8. Joint Ownership of French Property
- 8.1. Joint Ownership 'En Indivision'
- 8.2. Joint Ownership 'En Tontine'
8.1. Ownership of French Property 'En Indivision'
This is the most common method of joint ownership and in English law is equivalent to a ‘tenancy in common’.
The property is purchased by two or more persons, with each one holding a stake in the property in whatever terms that may be decided between them.
In the case of a couple this would normally be in equal shares but, where there are more than two purchasers, it may be in proportion to the amount each person contributed in financing the purchase e.g. 70% / 20% / 10%.
Top Tip!
Where the property is purchased in unequal shares then it is important that the source of funds from each party is clearly identified to avoid possible later difficulties with the French tax authorities concerning gifts tax.
If you wish to own in equal shares, but with different contributions, then make it clear in the legal documentation that the larger contribution is not a gift, but a loan.
The issue is also important from the perspective of later separation or divorce. Unless, at the time of purchase, the different contributions of each party are reflected in the ownership structure, the property will be owned on an equal basis by all owners and the later sale proceeds of the property will be divided in equal shares between all owners.
One of the key features of indivision is the decision making process that applies. Not surprisingly, all the owners are entitled to participate in decisions concerning the property.
This may not ordinarily be an issue between a couple, but could be a problem between several unrelated people, or following an inheritance, when the property may be shared between several inheritors.
Thus, the law requires that decisions concerning the property are made by at least a two-thirds majority of the owners, (although if emergency action is needed it can be taken by only one of the owners).
However, even the two-thirds rule is not absolute for
in exceptional circumstances one or more of the owners can demand that the property is sold, if they consider that it is in the overwhelming interests of the
indivision to do so.
It is quite possible that a single owner holds at least two-thirds of the ownership of the property, but this does not grant them the automatic right to do as they please with it.
In all decisions concerning the property a fairly strict and lengthy procedure applies, particularly regarding the sale of the property.
You will be guided by the notaire in the sale process, whose responsibility it is to ensure that minority interests are heard.
If no agreement can be reached, then it would be necessary to apply to the court for an order to be obtained authorising the sale of the property. However, do not hold your breath the matter could be resolved quickly. Delays in the judicial process mean that it is likely to be up to three years before a hearing could take place, with a right of appeal to either side.
Moreover, if not all of the owners can be traced, then it may not be possible for the matter to be considered by the courts.
One of the owners can also dispose by way of sale or gift that part of the property they own. In the case of sale of their part of the property, they are obliged to grant a right of pre-emption to existing owners. This rule does not apply where disposal is by way of gift.
The most appropriate way of managing a property held by several different owners, is to draw up a management agreement, called a convention d'indivision, which is considered below.
We can look at the implications of indivision from the point of view of married and unmarried/unrelated owners.
- 8.1.1. Married Couple
- 8.1.2.Unmarried/Unrelated Owners
8.1.1. Married Couples and Ownership of French Property 'En Indvision'
In relation to inheritance rights the effect of indivision has historically been a problem for surviving spouses of a marriage, who risked having to sell the marital home at the bequest of other inheritors entitled to a share of the estate of the deceased!
However, the situation has improved in recent years, to the extent that the surviving spouse is now afforded a large degree of protection.
Although they may not inherit all of the property on death of their spouse (as children are protected heirs), they are entitled to remain in the property for the remainder of their life, provided it is their principal home, whatever the proportion of the property retained by them on inheritance.
If the deceased has children by a previous relationship, then they are entitled to share in the inheritance of the property, in the same manner as children from the present marriage. This can sometimes be a source of conflict between family members, although it does not necessarily weaken the legal position of the surviving spouse.
Whilst there is no inheritance tax liability between man and wife, there is a potential liability on that part of the estate inherited by the children. However, the tax allowances available to children are generous, so this is only going to be a problem for those with substantial wealth.
Top Tip!
Accordingly, purchase
en indivision makes sense for most married couples, particularly if accompanied by entering into a
French marriage contract, called
régime de communauté universelle with the clause
d’attribution intégrale. Under the terms of this marriage contract, the
whole of the estate of the deceased spouse passes to the surviving spouse.
The problem with this solution if that if you have children by a previous relationship, a French marriage contract has the effect of disinheriting children from outside of the relationship, not blood children of the final deceased.
For this reason most notaires are reluctant to allow a couple with children outside of the relationship to enter into such a contract. Indeed, a notaire is obliged to notify children not of the issue, who then have right three months to contest the proposed change of marriage regime. If the children oppose the change, then it would be necessary to bring the matter in front of a court of law, and for a judge to determine if the change was in the best interests of the family.
If the notaire proceeds without notifying the children, the latter can, at any time, bring an action in the courts to obtain an annulment of the change, or seek a proportion of the inheritance if they do not become aware until after the death of their parent.
Nevertheless, a law operational with effect from Jan 07, now allows a child from a former marriage to renounce their right to bring an action for retrenchment, but retain their rights to an inheritance, which they would receive on the death of the surviving spouse, in the same manner as children from the existing marriage.
Accordingly, you may need to adopt a marriage contract in tandem with a Family Inheritance Pact (called a pacte successoral,) something you can discuss with your notaire.
Alternatively, you should consider purchasing of the property through a French property company, particularly if you are non-resident.
8.1.2. Ownership of French Property 'En Indivision' by Unrelated Persons
If the owners are not married, then things are a little different, and often very complicated.
On the death of one of the owners, and where the deceased leaves children, a surviving unmarried partner has limited rights, as the property of the deceased passes to the children of the deceased who share the property indivision. If necessary, they could force the sale of the property, even though the surviving partner may be a joint owner.
There are are a number of possible solutions to this problem, all of which involve a detailed consideration of your circumstances.
In summary, however, the solution turns on granting a 'life interest' in the property to the surviving partner.
This can be done in various ways, either through a will or gift. So, whilst the other inheritors may receive the reversionary freehold interest in the property, the surviving partner at least has the comfort of knowing that they are safe in their home.
Whilst the choice of a life interest does protect the surviving partner, there remains a potential inheritance tax liability on the value of the life interest, charged at the rate of 60%, after a personal allowance of €1500.
Top Tip!
The best way of getting around this problem would be for a resident couple to enter into a French civil partnership, called
pacte civil de solidarité (PACS). No inheritance tax is payable between those in a
PACS, but a French civil partnership is not available if you are non-resident.
Alternatively, entering into a civil partnership from your home country would normally also grant the same exemption, as is certainly the case for civil partners from the UK.
Whichever option you choose, at the time of purchase, it is also desirable to determine how the property is to be managed and, in particular, make some provision in the event of separation, or of the death of one of the owners.
The agreement, called a convention d'indivision, is made in front of the notaire and is normally valid for a period of five years, although it can also be made for an indefinite period.
The agreement cannot override the entrenched inheritance rights of children, or necessarily get around inheritance tax laws, but, within these parameters, it will make explicit what will happen in the event of disagreement or death. Thus, with such an agreement it is possible for the quota part of the property belonging to the deceased be attributed to the surviving spouse, provided there is appropriate compensation to the entrenched inheritors. The clause is called faculté d’acquisition ou d’attribution de l’indivisaire survivant.
Such an agreement will also set out the day-to-day management arrangements for the property during the lifetime of the owners, including the appointment of one of the owners as the property manager.
In conclusion, whilst indivision does not seem to be too much of a problem for a married couple, if you buy as unmarried partners, or unrelated owners, there are potential difficulties associated with the sale of the property on death of one of the owners, and tough inheritance rules also apply on death.
These problems are not insurmountable, but you need to anticipate the potential for disagreement between the owners and, ultimately, your own mortality.
Next: Ownership 'En Tontine'
Back: Subsequent Marriage
House Buying Process in France