For many foreign property owners in Spain, their home is more than just an investment. It may be their second home, the place where they spend their holidays, or even the home they hope to enjoy for many years to come.
But what if you want to release some of the value of your property without giving up the right to use it?
Spanish law provides an option that separates bare ownership from usufruct. This means that one person can own the property while another retains the right to use and enjoy it.
This arrangement can be used in property transactions as well as in family or inheritance planning, and it can have important legal and tax implications.
For foreign property owners, understanding how it works is particularly important before signing any documents relating to their property in Spain.
At MAM Solicitors, we have more than 30 years of experience advising foreign and non-resident property owners in Spain on their properties and the legal options available to them.
What is bare ownership?
Bare ownership is the ownership of a property where the right to use and enjoy it, known as usufruct, belongs to another person.
In simple terms, ownership of the property and the right to enjoy it are separated.
The bare owner legally owns the property but does not necessarily have the right to use it while the usufruct remains in place.
The usufructuary, on the other hand, has the right to use and enjoy the property within the limits established by law and the terms under which the usufruct was created.
This separation can be particularly relevant when someone wishes to transfer ownership of a property while retaining certain rights over it.
Can you sell the bare ownership and continue living in the property?
Yes. One of the options this arrangement provides is to sell the bare ownership while retaining the usufruct.
For example, a property owner can transfer the bare ownership of their home to another person while retaining the right of usufruct.
In practice, this means that the buyer acquires the bare ownership, while the seller retains the right to use and enjoy the property for as long as the usufruct remains in place.
For a foreign property owner who wants to release some of the value tied up in a property in Spain without immediately giving up the right to use it, this may be an option worth considering in certain circumstances.
However, before proceeding, it is essential to clearly define the rights retained by the usufructuary and those acquired by the new owner.
What rights does the usufructuary have?
The usufructuary has the right to enjoy the property in accordance with the established terms.
Depending on the circumstances, this may allow them to:
- Live in the property.
- Use it as a second home.
- Receive income or other benefits from it where legally permitted.
- Retain the right to use the property for the agreed period.
However, retaining the usufruct does not mean keeping exactly the same rights as when you owned the property outright.
For this reason, when bare ownership is established or transferred, it is important to clearly define what each party can do with the property and what their respective obligations are.
What happens to the property when the usufruct ends?
When the usufruct ends, the bare owner can consolidate full ownership of the property.
When and how the usufruct ends depends on how it was established.
For example, a usufruct may be granted for a fixed period or for the lifetime of the usufructuary. In the latter case, it will normally end upon the usufructuary’s death.
This is why the terms set out in the deed and the other transaction documents are particularly important.
Who pays the property expenses?
This is one of the issues that should be clarified when bare ownership and usufruct belong to different people.
A property can generate various expenses over time, including community fees, taxes, insurance, repairs, maintenance and utilities.
Responsibility for these expenses may vary depending on their nature and the specific circumstances of each case.
It is therefore important not to assume that all obligations automatically fall to either the usufructuary or the bare owner.
Reviewing these matters before completing the transaction helps prevent future disputes and ensures that each party clearly understands their responsibilities.
What taxes may apply?
Transferring bare ownership can have tax implications for both the seller and the buyer.
To determine the correct tax treatment, several factors must be considered, including the value of the property, the value attributed to the bare ownership and the usufruct, the type of usufruct, and the tax circumstances of the people involved.
If the property owner is a foreign national or a non-resident in Spain, it is also important to assess any tax obligations that may arise from the transaction.
For this reason, before signing a bare ownership sale agreement, it is advisable to review both the legal and tax implications of the transaction.
MAM Solicitors: legal advice for foreign property owners in Spain
Bare ownership and usufruct can form part of different transactions involving property in Spain. However, their implications can vary considerably depending on the owner’s circumstances and how the transaction is structured.
At MAM Solicitors, we have more than 30 years of experience advising foreign and non-resident property owners in Spain.
Our team can help you understand how bare ownership and usufruct work, review your property documentation, and advise you on the legal and tax matters that should be considered before proceeding with a transaction.
If you are thinking about selling the bare ownership of your property while retaining the usufruct, or simply want to understand your options as a foreign property owner in Spain, obtaining legal advice before signing can help you make an informed decision.
At MAM Solicitors, we are here to help you manage your property in Spain with greater peace of mind and confidence.
Do not hesitate to contact us.
