Marriage is not a must before considering the purchase of real estate for two! About 25% of French couples live together under the common-law regime. If they do not wish to exchange vows at the town hall, the cohabitees may however legitimately want to invest in a main residence of their own.
Several options are available to them to achieve this, including a classic joint purchase, the creation of a SCI or the addition of a “tontine” clause on the act of purchase. The signing of a civil solidarity pact (PACS), finally, is less rigid than a marital contract and can favor the survivor at the time of the death of the other member of the couple.
It should be noted that “whatever formula is chosen, a couple would be particularly well advised to consult a notary, a professional most capable of clarifying and orienting aspiring owners,”.
The purchase of a property in joint possession
As part of a first real estate purchase, joint ownership remains by far the most common formula for young cohabiting couples who do not yet have a significant heritage. Indivision consists in mentioning the names of the two buyers on the notarial deed of sale, and therefore in making the couple members the two legitimate owners of the property.
Why buy in joint possession?
Buying in joint possession is a simple solution to acquire a property with others: all unmarried couples can use it. When buying a joint property, each holds a share of the building expressed as a percentage. If an equal distribution at 50/50 is fairly common, it is also possible to choose a distribution at 60/40, 70/30, etc. Better indeed that the distribution chosen faithfully reflects the real investment effort of each partner, otherwise the tax authorities could sanction a disguised donation. This possibility of distributing the purchase according to an agreed percentage makes it possible to take into account the differences in income between the partners as well as the amount of contributions made by each, and therefore to limit the sources of conflict.
The specific case of a PACS couple
If you entered into a civil partnership before 1 January 2007, your diet is normally that of undivided when buying a property. You are then each owner of your main residence at 50% – unless you have opted for a different distribution – and this, regardless of the actual financial participation of each. These conditions are also the same as for cohabiting partners.
Since that date, PACS are subject by default to the separation of property regime. The goods acquired before and after the signature of the PACS remain the exclusive property of each partner, with the exception, however, of family housing for which there is a presumption of solidarity, in particular for the repayment of the mortgage. In return, the surviving partner will not have to settle inheritance tax on the property if the deceased had drawn up a will to that effect.
Purchase in joint possession then marriage
Have you bought a property in joint possession and now wish to get married? This decision has different consequences depending on the matrimonial regime you choose.
Thus, if you do not opt for the drafting of a marriage contract, the default regime (or legal regime) is that of the community reduced to acquests. In this case, only the real estate purchased after the marriage is common to the couple. This scheme therefore has no influence on the undivided co-ownership shares. This is also the case for the separation of property regime.
On the other hand, by opting for the universal community regime, the houses and apartments bought before the marriage, as well as the debts contracted, become common to the couple.
House purchase in joint possession and separation
As in any other joint ownership, unanimity is required for all important decisions concerning the property, including of course its possible sale. In the event of conflicting separation, three solutions can arise:
- The two ex-partners agree to sell.
- One of the two ex-concubines buys the share of the other, to continue to live in the accommodation.
- One wants to sell and the other doesn’t. The sale may in this case be ordered by authority by the court, insofar as “no one may be forced to remain in joint possession” (art. 815 of the Civil Code).
In general, before the act of purchase, ask yourself the question of the future of a mortgage in progress in the event of separation. Indeed, if one of the two ex-partners wishes to keep the house or the apartment, he must be able to buy the corresponding share. For this, it is possible to take out a mortgage complementary to the main loan.
Purchase in joint possession and death
Although being a simple solution, the joint purchase of a main residence is often problematic when one of the partners dies.
Indeed, in the absence of a marriage contract, cohabiting partners do not enter the estate and are not authorized to stay in the dwelling without the express agreement of the heirs (children, parents, brothers and sisters, etc.).
The surviving partner cannot demand to continue living in the accommodation insofar as he is no longer the sole owner: he only holds his share of joint possession, the other share belonging to the heirs.
To limit the consequences of a death in the couple, several solutions exist. It is for example possible to draw up a will or to give usufruct to one’s spouse in the event of death. This second option allows the cohabiting partner to continue living in the accommodation for their entire life, without having to obtain the prior agreement of the heirs. On the other hand, he has to pay 60% of inheritance tax.
Three other possibilities exist to protect the couple in the event of death: the joint ownership agreement, the tontine and the SCI (see below).
The real estate civil society (SCI)
Rarer than traditional joint ownership, the creation of a real estate civil society (SCI) in principle requires a small initial financial investment, of the order of 2,000 to 2,500 $. The two cohabiting partners are no longer directly owners of their main residence but hold the shares of the SCI as partners, up to their respective financial contribution.
SCI presents an attractive tax advantage since it can result in reducing the real value of the property by 10 or 15%. Beyond that, it also offers much better protection at the time of succession. By means of a legal arrangement called the “dismemberment of crossed property”, each cohabiting partner has half of the property in bare ownership and the other half – that of his companion – in usufruct. The usufruct cannot be inherited: on the death of one of the spouses, the survivor regains full ownership on his part while retaining the usufruct on the other part, without any heir being able to oppose it.
The SCI is by nature a fairly rigid formula for managing a simple main residence, involving the drafting of statutes or the regular holding of meetings. The conditions of its dissolution can be foreseen in advance in the statutes but will not prevent great difficulties in the event of heavy disagreement between the two partners. The courts, in fact, have no jurisdiction to intervene. Overall, the SCI is above all recommended for large property holdings.
The inclusion in the act of purchase of an increase clause, or “tontine”, may be of interest if the property, necessarily acting as the main residence, is of low value. Below an estimated value of $ 76,000, in fact, the surviving partner is exempt from the payment of any inheritance tax, just as it would have been under the marriage regime! This does not, however, exempt him from paying the amount of transfer duties. The clause also has the effect of making the surviving partner the sole owner of the property, by canceling the rights of certain reserved heirs.
The tontine is therefore reserved for a very specific audience, and also suffers from a certain rigidity. Its deletion requires the consent of both parties, as well as a sale and sharing in the event of separation.
Joint purchase: how to avoid risks?
Buying a property in joint possession presents certain risks which it is important to be aware of before launching. The co-owners must agree to all decisions concerning the property, from its maintenance to its resale.
In conflict situations, managing joint property can become very complex. In addition, the debts of the joint ownership must be settled according to the same percentage as that fixed at the time of the signing of the purchase (50/50, 60/40, 70/30…). This concerns the monthly payments on the mortgage, but also taxes (property tax, housing tax, etc.) and works.
The occurrence of the death of one of the owners is also a risky situation if no measures to protect the spouse have been taken before. Being well informed and consulting a notary is therefore essential.
The joint ownership agreement
Note that the drafting of an indivision agreement can be of great interest, giving the surviving partner priority to buy back the share of his companion when he dies.
An indivision agreement relating to real estate is a written act which must be drawn up by a notary and published in the Land Advertising Service. It can be fixed-term (5 years maximum, renewable) or indefinite.
Its objective is to fix a certain number of rules, such as the distribution of expenses, the appointment of a manager or even the amount of the occupancy allowance in the event of separation.
This agreement, however, cannot be an obstacle to the rights of any reserved heirs – in particular children – over the rest of the estate of the deceased.
Joint purchase and mortgage: everything you need to know
Buying a primary residence is an important life project in the life of a couple. Thanks to joint ownership, it is possible for all unmarried couples to acquire a property in a simple way, but what about the associated mortgage?
Cohabitation, PACS, marriage: taking out a mortgage is accomplished in the same way. Borrowers can go directly to banking establishments or use the services of a broker to obtain the best offer. If one of the partners contributes more than the other from their personal savings, it is recommended to adjust the percentage of the shares held.
The repayment of the undivided loan
Credit maturities are debited from a joint account opened with both names. Each partner must pay their share of the credit, in proportion to their share in the property, hence the advantage of setting a different percentage if the income of the two partners is very different.
In the event of separation, and as long as the situation is not resolved, each member of the couple must also pay their share of the credit maturity