People who love Burgundy are always talking about the dismantling of estates because of inheritance laws in France. (How many Gros’s are there by now?) How do the great Bordeaux châteaux manage to keep their property intact through the generations?
Thanks.
David Kubiak
I’ll certainly defer to other more knowledgeable people but my understanding was that many Chateaux have changed hands over the years but unlike Burgundy where it’s the vineyard that matters so you can sell half of your holdings in, e.g., Amoureuses it isn’t possible to sell half a Chateau (i.e., have one person produce Chateau Lafite I and another produce Chateau Lafite II) so historically they have had to sell the whole thing.
The Bordelais were really quite clever. Some vineyards were split up during the French Revolution. But to retain their large properties, they created a shareholder system for their estates instead of holding on as single owners. The shareholders were not subject to the Napoleonic code of succession law. Learn Everything about the History of Bordeaux and its Wines
Wealth and power. Burgundy was almost a separate state under the dukes in the middle ages, whereas Bordeaux was a trading center for England and wine was just part of what was going on. Moreover, in Burgundy most of the vineyards were owned by the church, whereas in Bordeaux, they were owned by French and English and Irish nobles.
The church wasn’t some group of spiritual folks either - that’s a recent thing. Back in the day it was a way to make money and people hated the bishops and abbots, etc. So when the revolution came, the church’s property was confiscated and parceled out. After the revolution, Napoleon banned the passing down to the oldest son.
In Bordeaux, some of the estates were seized - Haut Brion for example, and the owners beheaded. But Napoleon wasn’t stupid - he knew he needed a port for trading with other countries. And after him, the government needed the money. There was a lot of money involved and Burgundy was basically a backwater with little influence. It had little to do with terroir - that’s actually a very recent concern. Like most things, it had to do with power and politics.
Interesting, thank you!
Thanks Jay. Glad to help. Also, I forgot to respond to your previous post. Portions of vineyards and shares in estates have been bought, sold and traded in Bordeaux for centuries. Depending on the appellation, and vineyard, there might be some consequences that make it a better business decision to sell the entire estate, but that has nothing to do with the laws of succession.
Thank you gentlemen.
DPK
Large estates have split up in the past I think. Chateau Leoville was one estate until it was split up, I think, in the early 19th century. I have no doubt that Jeff is right with regard to modern history.
Correct. Which is what I told Jay. Several properties have been divided over the years. All 3 Leoville vineyards were part of one estate until 1840. Figeac was over 200 hectares in the 1800’s. That is why you see so many estates with the Figeac as part of their name today. Pichon Baron and Pichon Lalande etc… But the new owners of each property still needed to be shareholders instead of single owners to avoid the laws of succession.
My impression is that it is a matter of a corporate structure vs. individual ownership of fractured holdings that characterize Burgundian “estates”. In Burgundy, in most cases, it is the ownership of the vineyards that is key rather than ownership in an estate. The “domaine” in Burgundy is often merely just whoever is farming and making wines from various vineyard ownership permutations. Some “domaines” in Burgundy are corporations with shares which rent vineyards from various people, including family members. but do not actually necessarily own any vineyards. I think the Georges Roumier “domaine” is one such entity.
The fractured ownership in Burgundy, starting from the Revolution and the division of the Church’s holdings…has created zillions of small (and large) owners of various vineyard plots. Bordeau was not owned by the church…and was less affected by the Revolution as a result. Fraternite, egalite, etc…seems to have resulted in much less sophisticated and more fragmented ownership in Burgundy…and the Napoleonic codes of inheritance have created relative havoc. Much more havoc than we perceive in Burgundy, in fact. Some “owners” are merely making wine from holdings of diverse relatives, ie, those heading domaines are just the tip of the iceberg of ownership of the plots in many cases.
Let me add something here: in France, by law, all heirs have to be distributed equal shares. If not, they can petition to get their fair share. You cannot disinherit one or several of your children.
What this means is that heirs often end up having to sell the inherited property as estate taxes (“droits de succession”) are quite hefty: direct heirs will pay 30% for property worth over half a million euro, 40% for 900K euros, and up to 45% for 1.8M euros and above.
This is why most large châteaux and vignobles are often turned into corporations with shares.
So why aren’t all properties (valued over a certain amount) held via shares/corporate entities. Are there limits on residential property?
I think, though, the historical context is key to understanding why the regions’ wine industries are very different. The corporate ownership, etc…are mainly reactions to the different evolutions of ownership. For the most part, corporate structures would have no benefit in Burgundy, as it is too late.
The tax issue is separate from ownership…and has created some strategies related to that, of course in Burgundy.
Some estate owners and growers (including in Burgundy) use a GFV structure (“Groupement foncier vinicole”), an instrument designed to avoid getting hit hard with estate taxes. Basically, the owner will structure the property into a “société civile” (SCIs are similar to trusts, very common in France to aggregate real estate assets), and sell shares to investors and/or family members. You basically then own a tranche of a vineyard or château. This is a tool that’s commonly used for families to retain ownership (full or partial) of their properties.
As Arnaud outlined, much of the reason is due to the horrible French tax structure (though many family-owned US businesses wind up in the same position) and inheritance laws.
To give you a real life example with my dear producer friends in Champagne. The patriarch had two daughter and on his death each one received 50% of the vineyard holdings. The sister who is not involved in the business is contractually obliged to sell the grapes to her sister/husband who run the champagne biz. All good.
Now each of the two sisters has three children. So now at some point in the future the number of “owners” is going to go from the current 2 to 6…
It is the thing which keeps the sister/husband awake at night as two of their children will continue the business, but they are going to have to find a way to essentially buy out the other 4 who are not going to have any interest in anything except a payday. 12 hectares of prime champagne vineyards are worth millions.