What is a family SCI?
Definition of an SCI
What is the definition of an SCI? An SCI is a real estate company. This legal structure is made up of at least two people, with the status of partner in the management of one or more properties. The real estate assets are held by the SCI. The partners have shares in relation to their contribution.
The partners in an SCI appoint a manager whose role is to ensure the day-to-day management of the assets. The manager has a very well-defined management power, but one that gives him enough autonomy to act without continually seeking the approval of the partners.
An SCI has articles of association that define how it operates. Drafting the articles of association is essential to set the framework for decision-making: whether by majority or unanimous agreement of the partners. The purpose of the SCI is also clearly identified: whether or not to generate profits.
- An SCI that doesn't generate profits aims to manage one or more properties jointly. This way, the partners avoid the rules of joint ownership.
- An SCI that generates profits is primarily intended to manage the rental of properties and handle the resulting income.
Here's a quick rundown of what a SCI is all about:
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Company purpose: The company purpose of the SCI is freely chosen by the partners. When it is commercial in nature, it may involve renting out housing or buying properties for resale.
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Registered office: The registered office of the SCI can be set at the home of the appointed manager or in any identifiable location in the articles of association.
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Share capital: The amount of share capital is determined in the articles of association.
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Partners: You need at least two partners to form an SCI. It can't be a single-person legal structure. Minors and protected adults can also be partners.
An SCI between spouses or family members
In detail, a family SCI differs somewhat from a classic SCI. Whether it's a SCI between spouses or an SCI between several family members, the rules are the same. This legal structure is useful when members of the same family want to optimize the management of a shared real estate portfolio. Its operation is limited to the management of real estate assets with the possibility of renting. It cannot include purchase for resale because it is a commercial act.
The liability of the partners is unlimited. Each partner is responsible for the social liabilities in proportion to their participation in the share capital of the SCI [real estate company]. This means that in the event of a default in payment by the family SCI, the partners share the debt based on their held shares. If a partner is unable to pay their share of the debt, the creditors cannot turn against the other partners. The SCI for couples depends on the matrimonial regime and the common property acquired by the spouses.
When to set up a family SCI or between spouses?
Three conditions can motivate the creation of a family SCI (Société Civile Immobilière).
Creating an SCI between partners
A couple living together (unmarried) is subject to joint ownership when they purchase a property. If they break up or one of them passes away, the future of their home isn't guaranteed. With an SCI between spouses, if one spouse dies, the surviving spouse can inherit the property without having to pay inheritance tax.
Buying property as a family.
Buying property together as a family is a great way to create a family SCI. This could be for a rental investment or a vacation home. Family members can buy a primary residence and manage it through an SCI.
Following an inheritance
When a property is inherited, the beneficiaries can create a family SCI to get away from joint ownership. When it comes to taxes and management, a family SCI is better for owners of a family property. The heirs contribute a share of the property to the SCI, and in return, they get shares proportional to that contribution.
The advantages of setting up a property company (SCI) between spouses or family members
For families wishing to avoid joint ownership and its constraints, this legal structure is an excellent solution. The SCI offers several undeniable advantages for married couples as well.
Simplified management of real estate assets
An SCI between spouses or family members gives members of the same family or household the opportunity not to directly manage the real estate assets and their technical aspects, which are entrusted to an appointed manager:
- tax and administrative procedures;
- the maintenance and renovation of housing;
- the operation of real estate;
- payment of charges, etc.
The sole manager, appointed by the partners of the family SCI, performs all the tasks associated with the operation of the real estate. Management conflicts within the family are thus reduced. As in a classic SCI, the sole manager makes decisions autonomously to manage the real estate in the interest of the partners. The statutes serve to limit their powers and frame their actions.
Guarantee a smooth transfer of real estate assets
An SCI between spouses or family members offers real tax advantages in terms of wealth transfer. Parents benefit from tax allowances when they organize successive donations to their children. In the context of a family SCI, donations between parents and children are subject to an allowance of 100,000 euros per transaction. Parents can gradually transfer their real estate assets to their children, taking advantage of an advantageous allowance. Thanks to the family SCI system, owners are exempt from transfer duties.
Easier division of ownership
With a family property company, it is easier to split the ownership of a property. Parents are able to transfer the bare ownership and the related voting rights to their children. What do these two elements mean?
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Bare ownership is the right of a person to dispose of a property as opposed to the condition of a usufructuary, implying only a right of use.
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Political rights are defined based on Article 544 of the French Civil Code: “Ownership is the right to enjoy and dispose of things in the most absolute manner, provided that one does not make use of them prohibited by laws.”
Despite the transfer of political rights and bare ownership, parents can retain the usufruct of the real estate. All of these provisions must be detailed in the articles of association of the family SCI.
Guarantee the sustainability of the property
An SCI between spouses or family members helps keep real estate assets intact across generations. The SCI structure prevents the forced sale of property that would otherwise be jointly owned. One partner cannot force the other partners to sell the property. If a partner wants to leave the family SCI, they can transfer their shares to the other partners or to family members.
Written by our expert Editorial staff
April 16, 2024
