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French Property News, September
2007
International living is no longer just
for the rich and famous. Increased employment mobility and the
current popularity of buying a French property has 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 has some
real advantages from a legal or an income or inheritance tax point
of view. One of the issues which is raised regularly is how to
protect the surviving spouse in a country which favours children
above the surviving spouse. France has forced heir ship rules and
statutory inheritance rights which aim to protect the children.
Those who are married discover that from an inheritance stand point
it is much easier in France when you are 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 French permanently
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. In respect of
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 UK resident can
hold French based assets under UK inheritance Law (and therefore
their UK Will) by purchasing their property through a French
holding property company ie 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.
When the time comes where the relationship is
falling 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
seize a UK court. 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 a 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 autonomous ground 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 of forum can make a huge
difference to the outcome.
Therefore it gives space for doing forum
shopping and seizing the jurisdiction which 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 the light of the couple's particular circumstances – this is
the Judge's decision. The French way is likely to be different and
a French Jjdge will generally be bound by a pre- or post-nuptial
agreement signed by the parties.
It is worth remembering that 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 which 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 gives directions as to
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 would need to be
amended through the French Land Registry and a stamp duty will
apply at 1.10 % will be due on the whole property's value if one
spouse is due to become the sole owner. The Notaire who
will be dealing with this would require (a) an English translation
of the divorce documentation, (b) a certificate of custom drafted
by a Solicitor in French confirming that the Divorce has been
granted by a Decree Absolute and that the Court has endorsed a
financial settlement which deals with the
assets including the French house.
Despite all of this, remember that couples
moving abroad are less likely to divorce than those staying in the
UK. After the tourists have left the country, isn't the autumn the
best time for looking for a French house?
For more information, please contact
Christophe Dutertre, Blake
Lapthorn's French Private Assets and Tax team on 023 9253
0379; email christophe.dutertre@bllaw.co.uk.
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