Fundamental concepts: bare ownership and usufruct

To understand how the choice of usufruct type affects the final value of the transaction, it is worth recalling the regulatory framework established in the Spanish Civil Code. Full ownership of a property is equivalent to the sum of two essential elements:

• Bare ownership: This is the right of legal ownership over the property. The buyer acquires ownership, but cannot live in it or rent it out until the usufruct is terminated.
• Usufruct: This is the real right granting a person (the usufructuary) the exclusive use and enjoyment of the property for a specified period or for life.

When a homeowner decides to sell the bare ownership and retain the usufruct, the chosen option determines the percentage that each right represents relative to the total value of the property and sets the economically enforceable market valuation.

Lifetime usufruct: use and enjoyment for life

Lifetime usufruct is the most widespread option in the residential real estate market in Spain, especially among older people seeking to release equity from their property assets to supplement their income or secure their care without moving house.

What does lifetime usufruct involve?

This formula grants the usufructuary the indisputable right to reside in the property or rent it out until their death. Following this event, bare ownership and usufruct are automatically consolidated in the buyer, who becomes the full owner of the urban property.

Calculating the value of lifetime usufruct

For tax and real estate purposes, the value of lifetime usufruct is calculated using the rule set out by the regulations on Property Transfer Tax (ITP) and Stamp Duty:

Value of usufruct (%) = 89 - Age of the usufructuary

This result cannot exceed 70% or be lower than 10% of the total value of the property. The younger the seller, the higher the value assigned to the usufruct and, therefore, the lower the price corresponding to the bare ownership paid by the investor. Conversely, the older the usufructuary, the higher the value of the bare ownership.

Temporary usufruct: a defined horizon

Unlike the lifetime option, temporary usufruct sets a specific end date pre-agreed in the public deed executed before a notary.

When is temporary usufruct used?

Temporary usufruct usually responds to specific estate or employment planning strategies. It is ideal for homeowners who plan to move to another residence within a set timeframe or for investors seeking to define exactly when they will acquire full availability of the property.

Tax valuation of temporary usufruct

The financial valuation of temporary usufruct is directly related to the stipulated number of years of duration:

Value of usufruct (%) = 2% for each year of duration (up to a maximum limit of 70%)

For example, if a temporary usufruct of 10 years is agreed, the right of usufruct will represent 20% of the total value of the property, with the remaining 80% corresponding to bare ownership. If the agreed period is 20 years, the valuation of the usufruct rises to 40% of the total.

Comparative analysis: temporary vs lifetime usufruct

Weighing up the differences in the dilemma of temporary vs lifetime usufruct requires analysing legal, financial and future planning variables. The key contrasting points between both figures are outlined below:

• Duration and certainty: Lifetime usufruct extends for the seller's entire life, introducing a period of uncertainty for the buyer. Temporary usufruct sets a non-extendable term voluntarily agreed by both parties.
• Value of bare ownership: In lifetime usufruct, the price of bare ownership depends directly on the seller's age at the time of signing. In temporary usufruct, the value depends exclusively on the number of years contracted.
• Investor appeal: Temporary usufruct usually facilitates financial return planning on a fixed date, whereas lifetime usufruct requires a profile analysis focused on the medium to long term.
• Housing peace of mind: Lifetime usufruct guarantees the right to the property continuously regardless of the seller's longevity, providing maximum personal stability.

Distribution of expenses and taxation in the transaction

Regardless of whether the transaction is structured through a lifetime or temporary usufruct, the distribution of expenses and tax burden are governed by the same principles of Spanish legislation.

Distribution of property costs

To ensure a transparent contractual relationship, it is essential to clearly reflect each party's obligations in the deed:

• Usufructuary expenses: Individual utility supplies (water, electricity, gas), ordinary community charges and Property Tax (IBI), unless agreed otherwise.
• Bare owner expenses: Extraordinary community assessments, structural repairs to the property and building insurance.

Taxation applicable to the seller

The sale of bare ownership is taxed under Personal Income Tax (IRPF) as a capital gain or loss. In Spain, individuals over 65 years of age benefit from significant tax advantages when transferring the bare ownership of their primary residence, being exempt from paying IRPF on that capital gain in many cases.

Likewise, the transaction is subject to Municipal Capital Gains Tax (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana), the settlement of which falls to the seller unless agreed otherwise between the parties.

Considerations regarding Official Protection Housing (VPO)

In the case of properties subject to the Official Protection Housing (VPO) regime within the territorial scope of the Comunidad de Madrid, transferring bare ownership requires verifying whether the property is within the legal protection period. In the Comunidad de Madrid, the sale must respect the applicable regulatory maximum prices or formalise voluntary descalificación of the housing where regional regulations expressly permit it.

Legal guarantee and specialised advice

Structuring a property transfer transaction correctly requires legal rigour and an individualised study of each homeowner's personal and tax situation. The accurate calculation of usufruct percentages and the detailed drafting of maintenance clauses protect the rights of both parties throughout the term of the contract.

At Sky Real Estate, we have a highly qualified legal team whose work has been recognised with industry awards granted to Sky Law at the European Legal Awards between 2023 and 2025. Furthermore, our activity is backed by official registration in the register of Real Estate Credit Intermediaries ICI D-286 of the Banco de España, guaranteeing compliance with regulatory transparency standards.

If you wish to evaluate the option that best suits your financial and estate situation between temporary vs lifetime usufruct, our professionals are at your disposal to analyse your case on a personalised basis. We invite you to discover in detail our proposal for the sale of bare ownership and request a technical valuation tailored to your needs.