French property ownership: dealing with relationship breakdown is a question that often crops up at this time of year. Here are some answers.
International living is no longer just for the rich and famous. Increased employment mobility and the current popularity of buying a French property have led to a rising number of ‘international families’ and disputes spanning EU borders.
Divorce is always a distressful and emotional time for any family, but the issues become more acute if the couple moves abroad.
Purchasing as a married couple applies to most of the couples investing in France. Their marriage status is advantageous from both a legal and an income/inheritance tax point of view. One of the issues regularly raised is how to protect the surviving spouse in a country that favours children above the surviving spouse. France has forced heirship rules and statutory inheritance rights that aim to protect the children. Those who are married discover that from an inheritance stand point it is much easier in France when married to protect the surviving partner on the first death.
Often there is an issue with the presence of children from a previous relationship. This can normally be circumvented for those who intend to become a permanent French resident by entering into a survivorship scheme such as the Tontine, or by signing a French marriage contract and setting up a Communauté Universelle regime. Regarding the latter, children from a previous relationship should sign a waiver by which they will waive any claims against the surviving spouse.
Those who intend to remain in UK residency can hold French-based assets under UK inheritance Law (and therefore their UK Will) by purchasing their property through a French holding property company (Société Civile Immobilière). On their death they can decide under their UK Will to whom the estate should pass. The use of the French company has recently regained the favours of professionals as the threat for the shareholders of incurring a benefit-in-kind charge in the UK has disappeared (subject to conditions).
Where the relationship begins to fall apart, the spouses will be looking to lodge a divorce petition through a Court. Which country will have jurisdiction over the divorce? Jurisdiction is a complex and technical subject.
The spouse will usually find it more convenient and preferable to issue to divorce petition in their home country without the additional cost and impracticality of having to endure foreign proceedings with transport and language barriers for the parties, their families, witnesses and lawyers.
Those who are living in the UK would normally have to go through the UK courts. Those who have established a new residency in their French home are likely to have the choice under the European Règlement dated 27 November 2003 called ‘Brussels II bis’ to bring the divorce through either a French court or UK court.
Within the EU there are significant differences between member states in both their procedures and the law concerning grounds for divorce due to the different social policies and cultural beliefs of the individual states. In France divorce can be granted on the grounds of mutual consent. In the UK and other member states, irretrievable breakdown of the marriage is the sole ground for divorce.
Conflict between divorce laws of member states may cause difficulties in getting the divorce proceedings off the ground. Other potential legal problems arise such as enforcement of the financial settlement in France and the treatment of financial issues when choosing the court of issue. Being caught between two competing legal systems is a very complex position for a client to find themselves in and the choice can make a huge difference to the outcome.
There is therefore scope for which legal system to choose and deciding upon the jurisdiction that might be more favourable to one spouse over the other. The UK’s view is to look at the couple’s aggregated wealth and start dividing on a 50/50 basis irrespective of the origin of the assets and then adjusting it in light of the couple’s particular circumstances – this is the judge’s decision. The French way is likely to be different and a French judge will generally be bound by a pre- or post-nuptial agreement signed by the parties.
If proceedings are issued in a foreign jurisdiction there will be additional costs in retaining two sets of lawyers. As advantages may be gained in electing the preferred jurisdiction, in terms of certainty, practicality, cost and legal result, a race to issue proceedings is therefore common.
When a French house is part of the overall family assets that will have to be divided or dealt with under the financial arrangements, it is essential to ensure that the financial settlement approved by the court instructs what should be done with the French property. The couple might wish to keep it jointly but generally one party will have to transfer his or her interest into the other ex-partner’s name. The arrangement should indicate who will bear the costs of the transfer.
The French legal title will need to be amended through the French Land Registry and a stamp duty of 2.5% (from 1 January 2012) will be due on the whole property value if one spouse is due to become the sole owner. The notaire who will be dealing with this will require an English translation of the divorce documentation, including the court order or the decree absolute. It is wise to remember that notaires will probably require a period of approximately two months to carry out the searches and transfer the property to one or the other spouse. Therefore when dealing with the preparation of the court order the parties and their solicitors should make sure that approximately 60 days from the order should be given to a French notaire to allow the transfer of the property. It is common to see court orders stipulating that the property should be transferred within 28 days and it is usually difficult to fulfil the condition because the proceedings in France to transfer a property will not have been taken into consideration.