The concept of matrimonial regime is not a familiar one to most British couples as marriage contracts are not legal in the UK. It can therefore come as a surprise to couples moving to, or acquiring real estate in France to learn that they are considered under French law to be subject to a matrimonial regime which will affect the way in which their property is owned and will devolve on their death.

There are two broad categories of matrimonial régime - the régime communautaire (of which there are a number of different types) and the régime séparatiste. The vast majority of French couples (approximately 90%) are married under some kind of community regime. For those married since February 1965 the régime légale which applies to those couples who do not expressly contract to adopt an alternative (a régime conventionelle) is the régime de la communauté réduite aux acquêts by which each spouse’s individual property prior to the marriage remains his or her own whilst property acquired,either jointly or individually, during the marriage (with the exception of certain personal items such as clothing or tools of a trade which are defined by article 1404 of the Code Civil) becomes community property.

This is an arrangement which seems sensible and even familiar to British couples used, for example, to joint ownership of real estate under English common law. It is not, however, the arrangement which applies in France to couples who marry and establish their first principal residence in the UK. Under French law they are considered to be married under the régime de la séparation de biens which recognises only two estates in the marriage, that of the husband and that of the wife, ie there is no community property.

This situation, combined with other aspects of French property ownership and succession law, such as ownership en indivision (similar to tenancy in common) and forced heirship provisions, is what causes headaches for many British people acquiring property in France. For example a couple who marry and set up home in the UK, have children and later acquire a property in France en indivision will find not only that they are restricted as to the proportion of their respective shares of the property that they can leave to each other (because of the forced heirship provisions of French succession law) but also that anything which one does inherit from the other, over and above the value of FRF 500,000 will be liable to French inheritance tax (IHT).

The 1978 Hague Convention on matrimonial property regimes allows couples to change the law applicable to their matrimonial regime. Under article 6 of the Convention, couples may choose to adopt the law of a country of which at least one of them is a national or of a country in which one of them is resident. In addition, in respect of real estate only, they can choose to apply the law of the country in which that real estate is situated.

The provisions of the Convention apply in any event to couples married since 1 September 1992, regardless of their residential or national status. This is important because only five countries were signatories to the 1978 Convention and of these only three (France, the Netherlands and Luxembourg) have incorporated it into their internal laws. However it applies not only to relations between two signatory countries but also to relations between any of those countries and third party countries. So for a couple currently married under UK law who meet the criteria stipulated in article 6 the change will be valid for all property subject to French law, even though the UK is not a party to the Convention.

Couples who were married prior to 1 September 1992 can choose to submit their proposed change of regime either to French internal law (in which case they will have to respect the conditions set out by that law) or to the Hague Convention.

Any couple subject to French matrimonial law may change their matrimonial regime during the course of their marriage under the terms of French domestic law, but this is subject to certain conditions. They have to have been married or to have had their current regime for at least two years and the change has to be "in the interest of the family". The change has to be submitted to the Court for homologation which can render the process quite costly in terms of legal fees.

The wording of the Hague Convention refers only to a change of law applicable to matrimonial regime, stating merely that any change to the regime itself was subject to the internal laws of the country concerned. Until October 1997 when the provisions of the Convention were incorporated into the French Code Civil it was widely held that, by changing only the applicable law what couples acquired was the régime légale - ie the régime de la communauté réduite aux acquêts.

The position was clarified by the law of 28 October 1997 and specifically by article 1397-3 of the Code Civil which provides that, at the time of designating the law applicable to their matrimonial regime a couple can choose which of the regimes available in the country whose law they are taking to apply they wish to adopt. In this situation only, therefore, a couple can effectively change their matrimonial regime without having to undergo the formalities and meet the conditions required by French domestic law. So the change of regime can be effected simply by the signature of a notarised acte. In fact where a couple remaining domiciled outside France wish to submit only their French real estate to the new regime, this can be achieved simply by the insertion of a clause into their acte de vente stipulating which regime they wish to apply to the property.

Most British couples adopting a French regime under the provisions of the Hague Convention opt for the régime de la communauté universelle de biens which puts all the property subject to the regime into community ownership (subject again to the exceptions given under article 1404 of the Code Civil). This is normally on a 50/50 basis although other proportions can be chosen.

By incorporating into their new regime a clause d’attribution de communauté au conjoint survivant a couple can not only allow all community property to pass to the surviving spouse on the first death but also defer any French IHT until the second death - all that is payable on the first death is a 1% registration duty. It should, however, be borne in mind that this course of action does increase the potential IHT liability of any children of the marriage who will eventually receive their IHT allowances in the estate of only one of their parents instead of both.

It should also be noted that article 1527 of the Code Civil provides protection for the children of previous marriages who might otherwise lose out under such a change of matrimonial regime. This article gives them a right known as en retranchement which effectively limits the rights of the surviving spouse so that they apply only the the quotité disponible of the deceased spouse - ie the children of previous marriages retain their forced inheritance rights. In practice this means that a change of matrimonial regime is generally not a practical option for couples where one or both has children from a previous marriage although in the case of very large estates the tax advantages may still make it viable.

The agreement of the couple’s children is not necessary for the change of matrimonial regime but it should be noted that there have been cases where a change has been successfully challenged in the French courts by illegitimate children (who do not benefit from the right en retranchement) who have succeeded in having the change nullified when it has potentially deprived them of their forced inheritance rights.

There have been questions raised regarding the effectiveness of a change of matrimonial regime vis-à-vis third parties (which could include the tax authorities) and also regarding its retroactive effectiveness. With regard to the former article 1397-4 of the Code Civil provides that any change of matrimonial regime becomes effective between the spouses immediately whilst it becomes effective against third parties (opposable aux tiers) three months after the necessary formalités de publicité have taken place. These are set out in articles 1303-1 to 1303-6 of the nouveau code de la procédure civil. Where a couple is not subject to a marriage acte held by the French authorities this involves registering the change with the service central d’état civil set up at Nantes by the French Foreign Ministry, in accordance with the decree no 65-422 of 1 June 1965.

Even if these formalities are not accomplished, however, the change still becomes effective in relation to third parties provided that a suitable declaration regarding their matrimonial regime is included in any actes which are established by the couple in dealing with those third parties.

With regard to the retroactive effectiveness of the change, whilst the Hague Convention appears to provide for the change to be retroactive the October 1997 law provides only for the change to be effective as detailed above ie on signature of the acte and accomplishment of the necessary formalités de publicité.

In the case of a regime de la communauté universelle its nature is that it places all property present and future in community ownership. By that definition it would seem per se to be retroactively effective. However, in addition to the rights of children of previous marriages, care should be taken with the wording of any notarial acte to change the regime as article 1525 of the Code Civil provides that except when stipulated otherwise, a clause d’attribution intégrale does not prevent the heirs of the first spouse to die from clawing back into the succession any property which was owned by that spouse prior to designating the new matrimonial regime.

The French law is still relatively new and many authorities still advise a cautious approach. If it is possible to designate the regime applicable at the same time as purchasing the property this would certainly seem to be advisable. However the costs of effecting a change of matrimonial regime under the Hague Convention are relatively low in comparison with the potential benefits and it is therefore definitely an option worth considering particularly for couples who have no children and, in many cases, for couples who have children only of their present marriage.