The 89 rule and the impact of age on the price

To understand at what age selling bare ownership becomes an economically attractive transaction, it is necessary to know the tax formula used in Spain to value a usufruct. The Directorate-General for Taxation establishes the well-known 89 rule, whereby the value of the usufruct is calculated by subtracting the age of the usufructuary from the number 89. The result determines the percentage of the total property value corresponding to the usufruct, with a minimum limit of 10% and a maximum of 70%.

The value of bare ownership is the remaining percentage required to reach 100% of the property's total value. Therefore, the older the person selling the bare ownership, the lower the legal value of the usufruct and the higher the percentage received in cash:

• At 65 years old: The usufruct represents 24% (89 minus 65) and bare ownership 76%.
• At 70 years old: The usufruct represents 19% (89 minus 70) and bare ownership 81%.
• At 75 years old: The usufruct represents 14% (89 minus 75) and bare ownership 86%.
• At 80 years old or over: The usufruct approaches the legal minimum of 10%, meaning bare ownership reaches 90% of the base value.

In the real estate market, investors will apply a discount for the temporal uncertainty of the transaction. For this reason, if an owner decides to sell before reaching a mature age threshold, the discount demanded by the market will be higher and the cash capital received will be significantly reduced.

Why is selling bare ownership before age 65 not recommended?

Except in situations of extreme financial need or serious health problems, considering the age to sell bare ownership below 65 is usually inadvisable. At age 55, for example, a person has a life expectancy of several decades. An investor buyer will demand a drastic discount on market value to offset the uncertain waiting period.

Likewise, there are tax barriers that penalise sales at an early age:

1. Personal Income Tax (IRPF): Capital gains derived from the sale of bare ownership are taxed on the state and regional scales at between 19% and 28% if the seller is under 65 years old.
2. Loss of capital appreciation: Selling ownership of the property prematurely prevents the owner from benefiting from potential real estate market increases during their later years.

Tax benefits of selling at over 65 years of age

The threshold of 65 years of age not only marks a change in legal valuation percentages, but also grants decisive tax advantages under Personal Income Tax (IRPF) regulations.

When the person selling bare ownership has reached age 65 and the property is their main residence, the capital gain obtained from the transfer is fully exempt from Personal Income Tax (IRPF). This tax exemption applies in full without the need to reinvest the proceeds in another property.

In the event that the property sold is not the main residence (such as a second home), individuals over 65 can also benefit from a tax exemption if they use the amount received to set up an insured life annuity, up to a maximum limit of 240,000 euros and within six months of the sale.

Alternatives to selling bare ownership depending on age

Before making the final decision to relinquish ownership of a property, it is advisable to analyse your overall financial position. At ages between 60 and 70, bare ownership is not the only way to obtain financial resources.

Financial solutions exist that allow you to secure liquidity while retaining full ownership of the home. Through our real estate credit intermediary services, it is possible to assess whether debt restructuring, a mortgage-backed loan or the refinancing of existing assets are options better suited to each profile without giving up real estate assets.

Considerations for Subsidised Housing (VPO) in Comunidad de Madrid

If the property on which selling bare ownership is being considered is a Subsidised Housing (VPO) unit located in Comunidad de Madrid, several specific legal requirements under regional regulations must be taken into account:

• Maximum sale price: The value set for the bare ownership of a VPO cannot exceed the legal maximum sale price limits established by Comunidad de Madrid for its protection scheme.
• Rights of first refusal and pre-emption: Under certain regional protection schemes in Madrid, the regional public administration retains the right of first refusal and pre-emption.
• Prior disqualification: In many cases, voluntary disqualification (de-protection) of the VPO must be processed with the regional housing ministry of Comunidad de Madrid before executing the deed before a notary.

Frequently asked questions about the age to sell bare ownership

What happens if there are two owners of different ages?

When a property belongs to two spouses and both wish to reserve a joint and successive life usufruct, the valuation of the usufruct is calculated taking the age of the younger owner as a reference. As the expected duration of the usufruct is measured based on the younger person, the percentage reserved for the usufruct will be higher and the amount paid by the buyer for the bare ownership will be lower than if only the older spouse's age were taken into account.

Do I retain the right to rent out the property after selling bare ownership?

Yes. Retaining a life usufruct means keeping the right to use and enjoy the property regardless of the age of the usufructuary. The person may reside in the property or rent it out to a third party, receiving the monthly rental income in full without needing authorisation from the buyer of the bare ownership.