Equalising payment (soulte)

When a property cannot be divided in kind, one of the parties keeps it and pays the others the share due to them: that sum is the soulte (equalising payment). It appears in almost every liquidation involving a home: divorce, inheritance, the end of indivision (joint ownership) between unmarried partners or between business associates. The French Civil Code lays down the principle that equality in partition is equality in value; where the composition of the mass does not allow lots of equal value to be formed, their inequality is offset by an equalising payment.

The amount of the payment therefore depends on three inputs: the value of the property allocated, the liabilities attached to it (outstanding loan capital, for example) and each party’s rights in the mass. The value is that of the property at the date closest to partition, which gives the valuation date its full importance.

Where the rule comes from

Articles 826, 828, 829 and 834 of the French Civil Code organise the equalising payment: equality in value, valuation of the assets at the date closest to partition, payment in cash in the case of preferential allocation unless otherwise agreed, and revision where the debtor has been granted time to pay and the value of the property has varied by more than one quarter since partition. Article 1476 makes these rules applicable to the partition of the community of property between spouses. Partition duty is provided for in article 746 of the French General Tax Code.

In a valuation report

I do not fix the equalising payment: the notaire (French civil-law notary) or the judge does, after settling the mass and each party’s rights. What I provide is the value of the property at the date requested, as a range and as a single figure, and, if necessary, a value at another date (the date of separate enjoyment fixed by the judge, the date of the divorce petition for certain claims). Where one spouse has carried out works or occupies the property, the report gives the ancillary figures: value without the works for a récompense (compensation between spouses), rental value for an occupation indemnity. In a joint private valuation, both parties receive the same report, which confines the discussion to the value itself.

Example

Divorce, family home valued at €280,000 at the date closest to partition, outstanding loan capital €60,000, equal rights. Net assets: €220,000, that is €110,000 each. The spouse who keeps the house takes over the loan and pays an equalising payment of €110,000. Had the house been taken at €250,000 on the basis of an old estimate, the payment would have been €95,000: the €15,000 difference is the cost, to the other spouse, of a value that was not brought up to date. A joint private valuation avoids this kind of gap.

Not to be confused with

The récompense is a claim between a spouse and the community, calculated under article 1469; it enters the mass before the equalising payment is calculated. The occupation indemnity pays for the exclusive enjoyment of a jointly owned property. Licitation (court-ordered sale) is the sale of the property, which replaces the equalising payment when nobody keeps it.