What does en-indivision, en-tontine, joint tenancy and tenancy in common really mean?
Charlotte Macdonald, a specialist solicitor in Stone King LLP’s international and cross-border team, explains all.
Property ownership in England & Wales
If you own a property in England & Wales with your spouse or partner, you will have been asked by your conveyancer at the time of purchase ‘how’ you and your partner would like to own the property.
There are two main ways of jointly owning property in England & Wales. You can own it either as ‘joint tenants’ or as ‘tenants in common’.
Most married couples will buy their property together as joint tenants. One important aspect of buying as joint tenants are that the ‘rules of survivorship’ apply. These rules state that on the death of the first owner, the remaining owner automatically becomes the sole owner of the property.
For example, Mr and Mrs Smith decide to buy their home, Sea View, together as joint tenants. 20 years later Mr Smith dies. Mrs Smith automatically becomes the sole owner of Sea View. There is no need for a grant of probate because the Land Registry will transfer the property into Mrs Smith’s name, merely on the production of Mr Smith’s death certificate.
If Mr and Mrs Smith had fallen out shortly before Mr Smith’s death and Mr Smith had changed his will to leave all his assets to the cats’ home, Mrs Smith would still inherit Mr Smith’s share of Sea View because the joint tenancy (usually) ‘trumps’ a will.
If a couple no longer wish to own a property as joint tenants, it is possible for them to ‘sever’ their joint tenancy and instead own the property as tenants in common.
Tenancy in common
A tenancy in common will arise when a two or more people want to buy their property in set shares.
For example, Mr and Mrs Smith wish to buy their home, Sea View, and to each have a defined set share. Mrs Smith has contributed more to the purchase price, so it is decided that Mrs Smith will own 60% of Sea View and Mr Smith will own 40% of Sea View.
When Mr Smith dies 20 years later his will (if he has left one) determines where his share of Sea View will go. This could be to Mrs Smith or to anyone else that he has named in his will, say his children from a previous marriage.
Property ownership in France
It is also possible to jointly own property in France in different ways. The most common mode of ownership is ‘en indivision’.
Owning a property en indivision is similar to owning a property as tenants in common in the UK. The property will be owned in set percentage shares by the owners.
For example, Mr and Mrs Smith (an English couple) choose to buy a home in France, Vue de la Mer. Mr Smith provided more of the purchase price, so they choose for Mr Smith to own 70% of the property and for Mrs Smith to own 30%.
When Mr Smith dies, his 70% of Vue de la Mer will pass under the French forced heirship rules, or if he has made a will electing for English law to apply, to whomever he wishes.
If Mr and Mrs Smith want Vue de la Mer to pass automatically to the survivor of them, following the death of the first one of them to die, they could choose to add a ‘tontine clause’ into their purchase contract.
The result of having this clause is that following the death of one of the owners, the remaining owner will become the sole owner of the property.
If a couple wish own a property en tontine it is important they make that decision at the outset as it is usually very expensive to add a tontine clause once the property has been purchased.
A tontine clause will not be suitable for every couple and it can be challenged on death in certain circumstances.
As discussed below, the introduction of EU Regulation 650/2012 in 2015 means tontine clauses for British couples are no longer the only way of ensuring that your property passes to your spouse and the international and cross-border team at Stone King LLP are best placed to advise on the most appropriate planning.
Why is it important to carefully choose which way you jointly own your French property?
The majority of English married couples will choose to leave their property to one another on their death, and so a tontine clause may, on the face of it, sound like the best option.
However, French succession tax and UK inheritance tax work in different ways and this means that leaving everything outright to each other (either by tontine or alternatively using the EU Regulation) is not always the best option for your family, as it can sometimes lead to adverse tax consequences.
If your French advisor has not discussed with you the potential adverse tax consequences of leaving all of the property to your spouse, then you should ask why not?
Advising on the interrelationship between English and French succession, and making wills covering your French property that are tax efficient is highly specialised work, the expertise for which is seldom available from a local solicitor, notaire or advocat.
You must get specialist advice before buying your property to ensure that you are purchasing your French home in a way that suits your circumstances best.
I don’t have a tontine clause – but I do want my French property to go to my spouse. What can I do?
Under the French forced heirship rules, the ‘default’ position is that, if you have children you have to leave them a set percentage of your assets. You cannot leave all your assets to your spouse.
Since 2015 (due to EU regulation 650/2012) it is possible for non-French nationals to elect for the law of their nationality to apply to the succession of their estate in France. They can make this election in their will.
This means that, if you are English, you can elect English law to govern your assets in France. English law upholds the principle of testamentary freedom. This means in England we can leave our assets to whomever we choose, be that family, friends, charity or others – although it is possible for wills to be challenged in certain (limited) circumstances.
If you were to elect English law, you could therefore choose to leave your property directly to your spouse, and avoid the French forced heirship rules.
Again it is important to obtain specialist advice before placing an election in your will, as it will not always be appropriate to do so and there can be serious adverse succession and tax consequences if an election is made in the wrong circumstances.