Regime change

Most private client practitioners dealing with cross-border matters are familiar with the EU Succession Regulation, better known as Brussels IV. The EU Council has now passed two new regulations, for matrimonial property regimes (Regulation (EU) 2016/1103 (the MPR Regulation)) and the property consequences of registered partnerships (Regulation (EU) 2016/1104).

Eighteen EU member states have signed both new regulations. Brussels IV applies in these 18 states plus Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia. As with Brussels IV, the UK, Ireland and Denmark chose not to sign up to the new regulations.

In this article, we discuss how the new regulations will apply in France and Spain, two of the countries where British nationals are most likely to acquire property.

Matrimonial property regimes

Under English law, there is no concept of a matrimonial property regime (MPR). An MPR is a set of rules which govern the property aspects of a marriage both during its duration and when it ends, either through divorce or death. France and Spain have MPRs. There is no marriage in either country without an MPR coming into place. If the couple do not choose a regime, then a default one is imposed.

In both countries, there are, broadly, three types of MPR.

• Separation of assets: each spouse retains full ownership of their assets. Only assets belonging to the deceased spouse form part of their estate. This is similar to the English law position.
• Community of assets: some or all of the assets belong to the marital community, and not an individual spouse. Community assets, even if in the name of one spouse only, require both spouses’ agreement for their management and disposal.
• Participation of acquests (gains): a hybrid regime in which the assets and their management remain with the individual spouse, although each spouse is entitled to half the value of the assets defined as acquests at the time of the dissolution of the MPR.

Prior to winding up an estate, and regardless of the law applicable, it is necessary to liquidate the MPR. If the deceased was married under a community of assets, 50 per cent of the common assets will be transferred to the surviving spouse and the remaining 50 per cent will form part of the estate.

The position in France and Spain

The French default MPR is a community of acquests (communauté des acquêts), in which all assets acquired onerously after the marriage form part of the community; by contrast, those acquired prior to the marriage or by gift / legacy are the individual spouse’s property.

British couples that marry after 29 January 2019 will no longer be able to have an MPR from a member state that has signed up to the MPR Regulation, unless they meet one of the connecting factors

The second most common form of community is a ‘universal’ community (communauté universelle), so called because all assets of both spouses, however, whenever and wherever acquired, form part of it. A universal community will often include a clause which transfers all the assets to the surviving spouse on the first death.

In Spain, the situation is slightly more complicated. The default regime is a community of assets very similar to the French community of acquests; however, this does not apply to the entire country. Certain regions have a different MPR that applies by default, such as Cataluña and the Balearic Islands, whereby the default regime is a separation of assets.

In Spain, it is compulsory that the married couple register their MPR in the Civil Registry. When acquiring property in Spain, their MPR must be recorded in the title deeds to the property.

International couples

So, what happens when a British person marries a French or Spanish person? Do they have an MPR?

The Spanish conflict of law rules contained in the Spanish Civil Code state that the law that shall govern a marriage will be:

a) the law of the common nationality of the parties or, failing this,

b) the law of the nationality or place of residence of either of the parties (specifically chosen in a deed)

c) in the absence of (a) and (b), the law of the place where the couple had their first joint permanent residence after their marriage

d) in the absence of (a), (b) and (c), the law of the place where the marriage took place.

For instance, James (a British national) marries Carmen (Spanish) in London. They have their first joint residence in Madrid, so their marriage will be governed by Spanish law. This would imply that they would have an MPR of a community of assets, unless they state otherwise. This means that James’ and Carmen’s salaries and any income received during their marriage will be treated as commonly held assets. Any property that they acquire individually after their marriage will also be considered as a commonly held asset, unless they declare that the asset is held exclusively by one of them (bien privativo).

According to French conflict of law rules (Hague Convention on Matrimonial Property Regimes of 14 March 1978), if the couple does not elect to choose the law they want to apply to their marriage (which happens fairly often in the case of couples of different nationalities), it will be that of the couple’s first joint habitual residence; in the absence of a joint habitual residence, the joint nationality of the parties; and in the absence of both, the law of the country with which the spouses are most closely connected.

The new regulations

Both new EU regulations cover: conflicts of law, which law should apply, jurisdiction, and enforceability. In terms of the applicable law, the position is similar to that under Brussels IV: the law applicable by default will be the spouses’ first common habitual residence after the marriage; failing that, their common nationality; failing that, the country with which the spouses have jointly the closest connection at the time of their marriage, taking into account all circumstances.

However, the spouses can elect either the law of the country of one spouse’s habitual residence at the date of the agreement, or the law of the country of one spouse’s nationality at the date of the agreement. The MPR Regulation will only apply to those spouses who marry after 29 January 2019.

Complex situations

We frequently encounter British couples with French property who have been advised to enter into a communauté universelle for their French property. However, this can be a dangerous exercise where one of the spouses has children from a previous marriage. The French Civil Code allows the children of a first marriage to limit what the non-parent spouse receives from their parent under an MPR. This will have effect regardless of English law being applied to the deceased’s estate, as the MPR will have to be liquidated prior to winding up the estate.

In Spain, a British couple that has no connection to Spain other than having property there will not be able to elect any Spanish MPR. The Spanish Civil Code states that modifications to an MPR shall be valid if these are made in accordance with the law governing the marriage. In a property purchase, a Spanish notary will refer to the fact that in England and Wales there are no MPRs, but the Spanish equivalent would be that of a separation of assets regime.

The situation has changed with the MPR Regulation coming into force. British couples that marry after 29 January 2019 will no longer be able to have an MPR from a member state that has signed up to the MPR Regulation, unless they meet one of the connecting factors, such as being jointly habitually resident in that country, being a national of that country or having any closest connection to that country.

The new MPR Regulation no longer allows for a separate MPR relating solely to foreign land. British couples that have married after 29 January 2019 will no longer be able to have a French MPR if their only connection with France is owning property there. It is also worth mentioning that the regulation will also apply to couples wishing to change their MPR who were already married prior to 29 January.