Problems with the sale of the bare ownership of a property

Full ownership of a property is divided into two concepts: usufruct, which gives the right to use the property, and bare ownership, which is the mere ownership of the property, i.e. simple ownership without the right to use it. Many people consider the possibility of selling the bare ownership. This raises a wide range of problems.

One of the ways to obtain liquidity without having to abandon the property may be to sell the bare ownership. No loans, no mortgages, no interest.

What is the bare ownership?

The bare ownership of a property is the situation in which a person is not the full owner, but there is some real right in the property in question.

The clearest example is when a usufruct, whether for life or not, is established on a property. This means that the usufructuary can live in, or even rent out the property, and the bare owner cannot dispose of the property in any way. Broadly speaking, the usufructuary has to bear the current maintenance costs, and the bare owner has to bear the extraordinary costs. This creates big problems and tensions between the bare owner and the usufructuary, because the bare owner will have to pay for extraordinary works, to give an example of tension.

The institution of usufruct gives a position of predominance to one party over the other. The bare owner is nothing, i.e. he has a title, but he cannot inhabit, access, lease, etc. and he will also have to pay some costs.

The sale of the bare ownership

Consequently, many people consider selling the bare property. This brings with it a variety of problems.

The first problem is that if there are several joint owners, the sale will have to be agreed with all of them. This is sometimes very complicated.

The other problem is that banks do not offer financing against the bare property: they value them as illiquid or uninteresting assets. Therefore, the bare property is sometimes more of a problem than a solution. In fact, it is frustrating to see how sometimes there are heirs who end up with a bare property, establishing a usufruct for the widower of the deceased. But what happens if the heir needs a house and the usufructuary has this usufruct plus many other properties? Because the heir is left helpless, it has no civil relevance.

It is true that there are sales of bare property that do not follow this pattern, but almost the reverse: the freehold owner decides to sell the bare property to an investor, keeping the usufruct and receiving money in instalments or in a lump sum. This allows elderly people with no income to live in their own home until they die and to have some liquidity to survive.

The sale price of the bare property is usually between 20% and 80% below the market value, and it all depends on the age of the usufructuary. The older the usufructuary, the more expensive the bare property. The younger the usufructuary, the lower the sale value.

Think of the value of the bare property of a person in his fifties, or even of a person in his mid-twenties. The usufruct would almost be more valuable than the bare ownership, because in the case of a 25-year-old person, the usufruct allows the flat to be rented out for perhaps sixty years.

The rule for calculating the bare ownership is as follows:

• The easiest formula to calculate the usufruct for life is to subtract the age of the usufructuary from 89, taking into account that the minimum value of the usufruct for life is 10% of the total value of the property and the maximum is 70% of the total value of the property.
• Example: value of the usufruct for life when the usufructuary is thirty-five years old on a flat valued at 160,000 euros: 89-35 = 54% 160,000 euros x 54% = 86,400 euros. Therefore, subtracting the value of the usufruct from the value of the bare property, we get the theoretical price. In practice, nobody will pay us this.

You can contact our real estate experts for any questions or clarification you may have on this issue.