Compensation between spouses (récompense)

Under the French community of property regime, three estates coexist: the separate property of each spouse and the community property. When money passes from one to another, for instance when the community repays the loan that financed works on a house owned separately by one spouse, or when a spouse uses an inheritance to buy a community asset, the law restores the balance at liquidation by a récompense (compensation between spouses).

Its amount follows a three-step rule. In principle, the compensation is equal to the lower of the two sums represented by the expense incurred and the remaining benefit. It may not be less than the expense incurred where that expense was necessary. And it may not be less than the remaining benefit where the value borrowed was used to acquire, preserve or improve an asset that is still, at the date of liquidation, in the borrowing estate. It is this last case that calls for a valuation.

Where the rule comes from

Articles 1433 and 1437 of the French Civil Code lay down the principle of compensation in both directions; article 1469 sets its amount and specifies that the remaining benefit is assessed at the date of liquidation. Article 1479 extends the remaining benefit rule to claims between spouses. For works financed by the community on a spouse’s separate property, the Cour de cassation (French supreme court for civil and commercial matters, First Civil Chamber, 23 May 2024, appeal no. 22-18.911) set the formula: compensation = (A − B) × C / D, where A is the value of the property at the date of liquidation, B its value at the same date without the works, C the sum financed by the community and D the total cost of the works at the time they were carried out, labour included.

In a valuation report

I provide the values; the notaire (French civil-law notary) or the judge applies the formula. I establish the market value of the property at the date closest to liquidation (A), then the hypothetical value of the same property, at the same date, in the condition it would be in without the works or without the financed acquisition (B): bare land for a new build, an unrenovated house for a renovation, from comparables of properties in need of renovation. Finally I reconstruct the total cost of the works at their date (D), from quotes, invoices and construction prices of the time, including labour even where the spouse did the work personally. The report presents these three figures, their sources and the assumptions, so that each item can be discussed.

Example

House owned separately by the husband, worth €340,000 at the date of liquidation (A). Without the extension and renovation carried out during the marriage, the same house would be worth €220,000 (B). Total cost of the works at the time, labour included: €100,000 (D), of which €60,000 was repaid by the community (C). Remaining benefit: (340,000 − 220,000) × 60,000 / 100,000 = €72,000. The expense incurred is only €60,000, but the compensation may not be less than the remaining benefit: it is €72,000. If the husband had carried out part of the works himself, D would have been reconstructed with the labour he did not pay for, and the community’s share would have fallen accordingly.

Not to be confused with

The soulte (equalising payment) offsets unequal lots at partition; the compensation is settled beforehand, in the liquidation account. The occupation indemnity pays for the exclusive enjoyment of a jointly owned property after dissolution. The hotchpot of gifts concerns inheritance, not matrimonial property regimes.