Real-estate fiducie

The real-estate fiducie is the operation by which a settlor temporarily transfers ownership of a building (or of shares in a real-estate company) to a fiduciary who holds it in a separate pool of assets, for a purpose of security, management or transfer for the benefit of one or more beneficiaries. Governed by articles 2011 to 2030 of the Civil Code, it offers an enforceable asset segregation, a sought-after tax neutrality and an extra-judicial realisation mechanism in the event of default.

The security fiducie has three major advantages over the mortgage: (i) fast extra-judicial realisation in the event of default, appropriation or direct sale by the fiduciary, without real-estate seizure proceedings; (ii) resilience to the settlor's insolvency proceedings, the asset held in fiducie, isolated in a separate pool of assets, escapes the creditors' common pledge; (iii) tax neutrality on creation, no transfer duties for consideration in most configurations. The cost of creation is, however, higher than a conventional mortgage. Detailed comparisons on fiduciesurete.com.

Yes, in most configurations. On creation, the transfer of assets into the fiducie in principle triggers neither transfer duties for consideration (French Tax Code 668 bis et seq.) nor a taxable capital gain at the level of the settlor. The fiducie assets are transparent for VAT and corporate tax, taxation remaining at the level of the settlor (French Tax Code art. 223 V to 223 VG). On liquidation or retransfer, the return to the settlor is also neutral. A case-by-case analysis remains essential, in particular as regards the IFI and the 3% tax.

Yes. The fiducie can cover any type of asset, directly held buildings or shares in real-estate companies (SCI, real-estate SAS, SCPI). The fiducie over SCI shares is frequently used because it offers the same advantages as the fiducie over the building itself while simplifying rental and legal management. The applicable legal regime is that of the fiducie over movable assets (Civil Code art. 2372-1 et seq.), distinct from the direct real-estate fiducie (art. 2488-1 et seq.).

In the event of default by the secured debtor, the security fiducie allows the fiduciary to transfer ownership of the asset to the beneficiary, or to sell it to a third party, according to the terms provided in the contract. The value of the asset is determined by adversarial valuation. The fiduciary applies the proceeds against the secured claim; any surplus (balancing payment) returns to the settlor. This realisation takes place without prior recourse to the court and withstands the settlor's insolvency proceedings, which is the main strength of the mechanism.

The capacity of fiduciary is reserved to professionals: credit institutions, investment firms, insurance companies, pension institutions, the Public Treasury, the Banque de France, lawyers (Civil Code art. 2015). The choice of fiduciary is crucial: it must offer the solvency, operational rigour and legal coordination required by the transaction. BENSAID Avocats supports both settlors and fiduciaries in setting up the structures.

The fiducie is entered into for a fixed term, which may not exceed 99 years from its creation (Civil Code art. 2018). In practice, the duration is set according to the purpose: the term of the financing for a security fiducie, the term of the holding or management mandate for a management fiducie. On expiry, the asset returns to the beneficiary (or to the settlor in the absence of default). An early liquidation is always possible by agreement of the parties.

The 3% tax (French Tax Code art. 990 D to 990 H) taxes legal entities holding French real estate. The fiduciary may be regarded as the entity liable, but practice favours a transparency analysis tracing back to the settlor or the beneficial owners, in particular in order to benefit from the 990 E 4° exemption through an undertaking to disclose the shareholding. Compliance with the reporting obligations (form 2746) is essential: see our page 3% tax.