French Property Ownership Options
Tuesday 03 June 2014
There are various forms of property ownership in France, which have different legal and fiscal implications for the owners.
The choice you make about the form of property ownership may be a factor that needs to be considered in relation to inheritance planning.
Where multiple owners are buying it is also important to consider the management arrangements for the property, which will be affected by the form of ownership that is used.
The table below sets out the main forms of ownership, together with a summary of their main attributes. For a full explanation of the advantages and disadvantages you should refer to our free Guide to Buying Property in France.
|French Property Ownership Options|
|Form of Ownership||Application||Advantages||Disadvantages|
|'Indivision'||- Married Couples|
- Civil Partners
- Division of ownership as necessary
|- Not suitable with those with children outside relationship|
- Two thirds majority needed to sell
- Best used in conjuction with marriage contract
- Not suitable for unmarried couples
|'Tontine'||- Unmarried Couples|
- Married Couples
|- Strong protection against creditors|
- Protection for surviving partner
|- Property cannot be sold without unanimity|
- Disenfranchises children outside of relationship
|'Société civile immobilière|
|- Unmarried Couples|
- Extended Family
|- Cheaper, easier transfer of property|
- Protection for spouse/partner
- Can avoid inheritance laws
- Reduced inheritance taxes
|- Setting up costs|
- Running costs
- Cheaper transfer of property
- Future Inheritors
|- Reduced liability to inheritance taxes|
-Reduced transfer costs
- Notaire costs and taxes
-Uncertainty concerning date of full ownership
-Capital and revenue cost for viager purchase
|- Inheritance planning|
- Preservation of right of occupation
- Exemption from wealth tax
- Property can be sold to third party
- Capital and Income under 'viager'
Most people buy French property do so ‘en indivision’, a form of ownership that may be best described as a ‘tenancy in common’. It is simple, and is suitable for most married couples and civil partners.
Ownership 'en tontine' is used by those who want to ensure that the rights of the surviving partner or spouse are protected on first death, although for married couples a French marriage contract would achieve the same objective.
An French property company, called a Société civile immobilière (SCI), is frequently used by those buyers who are unrelated, or where an extended family buys a property.
Once you have purchased the property then it is possible later to divide the ownership structure of the property between the reversionary interest and the current life interest, called the 'nue-propriété' and the ‘usufruit’ .
This may be carried out with your descendants, as part of your inheritance planning, or with a third party to generate capital and income.
This would then leave you as the usufruit owner, having rights of occupation until your death, with the reversionary interest of the property held by a nue-propriété owner.
With recent changes in the law in France, it is also now possible to create trust structures to hold property, but doing so does not confer any tax advantage. There is also a complexity and potential uncertainty about them that you would probably be well advised to avoid!
This article was featured in our Newsletter dated 03/06/2014