Dividends from a French SCI and Quasi-Usufruct: Who Gets the Sale Proceeds?

In Paray-le-Monial, a family has held shares in a French SCI (société civile immobilière) for decades. The father, the usufructuary (the person entitled to use the property and receive its income), and the children, the bare owners (those who own the property but cannot use it while the usufruct lasts), share the rental income. But one day, the SCI sells all its buildings. The money goes into the company's coffers. The usufructuary wants to distribute this proceeds as dividends. The bare owners cry abuse. Who is right?

You may ask this question if you are in a situation of démembrement (split of ownership between usufruct and bare ownership). The answer is simple: unless there is a written agreement, the dividend taken from the sale price belongs to the bare owner; the usufructuary only has a quasi-usufruct (right to use the sum but obligation to return it at the end of the usufruct) over that sum. And importantly, the usufructuary does not commit abuse by voting for this distribution.

Detailed explanation of this decision handed down by the French Supreme Court on 19 September 2024, which secures the practices of SCIs and clarifies the rights of each party.

The Facts: A Story That Happens Every Day

Ms [F], usufructuary of 3,135 shares in an SCI, and Mr [F], bare owner of the same shares, are in dispute. The SCI owns a substantial property portfolio. In 2017, it sells all its real estate assets. The sale proceeds are placed in a current account. Then, in 2018, the usufructuary takes part in a general meeting that decides to distribute these proceeds as dividends. Mr [F] considers this distribution an abuse of usufruct (excessive use of her rights by the usufructuary) and sues his mother to have her usufruct extinguished and to obtain damages.

The tribunal de grande instance of Chalon-sur-Saône, then the cour d'appel of Dijon, dismiss his claim. Mr [F] appeals to the Supreme Court. He argues that his mother abused her right by distributing sums from the sale of real estate assets, which normally belong to the bare ownership, not the usufruct.

The French Supreme Court, in its judgment of 19 September 2024, dismisses the appeal. It confirms that the usufructuary did not abuse her right: the dividend taken from the sale proceeds belongs to the bare owner, because the usufructuary only has a quasi-usufruct over the distributed sum. In other words, she has the right to use the money, but must return it at the end of the usufruct. Voting for its distribution is therefore not an abuse.

The Reasoning of the Court — Explained

The French Supreme Court relies on Articles 578 et seq. of the Civil Code, which define usufruct (right to enjoy property) and bare ownership (right to dispose of the property). It recalls a fundamental principle: in the absence of a special agreement between the bare owner and the usufructuary of shares, the dividend taken from the proceeds of the sale of all the real estate assets of an SCI belongs to the bare owner. Why? Because the sale proceeds replace the sold building: they are therefore themselves a bare ownership asset. The usufructuary can only receive the interest (or, in this case, a quasi-usufruct over the sum, i.e., a right of use with an obligation to return).

The reasoning is as follows: the distribution of dividends from this proceeds merely transfers to the shareholders a sum that, in the SCI's assets, represents the value of the sold buildings. The bare owner, as owner of the capital, must receive this value. The usufructuary only manages the sum temporarily. He or she therefore does not commit abuse by voting for the distribution, since it does not unduly benefit him or her: it benefits the bare owner.

This decision confirms previous case law (notably Cass. civ. 3e, 12 July 2018, n° 17-21.660) but clarifies the specific case of dividends from the sale of assets. It dismisses the argument of abuse of usufruct, which could have been upheld if the usufructuary had used the sum for personal purposes without consideration. Here, the distribution is in the company's interest and does not harm the bare owner, who ultimately recovers the value of the buildings.

What This Changes for You — Practically

For the bare owner of SCI shares: This decision reassures you: if the SCI sells its buildings and distributes the proceeds, you are entitled to that dividend. The usufructuary cannot keep it. However, if the usufructuary receives the sum and consumes it (e.g., by using it for everyday expenses), he or she must return it at the end of the usufruct. You therefore have a claim against him or her. To avoid disputes, provide for a written agreement specifying the fate of sale proceeds.

For the usufructuary: You can vote for the distribution without fear of being accused of abuse. But be careful: the sum you receive is a quasi-usufruct. You must keep it or invest it prudently, because you must return it to the bare owner upon your death or at the end of the usufruct. If you spend it all, you leave a debt to your heirs. Example: in Digoin, an SCI sells a building for €300,000. The usufructuary receives €150,000 in dividends. If he uses it for personal renovations, the bare owners can claim that sum from his estate.

For real estate professionals (notary, lawyer, adviser): This decision clarifies the allocation of rights in case of démembrement. It encourages drafting SCI articles or usufruct agreements specifying the fate of exceptional proceeds (sale of assets, capital gains). Without a clause, the bare owner has priority over the capital, the usufructuary over current income (rents).

Four Tips to Avoid This Type of Dispute

• Draft a usufruct agreement. Before any transaction, provide in writing who benefits from dividends from the sale of assets. You can provide for a proportional sharing or a different allocation depending on the amounts.
• Keep records of meeting decisions. If you are a bare owner, insist that the distribution be voted at a general meeting and that the minutes mention the allocation of sums. This will avoid later challenges.
• If you are a usufructuary, do not consume the quasi-usufruct. Place the sums received in a dedicated account, or invest them in non-consumable assets (real estate, shares). This way, you can return them in kind or in value.
• Consult a specialist lawyer before any significant sale. In Paray-le-Monial as elsewhere, legal advice in advance will save you years of litigation. Maître Zakine can help you draft a suitable agreement.

Further Reading: Related Case Law and Developments

This decision fits into a consistent line of case law. In a judgment of 12 July 2018 (n° 17-21.660), the French Supreme Court had already held that the sale price of a property encumbered with a usufruct belongs to the bare owner, the usufructuary only having a right to the interest. Here, the transposition to shares is logical: the dividend replaces the sale price and follows the same regime.

On the other hand, a judgment of 13 May 2020 (n° 19-11.432) sanctioned a usufructuary who had used dividends for personal needs without returning them. The present decision specifies that merely voting for the distribution is not an abuse, but the actual use of the sums may be. Courts will therefore distinguish between the vote (lawful) and the use of the funds (which must respect the quasi-usufruct).

In the future, expect judges to be more attentive to the allocation of distributed sums. Usufruct agreements will be increasingly recommended to secure transactions.

Summary and Next Steps

Question: As a bare owner, can I demand the dividends from the sale of the SCI's buildings?
Answer: Yes, unless otherwise agreed. The usufructuary cannot keep them; he or she only has temporary use.

Question: Does the usufructuary commit abuse by voting for the distribution of these dividends?
Answer: No, according to this decision, as long as the distribution is regular and the usufructuary respects his or her obligation to return.

Question: What if the usufructuary has already consumed the sums?
Answer: You can take legal action to obtain compensation at the end of the usufruct, from the usufructuary's estate. Keep evidence of the distribution.

Question: Can I provide for a different allocation in the SCI's articles?
Answer: Yes, a clause in the articles or a usufruct agreement can modify the legal rule. Have a lawyer assist you in drafting it.

Question: What are the time limits for taking action?
Answer: The action for liability against the usufructuary is barred after 5 years from the distribution. For restitution, the time limit runs from the end of the usufruct (death or renunciation).

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of litigation — and often much more. Book an appointment →