The article below has previously appeared in leading market
publications or our own booklets or newsletters.
Please note that the law may have changed since the date of
publication and that information given on this website does
not constitute legal advice. Please read our disclaimer.
The clear choice for new buyers wanting to enjoy the benefits
of owning and occupying property in France for limited
periods only with the reduced costs that such a purchase can
bring is to use a non-time sharing method of company
ownership (called a société civile
immobilière d’attribution à temps
partagé or SCIATP) which allows the owners to share
ownership with friends or others who have similar interests.
As explained below, the use of such a structure can also have
significant French succession law-avoidance advantages.
The scheme can apply to a house or part of a house (for
example, a flat in a block). A property can be brought within
its scope either by being bought by an SCIATP previously
formed for that purpose, or a property owned by one or more
owners can be transferred to an SCIATP.
This is also the most satisfactory method for an existing
owner wishing to reduce his capital burden whilst retaining
an interest in his property. For example, the SCIATP acquires
the French property from the original owner who then offers
for sale as many shares as he wishes (e.g. 75% if he wants to
be able to occupy the property for about three months in
every year). French law provides precise rules as to the way
in which the property must be managed, how management costs
are dealt with, the rights of each occupier vis-à-vis
each other and their rights to deal with their occupancies
and generally everything which is necessary for the enjoyment
by these shareholders of the property by the company.
The right to occupy the property at agreed times stems from
the ownership of shares in the company. The basic rules laid
down by French law are strict since they are intended for the
protection of the public and cannot in most cases be varied.
The price for the shares will depend not only on the value of
the property but also on the periods in the year in which the
shares sold give rights to occupation. However, since these
periods are likely to be spread over the year over periods of
more than (say) six weeks at a time, it is probable that the
price for all of the shares will be more or less the same.
The sale by the original owner of shares will, of course,
give rise to French capital gains tax, but unless the
property is of recent acquisition and the owner has benefited
from an unusual rise in the French property market, this tax
is not likely to be high if it exists at all.
The equivalent of the Articles of Association of an English
company are the statuts of an SCIATP. All the basic rules
relating to the use of the property are set out in this
document. These will cover, in addition to the dates when the
property is occupied by shareholders (which can be varied by
consent of all the shareholders), the important provisions
relating to the transfer of shares during a
shareholder’s life and on his death.
The normal French rule is that transfers between existing
shareholders may be made freely as may transfers on a death
to heirs entitled to inherit, or spouses, but this can be
varied since the shareholders will be subject to English and
not French succession law. Otherwise, the body of
shareholders controls who can become shareholders and such a
decision requires at least a majority or unanimous vote.
French law specifically requires that shareholders must have
the right to let the property they occupy during their period
of occupation. The shareholder remains liable to the SCIATP
for his tenant’s default.
Rules for the holding of meetings of shareholders and for the
passing of resolutions by correspondence and similar
management procedures follow quite closely what is common
form in English companies.
Overall management is in the hands of the gérant who
basically takes the place of a director of an English
company. He may be appointed or removed by a simple majority
vote of the shareholders but the statuts can provide for a
larger majority or a unanimous vote. He can, but need not, be
a shareholder. It is his duty to act on behalf of the SCIATP
subject to such limitation as may be placed on his powers.
The gérant is responsible to report to the
shareholders when the annual accounts are submitted. The
SCIATP will be liable for taxe foncière (property tax)
and taxe d’habitation (local authority tax) but, unless
it has income - which is unlikely - for no other French
He is assisted by an Executive Committee composed of
shareholders (the number is fixed in the statuts) whose task
is to advise the gérant or the shareholders on all
matters relating to the management of the SCIATP which either
have been referred to it or which it enquires into of its own
volition. It is the recipient of the SCIATP’s accounts
and has a right to call for production of all documents and
papers affecting the SCIATP.
The cost of maintaining and managing the French property
will, as with these taxes, be shared out among the
shareholders in proportions which will reflect the length of
each period of occupation and presumably the date in each
year. The gérant arranges for the collection from each
shareholder of his share of expenses and, if needs be, may
ask for payments on account in advance. There are rules to
ensure prompt payment.
Unless the finances of an SCIATP attain a fairly high figure -
not likely where only a single house is involved - it is not
necessary to appoint auditors, but in that case the SCIATP must
appoint an independent qualified person who is not a shareholder
to prepare the annual accounts.
The use of an SCIATP is also a useful tool to avoid the
adverse implications of French succession law. In brief,
French succession law applies to all land, houses and flats
in France irrespective of the nationality, domicile or
residence of the owner. This put simply, means that children
have the absolute right to inherit but surviving spouses have
no such rights. Furthermore, if you do not structure joint
ownership of French property through an SCIATP or a similar
French company, the two alternative methods of joint
ownership re likely to cause problems. One method
(indivision) was created to deal with property inherited by
various members of the family and is quite unsuitable for
property which is bought for sharing with other people. The
other method (tontine) has the effect of the property
belonging to none of the joint owners until the death of all
except the last survivor, who then acquires the whole of the
property. This is clearly not suitable for owners who are
strangers to one another.
The purchase and transfer of French property and the
formation of companies in France is the sphere of a notaire
practising on French soil. However, any person interested in
making use of this scheme either as a means of selling part
of his interest in his French property or of buying into such
a property on such a basis should consult lawyers in England
expert in French legal matters since their residence and/or
domicile in England makes this highly desirable
Stephen Smith is a specialist in French property (purchases
or sales), tax and estate planning and wills. For further
information please contact Stephen Smith by e-mail at
firstname.lastname@example.org (Telephone: 01473
437186 Fax: 01473 436573).