When you own a second home, the question of how to structure it legally can quickly arise. Among the most common options, joint ownership and the Société Civile Immobilière (SCI) stand out as the preferred choices, each offering its own advantages and disadvantages.
In this article, we’ll explore these two options in detail, to help you make the decision that’s right for you.
What is indivision?
Joint ownership is a form of co-ownership in which several people own a property together, without the need to form a legal entity. Each co-owner holds a share of the property according to his or her initial contribution or the legal provisions in force.
The main advantage of joint ownership lies in its ease of implementation and flexibility. There is no need to create a separate legal entity, which reduces administrative formalities and associated costs. What’s more, the co-owners have the option of drawing up an indivision agreement, a document that can govern how the property is managed. This agreement can be adapted to the specific needs of the co-owners, offering a degree of flexibility in the management of the second home.
However, joint ownership can also have its drawbacks, particularly in the event of disagreement between co-owners. Important decisions concerning the second home must be taken unanimously (or by a 2/3 majority), which can sometimes lead to deadlock and conflict. What’s more, in the event of persistent disagreement, there is also the possibility of forced sale of the property, which can be worrying for some co-owners.
What is a Société Civile Immobilière (SCI)?
An SCI is a legal form for the collective management of one or more real estate assets. Unlike joint ownership, an SCI is a separate legal entity, giving it its own legal personality. SCI partners hold shares corresponding to their investment in the company.
However, setting up and managing an SCI involves administrative formalities and additional costs that are important to take into account. The SCI also has operating obligations, including bookkeeping and the regular organization of general meetings. What’s more, the transfer of shares requires the prior approval of the other partners, which can complicate the transfer process and limit partners’ flexibility.
How to choose between joint ownership and SCI?
Here are a few criteria to consider:
- Number of owners: If you have more than 3 co-owners, an SCI (non-trading property company) may be more appropriate to avoid decision-making bottlenecks.
- Wealth management objectives: If your objective is to facilitate the transfer of your second home to your heirs, the SCI can offer advantages in terms of estate management.
- Project duration : For a short-term project, joint ownership may be preferable, as it’s quicker and easier to set up. On the other hand, for a long-term project, SCI provides stability and security for all partners.
In conclusion, the choice between indivision and SCI will depend on your specific needs and the duration of your project. In all cases, we recommend that you consult a legal or wealth management professional to help you make the best decision for your situation.
