In recent years, thousands of non-residents have bought a property in France to escape from cold winters and wet summers. For many, their personal use of the property is a source of considerable pleasure. Although property prices in France are still generally low, and purchase loans are readily available, many potential buyers are discouraged from purchasing French property for two min reasons. Firstly, they do not want to feel tied down to the same property each year when there are other countries or parts of France to explore. Secondly, their available holiday time is often limited to two or three weeks in the summer and, although friends and relatives may occasionally visit the property, it will otherwise remain unoccupied for the rest of the year.

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 taxation.

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.

Please contact us if you would like any further assistance or information about this attractive scheme.