The word tontine comes from Lorenzo Tonti, a Neapolitan banker who proposed this system to Mazarin: each subscriber paid a sum into a fund and received dividends on the capital invested. When a subscriber died, his or her share was divided between the survivors.
In positive law, the " pacte tontinier " has become an agreement by which two or more people acquire a property jointly or severally, stipulating that the purchasers have joint enjoyment of the property acquired, but that ownership will ultimately devolve only to the survivor of one of them. In this way, each of the purchasers acquires full ownership of the property, but subject to a double condition: a suspensive condition of survival of the co-purchaser and a resolutory condition of pre-death. Under this mechanism, only the survivor owns the property and, because the condition is retroactive, is deemed to have owned it from the date of acquisition.
The principle is that several people buy a property together, usually a building, with the provision that on the death of one of them the property acquired becomes the exclusive property of the survivor(s), and this retroactively. Tontine purchases are usually made by two people, but technically they can be made by more: as each person dies, the property becomes the property of the survivors, until it becomes the exclusive property of the last survivor. The last survivor is then deemed to have been the sole owner of the property since the purchase, and the predeceased are deemed never to have had any rights to the property.
Unseizability as a consequence of the tontine agreement
The tontine agreement does not, of itself and by operation of law, render the property acquired by means of this technique legally inalienable. This is not the primary purpose of the clause.
Nevertheless, creditors' general pledge only allows them to seize rights relating to full ownership or usufruct of an asset, and only exclusive rights. In the case of a property acquired under a tontine arrangement, the tontine holders do not have exclusive ownership rights during their lifetime, but merely conditional rights. Their exclusive property rights will exist retroactively on condition that they survive their co-buyers. Any act of disposal will then require the agreement of all the joint purchasers.
This means that the creditor of one of the joint purchasers under a tontine will not be able to seize the property because the true owner of the property will not be determined until the situation is resolved by the survival of one of the joint purchasers. It is only when one of the joint purchasers dies that it will be known who the true owner has been all along. Until then, the joint purchasers have only conditional rights.
However, this does not work when the creditor has a claim against all the tontine holders. In this situation, the creditor will undoubtedly be able to seize the property in the same way as a creditor in a joint ownership arrangement.
For example, a business owner who wishes to protect a privately used property from seizure in order to protect it from business risks can use a tontine clause in his deed of purchase. In the first instance, this requires him to buy the property with at least one other person. The main or second home could then be purchased with his or her civil union partner or spouse. The property will be temporarily exempt from seizure (until the first death of one of the joint purchasers). Of course, this tontine clause will not prevent the company director from creating a real security interest in the property, such as a mortgage. This will require the agreement of all the tontine holders. This security will make the property seizable by creditors.
However, this type of unseizability is not without danger, which is why, before signing such an agreement, the company director should be aware of the dangers and disadvantages that accompany it, which can prove very restrictive.
The dangers and disadvantages of such a solution
Apart from the tax disadvantages, the major drawback of the tontine is the deadlock it can create if there is a disagreement between the tontine holders. The clause can only be terminated by the unanimous agreement of all the tontine holders. This means that all tontine purchasers can agree to waive the increase clause and revert to a conventional joint ownership system.
But in the event of disagreement, the situation becomes dramatic because everyone is supposed to be the owner of the whole. And if one of them refuses to sell, there is no other way but to wait until the other dies. The judge will not be able to unblock the situation, and no co-purchaser will be able to force the others to share (unlike joint ownership). The parties concerned are therefore caught in a trap.
However, there is nothing to prevent the tontine holders from specifying, from the outset, that certain events, listed exhaustively, will put an end to the random agreement entered into and allow partition to take place. The principle of freedom of contract authorises such a solution. The tontine holders would then avoid the risk that, in the event of disagreement reaching its climax, the situation created by the clause could turn into a trap with no way out. For example, a formula could be proposed whereby divorce automatically terminates the accretion or tontine clause. Similarly, some practitioners propose a clause of limited and renewable duration. There is no reason to condemn this variant: the element of uncertainty exists, but it is limited to a specific period, fixed in advance by the parties.
-In addition, although the tontine clause prevents the property from being seized, the rights of creditors must not be prejudiced when the property is acquired. A particular feature of joint acquisition with a clause d'accroissement or tontine is that it does not result in any quantitative impoverishment of the debtor. It does remove money from the debtor's assets, but in return it adds property rights. Nevertheless, these rights remain unseizable. However, doctrine and case law allow a paulian action to be brought against a deed that replaces, in the debtor's patrimony, an easily seizable asset with another that is difficult for creditors to seize. The clause certainly meets this criterion since it leaves the creditor without any prerogative. The creditor's prejudice, a condition for exercising the action paulienne, is therefore characterised.
Thus, if their claim arose prior to the tontine agreement and is, moreover, certain, liquid and due, the creditors may then use the action paulienne to render the clause unenforceable. Creditors will then be able to use the action paulienne to render the clause unenforceable, but they will still have to prove genuine fraud involving a desire on the part of the tontine holder to reduce his assets and an intention to cause harm.
If the business owner wants to protect his private assets from his professional creditors, he will have to be very careful if he already has creditors at the time of his acquisition.
In conclusion, the tontine clause can be useful for protecting assets only in certain specific cases. To do this, the company director must buy a property with his or her civil union partner or spouse who is separated from property, to avoid excessive taxation. The financing must be equal in terms of age. Above all, however, the company director's attention should be drawn to the serious risks of deadlock in the event of disagreement, and clauses should be included to avoid this (a tontine clause of limited and renewable duration, etc.).