Bare ownership implies the right that a person has over an asset, such as real estate, being its sole and exclusive owner. However, the right to use it will not belong to this person, as for this we would have to refer to the person who has its usufruct.
For this reason, the bare property consists of the ownership of a good, but does not imply its possession.
Currently, there are many people who benefit from reserving the usufruct of their home and selling its bare property, although in Spain only a minor part of the population does this. Some beneficiaries of this type of arrangement would be the elderly, without heirs, who need liquidity or simply want to have an extra income. Thus, the usufruct guarantees them the power to continue using their home for life and, in turn, receive financial compensation in exchange for giving up the bare property.
What are the main differences between bare ownership and usufruct?
Bare ownership and usufruct imply different rights. Here are some of its most important features:
- Is the owner of the property, but cannot enjoy or use it.
- Will not be able to rent the house, although they will be able to sell the bare property to a third party.
- In order for the bare owner to acquire the use and enjoyment of the property, the termination of the usufruct is necessary, which may occur, among others, by:
– Death of the usufructuary (most common cause).
– Compliance with the stipulated term.
– Compliance with a subsequent condition established in the usufruct agreement.
- Maintains its use, but does not own the property.
- Can rent the house and get an income.
- Can sell the usufruct to a third party, which is usually acquired by the bare owner.
Selling the bare ownership of a home: what are the advantages and disadvantages?
There are different ways to arrange the sale. It is true that the most common consists of a single payment, but there are those who would rather obtain a monthly payment, or even receive a high payment at first and the rest in monthly installments.
The truth is that these houses are sold between 20% and 50% below the market price. However, the commercial value of the bare property will depend for the most part on the life expectancy that is calculated for the usufructuary, based on their age, sex and other factors determined by the General Directorate of Insurance and the INE (National Statistics Institute).
For this reason, it is important to bear in mind that bare ownership is usually agreed after the age of 65, since, if done before, the value of the usufruct would far exceed the value of the house. Keep in mind that life expectancy in Spain is 79 years for men and 85 for women.
Investors are in favor of acquiring bare ownership of a property, since they do not need to dispose of it in the short term and it can guarantee them a future investment at a reduced price. It is important to clarify that success in the operation will not always be guaranteed as this will depend on the longevity of the usufructuary.
Although it is not a widespread current in Spain, the significant demographic changes that are taking place and that we already live in our country (couples without children, single men and women, etc.) will determine the future of this type of operations. This is why the sale of the bare ownership of a property can be a solution for those retired people who wish to enjoy a better retirement, as well as for younger people who would like to purchase a home at a more moderate price.