Buying a property with tontine or SCI

The tontine is an option whereby a couple can own a house jointly with ownership going directly to the survivor on the death of one of them.

When any two people buy a property the notaire can insert a tontine clause in the deed. To avoid a successful legal challenge in the future, there should not be a great age difference between the people concerned as there is meant to be uncertainty over who is likely to die first.

When one co-owner dies, the survivor is then deemed to have been the owner from the beginning and the rights of héritiers réservataires are overridden. This can, for example, be a good way of avoiding any issues arising from the 2021 French law that seeks to enforce French-law children's portions even where a foreign law is meant to govern the share-out of the estate.

Notaire François Trémosa said: “A tontine is particularly appropriate for couples with children from different relationships who want the survivor to be the sole owner.

"That will be out of the scope of the 2021 law since the mechanism is not related to succession law, but to property law, and has long been established – since the 1750s.

And to wrap everything up – including savings and other assets – it is often a good idea to combine it with designation of a foreign law of your nationality.”

A tontine cannot be created after purchase. It must be done simultaneously. One party may withdraw from it and give up rights to the property by a notarial deed.

A tontine should also not be taken out by people with any form of communauté marriage regime, including where a regime has changed to this after ten years in France (see here). If this applies to you, you may consider asking a notaire to change your regime to séparation de biens, so as to be able to buy with a tontine.

The tontine does not change tax rules and if someone dies, 60% inheritance tax is due on their half of the property in the case of concubins. There is an exception if the property was their main home and is worth less than €76,000 at the time of the first death: the transfer is instead subject to property transfer fees (5.09% - 5.8%). The same applies to property bought under a tontine before September 5, 1979. No transfer fees apply if there was a marriage, or civil partnership. 

If a couple live abroad French notaires will respect a tontine concerning a French home. It does not imply that you have chosen French law for the whole estate.

Société Civile Immobilière (SCI)

It is possible to hold property via a société civile immobilière (SCI).

This is a private company that has many characteristics of a partnership, since the holders of the parts (shares) have unlimited personal liability for debts of the SCI.

The shares are considered moveable property, not real estate.

For a non-resident (eg. for a holiday home) French inheritance rules do not apply on the person's death to their shares and rights of héritiers réservataires are overridden. This aspect does not however help people resident in France (unless they opt for a foreign law via the EU inheritance regulation) and is also less significant since the introduction of the EU inheritance regulation which means that by default France takes foreign law to apply to the whole estate of people living abroad.

It can be relevant to people whose marriage regime is séparation de biens so each spouse may own part of the shares in their own names.

Lawyers say it is not always completely safe from a legal challenge from heirs who lose out due to it, especially if a court might consider it transparently obvious the SCI was set up with this in mind. It is advisable to take legal advice if in doubt.

One possible advantage is that, on a sale, the shares of the SCI can be transferred instead of the property itself, which is cheaper than a sale of the property outside of the SCI. An SCI can also be more flexible if you want to make changes to proportions of ownership between joint owners.

On the death of one spouse, SCI shares of the deceased can be split. For example, use (usufruit) of the deceased’s shares could be given to the spouse and residual ownership (nue-propriété) to the children.

This would enable the spouse, with their own half-share of the shares plus use of the deceased’s, to have the use in full. This can also provide a tax benefit to the children who will obtain outright ownership on the surviving spouse's death.

An SCI can be inexpensively created by the notaire at the time of the purchase and is cheap and simple to run.

It must have a general manager (gérant), normally one of the co-owners, and informal accounts should be kept.

Income or capital gains tax, if applicable, are payable by shareholders in proportion to shares.