Essential Issues in the Sale of Bare Ownership

24 June, 2024
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Real Estate
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Neus Vallara


A few months ago, the College of Registrars reported that the sale of bare ownership of housing had increased by 11.3% last year. It has been noted that this increase is particularly significant among homeowners over 65 years old. What is happening? Why is selling the bare ownership of a property such an attractive option for this profile of owners? In this article, we explain it to you.

What is bare ownership?

Bare ownership is one of the elements that make up the full ownership of a property, which constitutes ownership without possession, use, or enjoyment. Thus, the owner of the bare ownership does not possess the property nor can they benefit from its fruits and income. The other element that makes up full ownership is usufruct, which constitutes the possession, use, and enjoyment of the property, including obtaining its fruits and income.

In this way, whoever holds full ownership of a property holds both the ownership and the usufruct. However, these two elements can be separated, and they do not have to belong to the same owner, so it is possible to transfer or acquire the bare ownership of a property, which we analyze in this article.

What benefits can selling the bare ownership bring to those over 65 years old?

María is 75 years old. She retired at 65 and since then has received a pension with which she manages to make ends meet, although not comfortably. She lives in her own mortgage-free apartment. María wants to continue living in her apartment, so she has never considered selling it, although some extra financial help would be very welcome to make ends meet and live comfortably during the remaining years of her life.

María’s case fits perfectly with the scenarios that motivate the sale of bare ownership: a person over 65 years old looking for a supplement to their pension without having to stop living in their home. And this is one of the main benefits of selling bare ownership: the supplement to the retirement pension.

Selling bare ownership provides additional liquidity to the pension without having to leave the home, which is what happens when full ownership is transferred. By reserving the usufruct for themselves, the seller can continue living in the apartment for the agreed period or until their death. Additionally, living in the apartment will always be an option, as the usufructuary can decide to transfer or rent it out in exchange for rent that they will have the right to receive until the usufruct is extinguished.

The benefit in selling bare ownership is also determined by the price the seller receives, which will not always be paid in the same way. Thus, the most common agreements regarding the price are as follows:

1) The seller receives the total price at the time of the transfer in a single payment. This can be agreed upon for both life usufructs and temporary usufructs.

2) The seller receives a lifetime annuity from the buyer, determined by the value of the property and the life expectancy of the usufructuary – it is not the same to agree with a 65-year-old person as with an 80-year-old person. Lifetime annuities are established in the case of life usufructs.

3) The seller receives a temporary annuity from the buyer that must be paid for the period for which the temporary usufruct has been agreed.

Combined formulas are also possible, such as the payment of an amount at the time of the transfer and, additionally, a temporary or lifetime annuity.

Whether a lifetime or temporary annuity is agreed upon, it is advisable to include a resolutory condition in the transfer deed, so that in case of non-payment of the agreed annuity by the buyer, the usufructuary can recover the bare ownership and once again hold full ownership of the property.

The last advantage is the right of disposition that the usufructuary maintains, allowing them to transfer it when convenient. However, unless otherwise agreed, the bare owner will have the right of first refusal, meaning they will have the right to acquire it under the same conditions as it was transferred by the usufructuary.

What benefits does buying bare ownership bring to buyers?

The typical buyer profile of bare ownership is usually an investor or even an individual who wants to invest in acquiring a property without needing immediate possession. Both profiles are attracted to the price factor, as the acquisition of bare ownership is done at a price that can be reduced to up to 60% of the market value of the property. This reduction mainly depends on the seller’s age, with the situation being that the older the seller, the smaller the reduction since the expectation of obtaining full ownership of the property decreases. Conversely, the younger the seller, the greater the reduction in price, as the expectation of obtaining full ownership of the property is long-term.

What factors determine the value assigned to bare ownership?

Obviously, the main factor is the market value of the property. To determine this value, it is always advisable to have an appraisal or a valuation carried out by an expert who takes into account all the circumstances that determine a property’s value, from its location, age, energy rating, state of conservation, etc.

Another factor that determines the value of bare ownership is the type of usufruct agreed upon between the parties. A lifetime usufruct generates more uncertainty, affecting the price to the seller’s disadvantage. Conversely, a temporary usufruct, posing less uncertainty for the buyer, allows the seller to demand a higher price. The term agreed upon for this temporary usufruct is also a factor to consider, as a shorter term will have more value than a longer term (a ten-year usufruct is not the same as a twenty-year one). In the case of lifetime usufructs, the life expectancy of the usufructuary must also be considered, as agreeing with a 65-year-old person is not the same as with an 80-year-old person, as mentioned earlier.

How is the sale of bare ownership structured?

This is one of the big questions generated by these types of transfers. The sale of bare ownership is a completely normal sale, although its peculiarity lies in the fact that the deed must regulate the conditions of the usufruct reserved by the owner who transfers the bare ownership.

Thus, the parties must appear before a notary, formalize the deed with all the legally required requirements and statements, and then proceed to register the deed in the Property Registry so that both owners appear in the Registry – the bare owner and the usufructuary. Once the usufruct expires, whether due to the death of the usufructuary or the lapse of the agreed period, the bare owner will consolidate their ownership and regain possession and the right of use and enjoyment of the property. Registration in the Registry is always optional, but it is highly recommended to assert rights against third parties.

How are expenses shared between the bare owner and the usufructuary?

This is a matter subject to negotiation and agreement between the parties, although it is most common for the usufructuary to cover the supply costs, ordinary repairs, property tax, and property insurance that covers the contents of the property and civil liability against third parties. Meanwhile, the bare owner usually covers community expenses, extraordinary repairs of the property, and the part of the insurance that covers the structure. It is advisable to specify in the transfer deed who will be responsible for each of these expenses, considering that they can be regulated by the parties at their discretion. If the parties do not reach an agreement, they must adhere to the law, as both the Civil Code and the Civil Code of Catalonia regulate the distribution of expenses, with their allocation being very similar to what we have indicated.

At MES Advocats, we offer comprehensive advice and support to owners who want to transfer the bare ownership of their property, as well as to investors or individuals who intend to acquire it. If you need more information or are interested in obtaining a quote, you can contact our real estate law area at this link.

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Purchasebare ownershipPropietarisusufruct

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