What happens to a holiday home when the property owner becomes incapacitated?

Many of your clients may own second homes abroad, with France and Spain being popular locations. When your clients bought their holiday home they may have given some thought to what happens to the property on their death, especially in view of the forced heirship regimes which apply in many European countries, in contrast to the relative testamentary freedom in England and Wales. They may not, however, have considered the situation should the property owner become incapacitated in later life.

When incapacity strikes

If a person who normally lives in England and Wales becomes incapable of dealing with their financial affairs, then their appointed attorney under a registered lasting power of attorney (LPA) or enduring power of attorney (EPA) steps in to take over. If there is no attorney appointed under an LPA/EPA then an application to the court will be made for the appointment of a deputy who will take on the task of looking after the incapacitated person’s finances.

So far so good, but what is the position if the incapable person owns a property in say France?

The Hague Convention XXXV on the international protection of adults

The Hague Convention XXXV was drawn up to produce some clarity on the questions of jurisdiction, applicable law and recognition of foreign court orders in this area of the law. Convention XXXV came fully into effect in 2009. Britain is a signatory to Convention XXXV but, crucially, it has not ratified it except for in Scotland. The Mental Capacity Act 2005, however, contains provisions that virtually mirror the provisions of Convention XXXV. One of the effects of this is that the court of protection has jurisdiction in relation to a person who normally lives (“habitually resides”) in England and Wales and over their property (wherever that may be).

Because the UK has not ratified Convention XXXV as far as England and Wales is concerned certain provisions in the Convention as to the automatic recognition of orders made by other Convention states do not apply. It is therefore possible that the jurisdiction in which the holiday property is located may not automatically recognise a court of protection order without a confirmatory order of the appropriate court in its own jurisdiction. This will inevitably cause delay and additional costs for the incapable person and their family. By comparison, if the UK had ratified the Convention the court’s order would be automatically recognised in other ratifying Convention countries such as France.

Similarly as far as LPAs and EPAs are concerned, the law applicable to them will be the law of the country where the incapable person normally lives, but problems still exist as to whether the LPA or EPA will be recognised by the authorities where the property is situated.

Take advice

When acquiring a property abroad your client should take local advice about what would happen if they later became incapable and the best advice is to make the local equivalent of an LPA in every jurisdiction in which the client owns property. If this is not possible it would be advisable for the English LPA to record the fact that the donor is habitually resident in England and Wales and to nominate the law of England and Wales as the applicable law.