Selling or buying a home stripped of its usufruct is a growing trend. Although it only represents a small part of the total sales that were signed last year, bare ownership operations grew by 23.7%, to 1,657, the highest amount since 2014, according to data from the College of Property and Mercantile Registrars of Spain. A figure that is expected to continue to rise despite being still far from the more than 6,000 operations that were signed in mid-2006.
“The trend is clearly upward, with a continuation of this behavior being foreseeable over the next few years”, indicate the registrars, who since last year have quantified and monitored the purchase and sale of bare ownership, those in which the owner does not have the right to use and enjoy the home, since someone else has the usufruct. The reasons that drive the growth of this type of tenure are several.
The first has to do, as the corporation points out in its latest annual report, with the lengthening of life expectancy, which entails an increase in the need for financial resources, especially when working life ends. The most common way to obtain liquidity is through the asset that tends to have the greatest value in the family patrimony, the home, either by renting it, selling it or through less common formulas such as reverse mortgages or bare ownership, which are increasingly common.
A common case in which an owner opts for the latter option is when they have to pay for extraordinary community expenses, such as installing an elevator. “There are those who cannot afford these expenses, since at certain ages there is no way to finance it, and when the children cannot afford it, they consider bare ownership so as not to lose the use of the home,” argues Abel Marín, partner at Marín y Mateo Abogados and author of the book Protect your inheritance. Another frequent case occurs when income is needed to pay for the careful residence of the owner of the property, who after the sale of the property will be the usufructuary for life.
Another reason that explains the rise of this type of ownership is the interest of investors to wait a few years before being able to use the property, be able to sell it and get a capital gain, since the acquisition of a bare property is made at a price below the market. “Normally they are institutional investors, with financial muscle and who hope to make money with this type of speculative operations,” explains Sergio Nasarre, professor of Civil Law at the Rovira i Virgili University (URiV).
Nasarre does not rule out that the recently approved new Housing law has increased the investor appetite for this tenure. A thesis also supported by real estate consultant Eduardo Molet, who argues that bare ownership makes it possible to enter a sector considered “safe” without “investing in conventional rentals”, thus avoiding rent control and the specific regulation for large holders imposed by the new regulations.
The real estate consultant assures that the boom in this type of operation is so notable that his agency estimates that more than double the number of closings this year than the previous one. The direct consequence is the entry of new agents in the sector. “Before, only three or four real estate agents in all of Spain marketed this product. Now we are dozens spread throughout the territory,” explains Molet.
One of the questions that both buyer and seller often ask is at what price should a bare property be transferred. “The discount depends on each case, as well as on the age and state of health of the usufructuary of the house”, explains Marín. That is, it will depend on what the two parties agree on. “For example, there are sellers who invest the money they receive from bare ownership in the property [for example, to adapt it to a person with a disability], and this also has to be reflected in the contract,” he explains. Likewise, the specialist recommends that the transaction be carried out preferably between family members. “I always explore that possibility, although it is almost never possible,” he admits.
In any case, he explains that he would never advise a purchase of these characteristics to an individual with a small heritage. The main reason is that, although the acquisition price is lower, the operation entails making a large outlay without the certainty of how many years it will take to start making a profit, especially in cases in which the usufruct is for life. Even so, it must be taken into account that a bare property can always change hands “without waiting for the death of the usufructuary,” Molet specifies.
The most common problem between usufructuary and owner usually arises when paying for housing expenses, according to property registrars. Normally the ordinary ones -supplies and community fee- are paid by the usufructuary, while the extraordinary ones, such as spills for maintenance of the facilities of the building in which the house is located, are paid by the bare owner.
Bare ownership transactions are taxed the same as a regular home purchase. The difference is that the amount to be paid will be less than if it had been purchased at market price since the owner did not have full ownership. Likewise, the value for tax purposes of this type of tenure, included in the Inheritance and Donations Tax Law and its Regulations, is computed by the difference between the value of the usufruct and the total value of the assets.
