Can the bare owner sell the property?

Difference between full ownership, bare ownership and usufruct

To understand the sale of a property under these conditions, it is essential to distinguish between the real rights that make up full ownership of a property under the Spanish Civil Code. Full ownership is divided into two independent elements:

• Bare ownership: is the right of ownership and legal title over the property, but without the right to occupy or rent it out. The holder is the bare owner.
• Usufruct: is the real right of enjoyment, use and occupation of the property. The usufructuary can live in the home or let it out and receive the rental income, whether for life or for a specific fixed term.

Due to this separation of rights, the law allows each party to dispose of their ownership independently, provided they always respect the legal position of the other party.

Legal conditions for the sale of bare ownership

When the bare owner decides to transfer their right, they do not require the approval or signature of the usufructuary. The transaction is formalised by public deed before a notary and registered in the relevant Land Registry.

However, the sale of bare ownership is subject to specific conditions that affect the transaction:

• Inviolability of the usufruct: the new buyer assumes ownership of the property but cannot occupy or use it while the usufruct remains in force.
• Market value: the selling price of bare ownership is lower than the full ownership value of the property, as it is calculated by discounting the economic value assigned to the usufruct based on the age of the usufructuary or the duration of the usufruct.
• Rights of pre-emption and redemption: where there are several joint bare owners in undivided co-ownership, the co-owners hold a right of pre-emption over the share being sold.

What happens to the usufructuary after the sale?

The usufructuary experiences no change in their existing conditions. The transfer of title does not extinguish the usufruct right nor modify its legal faculties. Therefore, the usufructuary will retain possession of the property until the expiry of the agreed term or until their death in the case of a life usufruct.

In addition, the usufructuary continues to bear the ordinary obligations relating to the upkeep of the property, such as paying standard service charges (community fees), utilities and taxes linked to usage, such as refuse collection fees, unless privately agreed otherwise.

Joint sale of full ownership by the bare owner and usufructuary

An advantageous alternative exists when both parties agree on selling or divesting the property. The bare owner and the usufructuary can jointly sell full ownership to a third party.

In this scenario, the buyer acquires complete ownership free of personal encumbrances. The financial division of the total sale proceeds between the bare owner and the usufructuary is carried out by applying official tax criteria:

1. Life usufruct: the value of the usufruct is calculated by subtracting the age of the usufructuary at the time of sale from 89. The result represents the percentage of the property's total value that belongs to the usufructuary, subject to a minimum limit of 10 % and a maximum of 70 %. The remaining percentage belongs to the bare owner.
2. Fixed-term usufruct: 2 % of the property's total value is allocated for each year of the usufruct's duration, up to a maximum limit of 70 % in all cases.

Financing and mortgages in the transfer of bare ownership

The sale and purchase of bare ownership presents particular challenges regarding mortgage financing. Most financial institutions do not typically grant mortgages with only bare ownership as security, given that foreclosure in the event of default does not grant immediate use of the property.

To navigate these transactions effectively and assess suitable financial alternatives, it is advisable to seek specialist professional advice through real estate credit intermediaries. These professionals analyse realistic financial structuring options and the best methods for tailoring loans to the financial circumstances of buyers and sellers.

Sale of bare ownership in Officially Protected Housing (VPO) in the Comunidad de Madrid

For Officially Protected Housing (VPO) located in the Comunidad de Madrid, transferring bare ownership requires careful attention to regional housing regulations. Properties subject to public protection schemes in the Comunidad de Madrid are subject to strict conditions:

Specific requirements applicable in the Comunidad de Madrid

• Maximum sale price: neither bare ownership nor full ownership can be transferred above the maximum legal sale price established by the Comunidad de Madrid for the property type and area.
• Prior administrative authorisation: before executing the deed, express authorisation must be requested and obtained from the Regional Housing Department of the Comunidad de Madrid, or confirmation must be made that the statutory disqualification period has elapsed.
• Regional right of pre-emption and redemption: in certain protected developments, the Administration of the Comunidad de Madrid retains a preferential right to acquire the property or share being transferred.

Taxes incurred when selling bare ownership

Both the buyer and the seller incur specific tax obligations upon completing the sale of bare ownership:

Taxes for the selling bare owner

The seller is responsible for two main taxes:

• Personal Income Tax (IRPF): tax is payable on any capital gain or loss generated. The gain is calculated as the difference between the acquisition value attributable to the bare ownership and its transfer value.
• Municipal Capital Gains Tax (IIVTNU): a local tax on the increase in value of urban land. The seller must pay this in proportion to the rateable land value assigned to the bare ownership.

Taxes for the buyer of bare ownership

The buyer must pay Property Transfer Tax (ITP), applying the tax rate of the relevant autonomous community to the economic value formally assigned to the bare ownership.