DA-Tax
What is the divorce position for UK resident couple with French holiday home?
This article is for general information only. You should not act or refrain from acting in reliance of it. You should always obtain professional advice on the facts of your particular case. Nothing in this article constitutes financial advice. The owner of this site accepts no liability.
For couples divorcing in the UK, a French holiday home may be one of the marital assets for
consideration. In the first instance, the property will need to be disclosed as part of the financial
disclosure process alongside all other marital assets in the UK.
The holiday home may need to be independently valued if a value can not be agreed between the
couple. It is important that the valuation accounts for all associated costs and charges so that the
property’s true ‘net’ value can be determined. This includes costs of sale, French Notary fees, any
outstanding mortgage on the property and all applicable taxes both in the UK and in France such as
Capital Gains Tax.
Options for dealing with the property include putting it on the market for sale and dividing the net
sale proceeds or transferring it into the sole name of one spouse only. The other spouse may then
be compensated with a cash lump sum to represent their share in the value of the property or they
may retain other marital assets of an equivalent value. It may be that specialist tax advice is
required to inform which of these options would be the most tax efficient.
Where a spouse wishes to retain the holiday home as an income stream, it may also be necessary to
consider their mortgage capacity as the mortgage provider would need to be satisfied of their ability
to meet the monthly repayments. Caution must be exercised if relying on the holiday home as a
future source of income as rental income from holiday lets can fluctuate widely based on a variety of
factors.
The title deed will also need to be checked to determine how the property is held in France. The
form of legal ownership applied by default in France is co-ownership which is similar to tenants in
common in the UK.
Additional administration will be required if the property deed is subject to a Tontine clause. A
Tontine clause is similar to a joint tenancy in the UK and it will be necessary to revoke the Tontine
clause to enable the property to be dealt with freely.
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