When assets are held jointly, whether as a result of inheritance, divorce or joint acquisition, debt management can quickly become a source of complexity and conflict. For creditors, identifying the right debtor and the assets that can be seized is a major challenge. Although joint ownership has no legal personality, it has its own liabilities, distinct from those of the joint owners. French law therefore provides a specific and particularly effective mechanism for joint tenancy creditors: the right of levy. Understanding this prerogative is essential if you are to secure the recovery of your debt. This article is part of the study of general framework of the rights and obligations of undivided creditorsby focusing on the drivers of this priority payment right.
The concept of 'levy' in joint ownership: a special meaning
In the everyday language of inheritance and matrimonial property law, the term "levy" generally refers to the act by which an heir or spouse takes a sum of money or property from the estate to be shared in order to pay what is owed to him or her. However, when article 815-17 of the Civil Code grants creditors of undivided co-ownership a right to 'draw on the assets before partition', it gives it a very different meaning and considerable scope.
Definition and origin (Frécon ruling)
This right to take samples has its roots in a long-standing body of case law, notably enshrined in the Frécon of 1912. The principle is as follows: until partition, the deceased's assets remain the sole and indivisible pledge of his creditors. In other words, for the creditors of the succession (and by extension, of any joint estate), the mass of undivided property remains an autonomous asset assigned as a priority to the settlement of their claims. The "levy" is therefore not the act of taking a specific asset, but rather the consecration of a priority right to payment. Creditors of the undivided co-ownership have the right to be paid out of the undivided assets before they are distributed among the undivided co-owners, and above all, before their personal creditors.
Distinction from the levy on co-partitioners
It is essential not to confuse this right of creditors to levy with levy in the classic sense of the term, which is a division operation. A co-partitioner (an heir, for example) who is also a creditor of the undivided estate may, as part of the liquidation, deduct an asset or sum from the estate in order to repay himself. This is a form of partition. Conversely, the right to deduct under article 815-17 of the Civil Code is exercised by a creditor (who may be a third party or an undivided co-owner acting as such) and constitutes an act of payment which takes place *before* any division operation. As the third-party creditor is not a co-partitioner, his action cannot be analysed as a means of distributing the property.
Terms and conditions for exercising the right of withdrawal
There are specific conditions governing the exercise of this priority right, both in terms of the creditors who can benefit from it and the way in which it can be exercised.
Who can benefit (previous creditors, conservation/management claims)
Article 815-17 of the Civil Code defines two main categories of joint tenancy creditors who may avail themselves of the right of levy:
- Creditors prior to joint ownership These are those "who could have acted on the undivided property before there was indivision". The most common example is that of the creditors of a deceased person, whose debts existed before his estate became jointly owned. This also applies to creditors of a marital community dissolved by divorce, who can take action against the property of the post-communal joint ownership.
- Creditors whose claims arise from the conservation or management of undivided property Joint ownership debts: this category covers debts incurred during the period of joint ownership, but which are directly related to the property itself. Such debts may include an invoice from a tradesman who has carried out urgent repairs to an undivided property, or an undivided co-owner who has used his or her personal funds to pay property tax or co-ownership charges on behalf of the undivided co-ownership.
What assets does it apply to (cash, assets in kind)?
The right of levy is exercised first and foremost on the cash available in the undivided estate. If the undivided estate contains sufficient funds in a bank account, creditors may ask to be paid directly from these sums. This is the simplest and quickest way.
However, if the joint ownership does not have the necessary liquidity, the rights of the joint ownership creditors take on a different dimension. They can "pursue the seizure and sale of undivided property". This prerogative extends to all assets, whether movable (a portfolio of securities, a vehicle) or immovable. The pledge of the undivided co-ownership creditor relates to all the undivided assets, not just the share of one or other of the owners.
Need for agreement of undivided co-owners or recourse to enforcement measures
The practical implementation of the levy depends on whether or not there is a consensus between the co-owners. If all the co-owners recognise the debt and agree to pay it from the undivided funds, payment can be made voluntarily, without excessive formality. In practice, however, the agreement of a third party holding the funds (a bank, for example) will often require everyone to sign.
In the event of disagreement or inertia on the part of one of the joint owners, or in the absence of liquid assets, the creditor has no choice but to resort to compulsory enforcement. The creditor will have to obtain a writ of execution (a judgment of condemnation) and then proceed to seize the sums of money or, in the most extreme case, to initiate a foreclosure to force the sale of the undivided property. The law does not make the right of levy conditional on an agreement, but resistance from the undivided co-owners forces the creditor to take legal action to enforce it.
The practical consequences of the levy for joint ownership
The exercise of the right to levy by joint tenancy creditors has direct and significant repercussions on the undivided estate, on the rights of the joint tenants and also on the situation of other creditors who may be involved.
Payment of creditors before any division
The most direct consequence of the right to levy is that it ensures that the joint-ownership creditors are paid before any distribution of assets between the joint-owners. The joint ownership's liabilities are paid upstream. This means that the net assets that will ultimately be shared between the joint owners will be those remaining after payment of all these debts. The joint owners will only share the balance, if any. This priority is a powerful protection mechanism for those whose claim arose from the assets prior to joint ownership or from their management.
Impact on the undivided estate and other creditors
The levy logically reduces the value of the undivided assets. This has a major impact on the personal creditors of the undivided co-owners. These creditors can only seize assets that are actually allocated to their debtor after partition. By reducing the amount to be divided, the levy taken by the joint-ownership creditors reduces the potential pledge of the personal creditors.
The law establishes a very clear hierarchy: joint ownership creditors take precedence over the personal creditors of the joint owners. This precedence is so strong that case law considers that a joint-ownership creditor, even one with no specific guarantee (unsecured), will be paid before a joint-owner's personal creditor who holds a mortgage on the debtor's undivided share. In the event of a compulsory sale, the mechanisms of judicial distribution of the sale price will respect this absolute priority.
Impact of the levy on the division of property
The right to levy, although closely linked to the phase of liquidation of joint ownership, must not be confused with the sharing operations themselves. This distinction has specific legal consequences.
Direct debit is not a sharing operation
Case law is consistent on this point: payment of a creditor from the undivided assets is an act of settling liabilities, not an act of partition. Consequently, the rules specific to partition, such as the declaratory effect (under which each co-sharer is deemed to have always been the owner of the property allocated to him or her) or the possibility of an action for rescission on the grounds of lesion (if a co-sharer has received a lot worth more than a quarter less than his or her rights), do not apply to this transaction. The aim is to settle the debts of the estate before determining what is actually divisible.
Effect on the guarantees and rights of undivided co-owners
The right to levy is a prerogative that is exercised for as long as the indivision lasts. Once the division has become final, this right lapses in respect of the property that has been allocated. Joint-ownership creditors who have not acted in time lose their priority claim on assets that have now become the exclusive property of a joint owner. They will then have to divide their claims between the former joint tenants, who will become mere personal debtors.
For the undivided co-owners, the consequence is mathematical: their rights in the division will only be calculated on the basis of the net assets, i.e. after deduction of all the undivided co-ownership debts. Their final share (or emolument) may therefore be considerably reduced, or even wiped out if the liabilities absorb all the assets.
The case of an undivided co-owner who is a creditor: can he or she take advantage of the right of direct debit?
A particular and frequent situation is where one of the undivided co-owners is himself a creditor of the joint ownership. This happens, for example, when he or she has used personal funds to finance the work required to maintain an undivided asset, or has paid off the instalments of a joint loan on his or her own.
Specific conditions for the undivided co-owner creditor
An undivided co-owner who has a claim on joint ownership (under Articles 815-12 or 815-13 of the Civil Code) has an option. Traditionally, the claim is entered in the joint ownership account and will be settled when the property is divided. However, case law gives him the option of acting not as a co-sharer, but as an ordinary creditor. He may thus choose not to wait for partition and demand immediate payment of his claim, putting himself in the same position as a third-party creditor.
Terms of repayment from undivided assets
By choosing to act as an undivided co-ownership creditor, the undivided co-owner benefits from all the prerogatives attached to this status. He may therefore demand to be "paid out of the assets before partition". In practical terms, this means that they can demand repayment of their claim from the undivided co-ownership's liquid assets. If they refuse, or if the funds are insufficient, they are entitled, like any other creditor, to take legal action to cause the seizure and sale of an undivided asset in order to be paid out of the price. This possibility gives diligent joint owners effective leverage to obtain repayment of the advances they have made in the interests of the estate.
The right of levy is an essential legal weapon for joint tenancy creditors, but its implementation can give rise to practical difficulties, particularly where there is disagreement between the joint tenants. The assistance of a lawyer is often essential to initiate the appropriate procedures and ensure that the debt is effectively recovered. If you are faced with such a situation, the expertise of a lawyer specialised in enforcement is a decisive factor in asserting your rights.
Sources
- Civil Code, in particular articles 815 to 815-18
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