The recent High Court judgment in Euro Accessories Limited  EWHC 47 (Ch) has shed some light on the interpretation of “fair value” for a compulsory transfer initiated by a...
French Wills and forced heirship
France’s succession law is notorious for its principle of forced heirship, whereby children are the reserved heirs of their parents. Therefore, on the death of the first parent, the children have a protected right to inherit part of the estate which they will share with the surviving spouse.
This arrangement differs from the UK where, under the principle of testamentary freedom, it is more usual for the estate to pass entirely to the surviving spouse on first death and, eventually, to any children on the second death.
The difference between the two systems often causes concern for British citizens looking to buy a property in France and avoid forced heirship rules. Following a change in EU legislation in August 2015, there are now various options to do this. One pre-existing solution is the tontine clause (known in French as a clause de tontine / pacte tontinier / clause d’accroissement).
The tontine is a specific provision inserted during the purchase process in the final Transfer Deed and, therefore, must be agreed on prior to completion. Therefore, it only relates to the property which is being bought, and it will not have any effect on any other French assets the co-owners may own. The co-owners do not have to be married to have the option of using a tontine clause.
The tontine is similar, in effect, to owning a property in England as Joint Tenants (as opposed to as Tenants in Common) which means that, on the death of the first co-owner, the property passes entirely to the survivor. It is often likened to a bet between co-owners that each will outlive the other. For this reason, the age gap between the co-owners must not be too great and one co-owner must not be in a significantly worse state of health than the other.
As practical as it sounds, the tontine clause is sometimes regarded as inflexible and potentially problematic (and almost never used by the French). This is because in the event of a dispute between the co-owners or the co-owners divorcing, they would both have to agree to a sale of the property, if relevant, or to the Tontine clause being revoked if they wished to transfer the property into one of their names only. Any revocation of the clause must be done by a Notaire’s Deed in France and can prove costly.
In other words, if there is a tontine clause and the co-owners cannot agree on a sale, neither of them is entitled to apply to the Court for an Order for sale. Hence, in such circumstances and in the absence of an amicable agreement, deadlock would ensue and a sale could not be forced.
However, if a potential dispute is not a concern, and the main objective of the co-owners is to ensure that the surviving partner becomes the outright owner of the property, with full control to sell or keep it and to retain all the net proceeds of any sale (i.e. without the involvement of the deceased’s children), then this option remains an interesting one to consider. It will vastly facilitate the probate for the surviving spouse as, on first death, the effect of the tontine clause is that the property automatically becomes the sole property of the survivor, without the need for any formalities in France. If the survivor subsequently wishes to sell the property, then all they need to do at the time of the sale is to ask the Notaire to send a copy of the death certificate to the French Land Registry. Furthermore, there would be no need for a Notaire to draw up a deed of transfer of the property into the survivor’s name first.
As already mentioned, the tontine clause is only one of the various options available to avoid forced heirship rules and, therefore, we would recommend seeking legal advice to review your ownership structure options before completion or making a Will, which we would be happy to provide.