A Hefty Premium

February 17, 2016 5:18 pm Published by

In the market for some high end real estate? In January, Hugh Hefner listed his home – better known as the Playboy Mansion- for the tidy sum of two hundred million dollars.(The impact, is better felt when expressed numerically as $200,000,000.00).As a luxury home in Guelph sells for considerably fewer zeros, I cannot claim to have any insight into what a $200,000,000.00 home might offer in the way of amenities.I can however, venture a good guess that a significant portion of the asking price is owed to the reputation and fame of both the home and it’s current owner. The next highest priced home in the immediate Beverly Hills neighbourhood is a mere $60,000,000.00. That is a hefty premium indeed ( pun intended ) for a little bit of notoriety.But that’s not the best part of the story.Just to be sure the new purchaser doesn’t forget exactly why he or she paid such a premium, Mr. Hefner will remain as a resident in the house.That’s right.The deal is, any buyer willing to plunk down the GDP of a medium sized Caribbean island to buy the Playboy Mansion, must agree to allow the current owner to remain for life.A ‘cake and eat it too’ deal if ever there was one.

An 89 year old with a partiality to self medicating his blood flow deficiencies might very well seem to be a reasonable bet to remain only as a short term tenant.Buyers however, ought to be very aware.There is a precedent for such life lease deals to go badly indeed for the one betting on the mortality of another.

Purchasing properties “en viager” , or “for life”, is common in France.The premise is simple.An elderly owner receives a monthly stipend from a willing purchaser, with the understanding that they may occupy the dwelling until their death.(Sort of a pre cursor to reverse mortgages!)In a perfect world, this would be a win win situation, provided death occurs roughly when both parties originally anticipated.

Andre-Francois Raffray, a 47 year old Marseilles lawyer thought he had found himself just such a deal in a 90 year old client Jeanne Calmant.Raffray began paying Ms. Calmant 2500 Francs a month, and continued to do so for the next thirty years, until his death at age 77. Unfortunately for his widow, the contract Raffray had penned obligated the heirs of both parties to abide by the contract after death, and so his widow continued to pay Ms. Calmant 2500 Francs a month until the old lady’s eventual death as the oldest human being on record at 122 years of age.

So lest you think assuming Mr. Hefner as a tenant is a relatively low risk/short term agreement, consider yourself forewarned.Our demise cannot always be predicted.There is something distasteful about waiting around for someone else to expire anyway.Funerals, ought to remain attended only by the sorrowful, and without the conflict of interest of a financial windfall !So regrettably, on principle alone, I’ll have to pass on the opportunity to purchase the playboy mansion.

Thanks for reading,

Jeff Neumann

 

Photo Credit: Jim Bartsch from http://goo.gl/24zNzn

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