8. Joint Ownership of French Property
- Joint Ownership 'En Indivision'
- 'En Indivision' for Married Couples
- 'En Indivision' for Unmarried Couples/Groups
- Joint Ownership 'En Tontine'
8.3. Ownership 'En Indivision' by Unmarried Couples/Groups
If the prospective owners are not married the ownership structure to be used is not clear cut.
The problem concerns French heirship laws, which grants rights to children, although there is also likely to be an inheritance tax implication.
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 obtaining security for the surviving partner, all of which involve a detailed consideration of your circumstances.
Since 2015 it has been possible to get around French heirship laws by making a Will and electing to adopt the inheritance laws of your nationality. If there is testamentary freedom in your country, as in the case in the UK, then it is not a difficult choice to make. However, the law grants no exemption to inheritance tax in France.
Alternatively, the solution turns on granting a 'life interest' in the property to the surviving partner, although once again, there are inheritance tax implications.
This can be done in various ways, either through a will or gift or through a French property company, called an SCI, which we consider separately in Guide to Société Civile Immobilière (SCI).
In such circumstances, 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.
One 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), and grant the partner preferential rights to the property.
Although this will require compensation is paid to the remaining inheritors, no inheritance tax is payable between those in a PACS.
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.
You can read more about the rights of surviving partners of a civil partnership at French Inheritance Laws and Civil Partnerships.
We have further developed thoughts set out above in an article we published in our Newsletter, which you can find at How to Buy French Property as an Unmarried Couple.
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 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'
The Guides to France are published for general information only.
Please visit our Disclaimer for full details.