of a permanent annuity contract is possible. However, it should be remembered that the death of the annuitant or the termination of his existence are not grounds for terminating the obligation to pay the annuity. One of the grounds for terminating the annuity may be its redemption. The redemption of the annuity may be limited to the life cycle of the annuitant and no later than 30 years from the date of conclusion of the contract. However, contracts with time restrictions are contracts with risks.

Right to buy out permanent annuity

Redemption of property included in the rent means payment by the rent payer of the value of the property, which is included in the agreement itself. If such a condition is absent in the permanent annuity agreement, then the price is determined based on the total payments for the year. The payer must notify the recipient of his desire to buy out the annuity at least 3 months before the termination of payment. The annuity recipient has the right to insist that the payer buy it back. This requirement may occur in the following cases:

• if the payer has violated the payment terms for more than a year;
• if the terms of payment were violated;
• the rent payer is declared insolvent;
• property given for rent is transferred into common ownership;
• other cases.”

Who benefits from the agreement?

Most of all, elderly people who are homeowners, but in need of material and social assistance, are interested in the permanent rent of the Civil Code (Civil Code). Moreover, the agreement is often concluded not only by lonely old people who do not have heirs, but also by those who have them.

Some heirs forget about their elderly relatives, do not visit them, do not take care of them, but after their death they quickly claim their rights to the property. Therefore, old people whose relationships with their children and grandchildren have not worked out, following the example of their friends, enter into a permanent rent agreement and prefer to receive constant help from other people, and for this in the future the right to their living space will be transferred to the payers.