An accretion clause in a purchase transaction is a useful tool for succession planning, where the surviving party becomes full owner of the property. Consider, for example, favouring your partner or family.
What is a stipulation of accretion or a tontine for real estate?
A stipulation of accretion or tontine is an agreement in which two or more persons transfer their undivided share in a particular asset to the other party or parties on the condition precedent that the other party lives the longest. The relinquishment and transfer of the share in the property from one party to the other is done in exchange for an "opportunity", thus qualifying a clause of accretion as an opportunity contract.
An example. Patrick and Elke each buy a property 50/50 and include an accretion clause in the notarial deed. The surviving partner acquires the deceased's share. Suppose Patrick dies first, Elke acquires Patrick's share and becomes owner for 100%.
How is a stipulation of accretion or tontine viewed in Flanders?
There are two possibilities. A clause of accretion or tontine may qualify as a opportunity contract with a quid pro quo when the odds are balanced. The parties involved should have similar life expectancies and inputs.
The clause of accretion or tontine may also qualify as a opportunity contract without consideration. This is basically a gift. For example, there is a big age difference , one of the parties has a serious illness or one of the parties has a dangerous job.
An example: Patrick is 35 and Elke is 89 and enter into a stipulation of accretion when buying a property. It is realistic, perhaps probable, that Elke will not live as long as Patrick. There is then a contract of chance without consideration. Elke actually donates her share of the property to Patrick.
What are the tax implications in Flanders?
If you buy property in Flanders with a stipulation of accretion and this qualifies as an opportunity contract with consideration, in principle a sales charge is due on half the value of the property. Today, the rate for a property other than sole and own home is in principle 12%. For property abroad, no sales duty is due in Belgium.
However, if you buy property in Flanders with an accrual clause and this qualifies as an opportunity contract without consideration, it is in principle a gift under the condition precedent of death. This is then subject to inheritance and gift tax. For real estate abroad, no Flemish gift tax applies provided the donation is not registered in Belgium.
What about a stipulation of accretion or tontine in Spain?
A clause of accretion or tontine is regarded in Spain as an agreement to settle a future inheritance. Such clauses or agreements are fundamentally prohibited under Spanish law.
However, a clause of accretion is possible in Catalonia in accordance with Articles 44 - 47 of the Catalan Código de Familia. According to these articles, spouses married under the system of separation of property can enter into a clause of accretion when purchasing a property. Catalan case-law has extended the interpretation to married couples under the system of community of property and legally cohabiting partners.
The clause of accretion or tontine ends automatically at the end of the relationship. Catalan law does not require special conditions such as equivalent life expectancy to be valid.
Are there other options?
Yes. A tontine is considered part of inheritance and matrimonial property law in Spain. There is legal doctrine that recognises that a tontine is possible in accordance with the law of the country of residence of the purchasers or (with inheritance choice) the law of the country of nationality. So there is no restriction to Catalonia.
In Belgium, a clause of accretion or tontine is of course possible and a common practice. As a result, Belgian buyers can theoretically buy with a tontine based on Belgian legislation. Belgian buyers must then prove in Spain that the Belgian regulations allow such a clause, for example through a declaration by a Belgian notary.
Note: A tontine is rarely used in Spanish practice. Not all, in fact very few, Spanish notaries have experience with a clause of accretion or tontine. The instrumenting Spanish notary of the purchase and sale transaction must first accept the clause.
What about taxes?
With a stipulation of accretion or tontine, the surviving partner pays the registration fee (ITP) on the deceased partner's share.
Decision: stipulation of accretion or tontine in Spain
Belgian buyers can theoretically include a clause of accretion or tontine in their purchase contract. It is important to mention 'in theory'. Very few notaries in Spain are familiar with this construction and it is possible that they refuse to include the clause of accretion or tontine in purchase deed.