WITH all the madness and chaos going on in the UK regarding Brexit, and the fact that we are all trying to get back into normal working mode after the heat and busy period of the summer months, I thought it would be Better to focus my column this week on a topic I was recently asked about: ‘Naked Property.’
I have to admit that although I had heard about it, I didn’t really know all the legal aspects, so I thought I would ask Javier Casos of Casos y Asociados the question.
According to Javier Cases, ‘bare ownership’ or ‘usufruct’ is a form of capital release through the sale of the ‘bare ownership’ of your house, while retaining the lifelong right of use, or usufruct, to continue living in his house until his death.
Apparently this is an increasingly popular alternative among older people looking for financial solvency or a supplement for their retirement.
Of course, this has to be a good investment opportunity for the buyer, who would clearly be more attractive if they are over 70 than over 60, so be realistic.
For older people who do not have heirs or who need extra income to improve their quality of life, it seems an interesting solution.
However, the owners must agree on a price attractive to the buyer: up to 50% of the value of the property at the market price, depending on the age and health of the owner.
The price can be received in a single payment or in monthly installments.
In the UK market value is easier to calculate, but in Spain valuations can vary substantially in either direction.
My recommendation would be to get a trusted real estate agent to give you a modest rating, or maybe three for comparison, and choose the middle ground.
You should also do your own market research on the web.
From a legal point of view, this is a special real estate operation, where both parties, seller and buyer, have to have the maximum guarantees and be duly advised by a lawyer.
Regarding the price of the home (without usufruct), its value is determined by the market price of the home and the age of the future usufructuary (seller) and his life expectancy.
The longer the life expectancy, the greater the discount and vice versa, since the benefit that the buyer does not obtain from the house must be deducted, since he cannot use or exploit it on lease until the death of the usufructuary.
The rights and duties to be taken into account by each party are:
• Buyer or investor:
– You are obliged to take care of extraordinary community expenses.
of the property, the IBI (Real Estate Tax) and the property insurance, as well as the majority of expenses associated with the purchase.
– If the transfer of the property is made in exchange for the payment of a monthly rent, they are obliged to pay this rent through a Resolutory Condition, so they would lose the property in favor of the usufructuary if they fail to pay.
– When the right of usufruct ends, that is, due to the death of an elderly person, the buyer receives full ownership of the property.
• Usufructuary or seller:
– You must pay all ordinary community expenses and supplies (electricity, water, telephone, gas…)
-If it were the habitual residence, I would not pay capital gains.
– You can carry out any type of redecorating work in the house as long as it does not
They imply a change in the structure of the property.
– If at any given time it is not desired to continue using the house, the usufructuary can sell the usufruct to the buyer or rent the house and obtain the full rent.
• Advantages for the seller:
– It’s a great way for an owner to have a lump sum of cash rather than being left with a large asset (we recommend chatting to family first!).
– The owner can remain in his home for the rest of his life, and leave the remaining agreed percentage to his family.
– The owner can use the capital right now and perhaps donate it to an heir to pay for a wedding/college education, etc.
– The usufruct of the owners or the ‘right to live in the property’ has a calculable real value. They can collect early and sell it or even renegotiate with the investor to sell it early to investors.
• Advantages for investors (buyers):
– For the buyer or investor, the purchase of bare ownership implies the
acquisition of a real estate asset for a price lower than its market value, up to a reduction of 50%.
– An investor only gets paid when the owner dies.
– It can be a very long-term risk if the owner is healthy and over 70 years old.
– The original owner remains responsible for the maintenance of the property.
– Negotiating can be difficult, although not impossible.
– A bare ownership agreement is not as attractive to a real estate agent, who prefers a clean purchase.
If you are interested in the bare property, please do not hesitate to contact me at firstname.lastname@example.org, the buyer’s specialist agent.