THE TONTINE CLAUSE

Historically the clause de tontine has been much favoured by UK purchasers of French real estate as it has been seen as a solution to the inheritance/succession situation under French law whilst protecting the interests of the surviving spouse. It was first introduced to France by the Italian banker Lorenzo Tonti back in 17 th century for the purpose of multi subscriber purchases of real estate investment. Each subscriber paid a sum into the fund and received a divided payment from the investment. As each investor died, their share was divided amongst the others until only one remained. In its contemporary application the tontine clause (or clause d’accroissement) is a mechanism whereby ownership of the property passes to the surviving partner, who upon the death of the first partner is considered retrospectively to have been the sole owner since the date of acquisition. The tontine clause must be inserted at the time of signing the original purchase title deed (acte de vente). It can only be revoked by agreement between the parties and this must be done by notarised deed of renunciation. Some notaires are reluctant to include the tontine clause, as they perceive it as dangerous by virtue of its rigidity. The general situation is that where a property is purchased jointly all owners have to be in agreement to sell, lease or to constitute a charge over the property. If an agreement cannot be reached the owners can ultimately appeal to the court to resolve the issue. However where a purchase is made en tontine , should for example one owner wishes to sell and the other not, if there exists no possibility of amicable agreement the owners are locked into the situation literally until death. Notwithstanding this disadvantage the clause itself is challengeable under certain circumstances where for example potentially aggrieved third parties could claim that the clause was simply a device to circumnavigate the inheritance rules in order to disinherit a valid heir. Under certain conditions such a challenge may well succeed. However, all being well the surviving partner does become the absolute owner and has complete freedom of action over the property as if the first partner had never had an interest in the estate. This replicates the state of affairs we in the UK recognise as joint tenancy. Finally it should be considered that the tontine does leave the inheritance situation upon the demise of the survivor open to significant tax disadvantages. Therefore, it is wise to seek personally tailored advice as alternatives exist that may better cater to your needs providing a more inheritance tax advantageous outcome.

THE TONTINE CLAUSE

Historically the clause de tontine has been much favoured by UK purchasers of French real estate as it has been seen as a solution to the inheritance/succession situation under French law whilst protecting the interests of the surviving spouse. It was first introduced to France by the Italian banker Lorenzo Tonti back in 17 th century for the purpose of multi subscriber purchases of real estate investment. Each subscriber paid a sum into the fund and received a divided payment from the investment. As each investor died, their share was divided amongst the others until only one remained. In its contemporary application the tontine clause (or clause d’accroissement) is a mechanism whereby ownership of the property passes to the surviving partner, who upon the death of the first partner is considered retrospectively to have been the sole owner since the date of acquisition. The tontine clause must be inserted at the time of signing the original purchase title deed (acte de vente). It can only be revoked by agreement between the parties and this must be done by notarised deed of renunciation. Some notaires are reluctant to include the tontine clause, as they perceive it as dangerous by virtue of its rigidity. The general situation is that where a property is purchased jointly all owners have to be in agreement to sell, lease or to constitute a charge over the property. If an agreement cannot be reached the owners can ultimately appeal to the court to resolve the issue. However where a purchase is made en tontine , should for example one owner wishes to sell and the other not, if there exists no possibility of amicable agreement the owners are locked into the situation literally until death. Notwithstanding this disadvantage the clause itself is challengeable under certain circumstances where for example potentially aggrieved third parties could claim that the clause was simply a device to circumnavigate the inheritance rules in order to disinherit a valid heir. Under certain conditions such a challenge may well succeed. However, all being well the surviving partner does become the absolute owner and has complete freedom of action over the property as if the first partner had never had an interest in the estate. This replicates the state of affairs we in the UK recognise as joint tenancy. Finally it should be considered that the tontine does leave the inheritance situation upon the demise of the survivor open to significant tax disadvantages. Therefore, it is wise to seek personally tailored advice as alternatives exist that may better cater to your needs providing a more inheritance tax advantageous outcome.