Real Estate Purchase: How to Invest Well for Two?
A real estate acquisition made within the context of a marriage naturally protects the two buyers: the community of property laws apply, or the regulations outlined in the marriage contract, if appropriate. Cohabiting partners or roommates who make a joint purchase are not afforded any particular protection since they are legally considered aliens. They are therefore free to take particular steps to safeguard their separate assets in the case of a divorce or death of one of them. Let’s look at several options for securing a real estate purchase outside of marriage.
Establish an in division agreement
The principle of joint ownership
It entails purchasing a property with two or more people, with each person becoming the owner up to the amount of money specified in the agreement. All decisions under joint ownership must be made unanimously. There are two options if a resale is being explored and the owner does not want to sell the home. In order to retain the property, a co-owner is free to purchase another co-share owner’s (or many, as the case may be). If a settlement cannot be reached, the court may mandate the sale under Article 815 of the Civil Code, which states that “no one may be compelled to stay in joint ownership.”
In addition, to avoid a potential death, a priority redemption provision for the deceased’s share may be included in the joint ownership agreement. The reserved heirs will therefore be unable to object to the redemption as long as the clause’s beneficiary is able to purchase it and pay them off.
A will may also be made in the cohabiting partner’s favor in order to leave his quota or usufruct, unless this would conflict with the rights of the other heirs. Be wary of the hefty inheritance tax that applies to cohabiting couples.
PACS
There are two scenarios: civil unions formed before January 1, 2007 must be subject to the joint ownership system, which means that each spouse owns a portion of the home, by default 50%, although it may be selected as previously stated. each person’s contribution
People who entered into a civil partnership after January 1, 2007 rely on the separation of property regime: they own the property up to the financial contribution and are the sole owners of property purchased prior to the PACS. They may, however, choose to own the business together.
In the case of a divorce and the dissolution of the PACS, the parties may opt to sell the property by mutual consent, with each party recovering its portion of the proceeds. The ex-share partner’s may also be redeemed, allowing the other to become the sole owner of the property. Finally, the accommodation may be kept in shared ownership by paying an indemnification to PACS’s former partner: the amount of the indemnity can be set by mutual agreement or by a judge of the tribunal de grande instance intervening.
To safeguard the spouse and leave him the part of the property in the case of death, it is highly advised to draft a will with a notary. Unless there is a particular provision in the PACS contract, the deceased’s portion will be given to his heirs (children or parents). If the PACS was formed after January 1, 2007, the survivor is still entitled to a 12-month usufruct on the property. A will also provides for a more affordable gift than simply partners (but more expensive than for a married couple).
SCI: to build up real estate assets
By purchasing shares in a business that owns the real estate, you may form a Société Civile Immobilière and become partners with other individuals. Each has an infinite number of partners and shares up to their financial investment.
The SCI suggests that, upon its formation, it determine the actions to be done in light of the many situations that would affect its future existence (mainly desire to leave the SCI or death, but also modification of the number of shares). Obviously, the goal is to safeguard the interests of the different purchasers while also ensuring a shared vision of the project. As a result, creation comes at a price (€ 200 to € 2,500) and requires meticulous administration in terms of writing laws and conducting assemblies.
The SCI, as a couple, makes real estate administration easier in the case of a second house, studio, or chalet in the mountains. It will then be simple to alter the property divide by giving or selling shares.
From a tax standpoint, it is feasible to undervalue the SCI’s shares by 10% to 20% without risk of a tax adjustment. The SCI, on the other hand, provides the possibility to implement a financial package that strengthens the rights of the remaining cohabiting spouse against the heirs due to the cross-ownership dismemberment. As a result, each partner will possess half of the bare ownership shares as well as the usufruct on the other partner’s bare ownership shares.
In the case of death, the survivor receives his shares as well as the usufruct on the deceased’s shares, allowing him to become the only usufructuary without jeopardizing the heirs’ rights to the part allocated for them. However, if the divorce is contentious, the court will not be able to order the SCI to be divided.
The tontine: when there are no children
The tontine makes the property solely owned by the last survivor. Also known as the increase clause, it notifies the survivor’s retention of the residence in the deed of ownership, a provision to which the heirs who are retaining them cannot object (parents for example). The tontine, on the other hand, cannot be utilized to prevent offspring from inheriting.
The disadvantage is that if the property is not the main home and/or its worth exceeds 76,000 euros, inheritance tax will be calculated at 60% of the property’s value. The survivor will only have to pay transfer duties for a consideration if the amount is less than 76,000 euros (ie the maximum legal rate of 5.81 percent ). Only by mutual consent may the two parties end the tontine in the case of separation.
A real estate acquisition made outside of marriage should not be done lightly, and it is critical to decide which regime you want to become owners under early on and with all parties involved. This will have an impact on one’s ability to protect the other in the case of separation or disappearance. It’s also a good idea to talk it over with the notary in order to figure out the best option for everyone.