SCPI with temporary dismemberment of ownership: mechanics and risks for the investor

A company with a lasting cash surplus rarely wishes to tie it up in an investment that generates income immediately subject to corporate income tax. The temporary dismemberment of SCPI units addresses precisely this need: acquiring the bare ownership (nue-propriété) of discounted units, without receiving any income for several years, and then recovering full ownership when the dismemberment expires. This arrangement, presented as a long-term cash investment, rests on a legal mechanism of the French Civil Code in which each step carries specific consequences. This analysis sets out how dismemberment works when applied to SCPI units, the use case for an institutional investor, and above all the risks that crystallise when full ownership is reconstituted.

Dismemberment of ownership applied to SCPI units: the fundamentals

Usufruct and bare ownership: two separate rights over the same unit

The ownership of an asset comprises three attributes: usus (the right to use it), fructus (the right to receive its fruits) and abusus (the right to dispose of it). Dismemberment consists in separating these attributes between two distinct holders.

Article 578 of the French Civil Code defines usufruct:

"Usufruct is the right to enjoy things owned by another person as the owner himself would, but subject to the obligation of preserving their substance."

The usufructuary (usufruitier) holds the usus and the fructus: in respect of an SCPI unit, he or she receives the distributed income, that is, the rents redistributed by the management company after deduction of costs. The bare owner (nu-propriétaire) retains the abusus: he or she holds the substance of the unit but receives no income throughout the dismemberment. This distinction is central to understanding the arrangement: one party collects income flows, the other builds up capital value. The question of security for a financing granted over the bare ownership alone or over the usufruct alone is dealt with in our article on mortgages and dismemberment of ownership.

SCPIs (sociétés civiles de placement immobilier, or French property investment partnerships) are vehicles governed by Articles L.214-114 et seq. of the French Monetary and Financial Code, the marketing of which is subject to the approval (visa) of the AMF (the French financial markets authority). An SCPI unit is an intangible movable asset, which does not in any way prevent its dismemberment: the rules of the Civil Code on usufruct apply to securities and company rights as they do to real property.

The specific features of temporary dismemberment

Dismemberment may be for life (it ends on the death of the usufructuary) or temporary (it ends on a date fixed in advance). In the case of SCPI dismemberment, the arrangement adopted is almost always temporary, for a fixed term that generally ranges from five to twenty years depending on the offers of the management companies. Common questions on the dismemberment of real property ownership and its use in an estate transfer strategy are covered in our dedicated FAQ.

This temporary dismemberment of ownership offers a major advantage: its expiry date is known from subscription. The bare ownership investor knows precisely when he or she will become full owner again. This predictability makes it a tool for estate planning and cash management, unlike lifetime dismemberment, the term of which depends on an uncertain event, the lifespan of the usufructuary.

Where the usufructuary is a legal entity, Article 619 of the French Civil Code caps the duration:

"Usufruct that is not granted to natural persons lasts only thirty years."

A temporary usufruct over SCPI units therefore cannot exceed thirty years where it benefits a company. In practice, the durations offered remain well below that.

The legal mechanism of temporary dismemberment of SCPI units

The allocation key

The economic core of the arrangement lies in the allocation key, also called the dismemberment key. It is the breakdown, expressed as a percentage, between the value of the bare ownership and that of the temporary usufruct, for a unit worth 100% in full ownership.

This key varies mainly according to two parameters: the duration of the dismemberment and the expected yield of the SCPI. The longer the duration, the more value the temporary usufruct captures, since it entitles its holder to more years of income. Correspondingly, the bare ownership is discounted further. For a short duration, the ratio is reversed: the usufruct is worth less and the bare ownership costs more.

In practical terms, an investor in bare ownership of SCPI units acquires the units at a discount corresponding to his or her share of the key. The investor therefore pays a price lower than the value of full ownership, and will recover that full ownership when the dismemberment expires, without any further payment. The discount is the counterpart of the absence of income throughout the period.

This economic allocation key, freely set by the management company, must be distinguished from the tax scale in Article 669 of the French General Tax Code (CGI). That scale, used in particular for transfer duties, values a temporary usufruct at 23% of the value of full ownership for each period of ten years. The tax scale and the economic key do not necessarily coincide, which may create discrepancies to be monitored for tax purposes.

Allocation of income and rights during the dismemberment

Throughout the dismemberment, the allocation of prerogatives follows specific rules:

• the usufructuary receives all the income distributed by the SCPI, corresponding to the net rents collected by the vehicle;
• the bare owner receives nothing but holds the substance of the units;
• voting rights are shared according to the nature of the decisions: the usufructuary generally votes on the allocation of profits and the bare owner on decisions affecting the substance, unless the SCPI's articles of association provide otherwise.

The SCPI usufruct therefore gives its holder an income flow concentrated over a known period, whereas the bare owner adopts a purely capital-based approach, with no current yield.

One technical point deserves attention: the income distributed by an SCPI is not always limited to property income. An SCPI may distribute financial income derived from its cash holdings, or even capital gains. The dismemberment agreement must specify to whom these different categories belong, in particular exceptional distributions or the liquidation surplus (boni de liquidation) on dissolution of the SCPI.

Duration and legal framework

The expiry of a temporary dismemberment is governed by Article 617 of the French Civil Code, which lists the grounds on which usufruct ends, including "the expiry of the period for which the usufruct was granted". On the agreed date, the usufruct ends automatically, without formality or compensation, and full ownership is reconstituted in the hands of the bare owner.

This mechanism of expiry without compensation is fundamental: the bare owner pays nothing further, and the usufructuary cannot claim any compensation for the value lost. Each party made its calculations at subscription, on the basis of the allocation key.

The use case for the institutional investor: placing long-term cash

Why bare ownership appeals to a legal entity

A company, a family holding company or an association with lasting cash surpluses faces a recurring difficulty: liquid and secure investments yield little, and income-generating investments increase the profit subject to corporate income tax. Acquiring the bare ownership of SCPI units meets this constraint by design.

The institutional investor buys discounted units, receives no income during the dismemberment, and recovers full ownership at maturity. The arrangement turns idle cash into a property investment with a known horizon, with no intermediate taxable flow. It is particularly suited to long-term cash, that is, liquidity that the company knows it will not need to use for several years.

The most telling illustration is that of a family holding company that has just sold a shareholding and has significant capital available. Rather than placing it in instruments generating immediately taxable financial income, it acquires the bare ownership of SCPI units for a period of ten years. During that period, it declares no income in respect of those units. When the dismemberment expires, it holds units in full ownership that produce income, which it can then keep or sell.

Accounting and tax treatment

For a legal entity subject to corporate income tax, the absence of income received during the dismemberment means the absence of a taxable base in respect of those units. This is one of the main drivers of the arrangement. The accounting treatment of the bare ownership and the possible recognition of a discount or depreciation depend on the applicable regime and on the company's choices, questions that must be settled with the chartered accountant and the tax adviser before any subscription.

On the usufructuary's side, the tax treatment is markedly different. Where a person transfers a temporary usufruct for consideration, Article 13, 5 of the CGI provides that the proceeds of that first transfer are taxed in the category of income to which the fruits yielded by the asset belong, and not under the capital gains regime. This provision, introduced to counter certain tax optimisation schemes, must be taken into account in the analysis where the usufruct comes from a seller subject to income tax.

The interaction between the bare owner's regime and the usufructuary's regime is never neutral. The same arrangement may be advantageous for one and costly for the other, which justifies a joint and documented tax analysis before commitment.

Expiry of the dismemberment: the critical moment

Automatic reconstitution of full ownership

On the expiry date, the usufruct disappears and the bare owner becomes full owner of the units, without any deed, without any payment, and without specific taxation arising from this consolidation. The owner then receives all the income distributed and may freely dispose of the units, in particular by selling them on the SCPI's secondary market.

This reconstitution is the expected outcome of the arrangement. But it is also the moment when the gap, possibly unfavourable, between the assumptions made at subscription and the reality of the property market becomes apparent. The bare owner acquired a discounted value, betting on the preservation, or even the appreciation, of the value of the unit. Nothing guarantees that result.

Valuation risks

The bare owner's reasoning rests on an implicit assumption: the value of the SCPI unit will, when the dismemberment expires, be at least equal to the value recorded at subscription. This assumption is false by nature, because the value of an SCPI unit moves with the underlying property market.

The years 2023 and 2024 were a forceful reminder of this reality: several management companies made significant reductions in the price of their units, in particular for SCPIs invested in office property, as a result of rising interest rates and the contraction of appraisal values. An investor who acquired the bare ownership before those corrections may find, on expiry, that he or she owns units whose value in full ownership is lower than the price paid for the bare ownership alone. The initial discount does not protect against a steeper fall in the value of the unit.

The risks to assess before subscribing

Risk of capital loss

An SCPI unit offers no capital guarantee. Its value depends on the valuation of the property portfolio held by the company, periodically reappraised by independent experts. The bare owner, who builds up capital on the value of the unit, bears this risk in full: if the reconstitution value collapses during the dismemberment, the bare owner suffers a loss, without having received any income to offset it.

This risk is asymmetric. Unlike the full owner, who has collected distributions throughout the period and can set them against a fall in the value of his or her unit, the bare owner has no income flow to cushion the blow. Performance depends entirely on the value of the units at the end of the term.

Liquidity risk

SCPI units are not listed. Selling them requires finding a buyer on the secondary market, organised by the management company for fixed-capital SCPIs, or relying on the withdrawal mechanism for variable-capital SCPIs. In periods of stress, such as the waves of withdrawals observed in 2023, the time needed to resell may lengthen considerably, and some withdrawal requests remain unsatisfied for lack of a counterparty.

During the dismemberment, selling the bare ownership alone is even more difficult: the secondary market for dismembered bare ownership is narrow. The investor must therefore regard the investment as tied up until expiry, which is consistent with the logic of genuinely long-term cash.

Tax risk

The tax regime of the arrangement is not fixed. With Article 13, 5 of the CGI, the legislature has shown its intention to neutralise certain advantages linked to temporary dismemberment. A change in legislation or in administrative doctrine during the dismemberment may alter the balance of the arrangement, without the investor being able to undo its effects.

In addition, the accounting and tax treatment of bare ownership for a legal entity subject to corporate income tax is the subject of technical analyses that must be secured in advance. The characterisation of the discount, its accounting treatment on expiry and the possible existence of taxable income at the time of reconstitution are questions to be settled with a tax adviser, according to the company's particular situation.

Risks relating to the usufructuary

In a dismemberment of SCPI units, the usufructuary and the bare owner do not share the same interests. The usufructuary favours immediate yield, the bare owner the preservation of long-term value. This divergence may surface in votes at general meetings, in particular on the allocation of results or on transactions affecting the SCPI's assets. The comparable deadlocks that arise between co-investors holding SCPI units in joint ownership (indivision), and the ways out, are analysed in our article on that subject.

The dismemberment agreement must therefore regulate precisely the allocation of voting rights, the treatment of exceptional distributions and of capital gains on property disposals, as well as the arrangements for handling unforeseen situations, such as an early dissolution of the SCPI or a merger. Failing clear provisions, disputes over interpretation may arise, with a significant litigation risk at the time of expiry.

Conclusion

The temporary dismemberment of SCPI units is not a yield product; it is an instrument for converting long-term cash into capital value, over a known horizon. For a legal entity with lasting surpluses seeking to avoid immediately taxable income, acquiring discounted bare ownership is genuinely coherent. But that coherence holds only if the two truths of the arrangement are accepted with clear eyes: no income throughout the period, and no guarantee as to the reconstitution value on expiry.

The central risk is not tax, it is property. The value corrections observed on SCPIs in 2023 and 2024 show that the initial discount is not a sufficient safety cushion against a lasting fall in the market. A prudent institutional investor will therefore treat this investment as a long-term property bet, and not as a secure cash product. Before any subscription, have the allocation key, the soundness of the target SCPI's portfolio and the accounting treatment of the transaction analysed jointly by your chartered accountant and your tax adviser, and require a dismemberment agreement that expressly specifies the treatment of exceptional distributions and the allocation of voting rights.

Frequently asked questions

Does an investor in the bare ownership of SCPI units receive income?

No. Throughout the dismemberment, the usufructuary receives all the income distributed by the SCPI, in application of Article 578 of the French Civil Code, which attributes the fructus to the usufructuary. The bare owner receives no income. The counterpart is the discount granted on acquisition and the reconstitution of full ownership at maturity, without any further payment.

What is the maximum duration of a temporary dismemberment of SCPI units?

Where the usufructuary is a legal entity, Article 619 of the French Civil Code caps temporary usufruct at thirty years. In practice, management companies offer durations of between five and twenty years. This duration determines the allocation key: the longer it is, the greater the discount on the bare ownership and the more value the usufruct captures.

How is the discount on the bare ownership calculated?

The discount results from the economic allocation key set by the management company, mainly according to the duration of the dismemberment and the expected yield of the SCPI. This economic key differs from the tax scale in Article 669 of the CGI, which values a temporary usufruct at 23% of full ownership for each period of ten years. The difference between the two must be analysed for tax purposes before subscription.

What happens when the dismemberment expires?

Under Article 617 of the French Civil Code, the usufruct ends automatically on expiry of the agreed period. Full ownership is reconstituted in the hands of the bare owner, without any deed, without further payment and without specific taxation arising from this consolidation. The bare owner then becomes full owner and receives all future income.

Does dismemberment protect against a fall in the value of the units?

No. The initial discount is not a capital guarantee. If the value of the unit falls during the dismemberment, as in the corrections of several SCPIs in 2023 and 2024, the bare owner may recover full ownership worth less than the price paid for the bare ownership alone. The bare owner bears the property risk in full, with no income to cushion it.

Why does this arrangement appeal to a company with cash available?

A legal entity subject to corporate income tax receives no taxable income in respect of the units during the dismemberment, which avoids increasing its taxable profit. It ties up long-term cash in an investment with a known horizon and recovers full ownership at maturity. The arrangement suits liquidity that the company knows it will not need to use for several years.

Can bare ownership of SCPI units be resold before the term?

It is legally possible but difficult in practice. SCPI units are not listed and the secondary market for dismembered bare ownership is narrow. In periods of stress on withdrawals, as in 2023, resale may prove lengthy or impossible. The investor must regard the investment as tied up until the dismemberment expires.