What happens to the usufruct if the usufructuary moves into a care home?

The right of usufruct does not depend on main residence status

Usufruct is a real right that grants its holder the right to enjoy another person's property while preserving its form and substance, as set out in the Civil Code. The fact that the usufructuary moves into a care home or residential care facility does not alter the validity of their right in any way. Unless a resolutory clause linked to changing primary residence was included in the document creating the usufruct, ownership of the right over the property remains fully intact.

For this reason, the bare owner does not automatically gain the use of the property. Moving into the home, letting it out on their own account or changing the lock without the usufructuary's explicit authorisation constitutes a legal breach. Possession and decision-making authority over the property continue to belong exclusively to the usufruct holder until the right is officially extinguished.

Options for the usufructuary upon entering a care facility

Following the holder's move to a care home, there are several legal options for managing the property subject to the usufruct:

• Letting the property: The usufructuary has the right to receive civil fruits generated by the property. Letting the home provides a monthly income to help fund care home fees. The tenancy agreement terminates when the usufruct lapses.
• Assigning use or keeping the property empty: The usufructuary can freely decide to leave the home unoccupied or allow a relative to live there under a loan-for-use or precarious occupancy agreement.
• Voluntary waiver of the usufruct: The right can be extinguished by executing a waiver in a public deed. The waiver may be gratuitous or for consideration, consolidating full ownership in the hands of the bare owner.
• Joint sale of full ownership: If both the usufructuary and the bare owner agree, they can sell full ownership of the property to a third party and divide the proceeds proportionally according to the legal value of each right.

Division of expenses and taxes between usufructuary and bare owner

The usufructuary's move into a care home does not alter the legal framework governing the division of expenses or tax obligations associated with the property:

Taxes and service charges

The usufructuary must continue paying the property's ordinary running costs, notably regular service charges for the homeowners' association and Property Tax (IBI). On the other hand, the bare owner is responsible for extraordinary expenses, such as special community levies intended for structural maintenance or improvements to the building.

Tax implications for income tax (IRPF)

If the property is let out, the usufructuary must pay tax on rental income under personal income tax (IRPF), deducting allowable expenses. If the property remains empty and ceases to be their primary residence due to the move to the care home, the tax authorities will apply the corresponding deemed rental income tax (imputación de rentas urbanas).

Wealth management, financing and Social Housing (VPO)

In senior care planning, the need for liquidity to cover healthcare costs may prompt a search for financing or estate restructuring solutions. To explore the best financial options for properties subject to encumbrances or usufructs, it is advisable to consult intermediarios de crédito inmobiliario, who assess the feasibility of mortgage operations tailored to the specific circumstances of usufructuaries and owners.

Impact on Subsidised Housing (VPO)

Where the property subject to usufruct retains its official status as Subsidised Housing (VPO) in the Comunidad de Madrid, additional regulatory requirements must be observed. If the intention is to let the property to pay for care home fees, the rent amount cannot exceed the maximum regulatory limits established by the Comunidad de Madrid. Furthermore, depending on the applicable protection scheme, prior administrative authorisation from the housing authorities of the Comunidad de Madrid may be required to let out the VPO property.

Causes for the formal extinguishment of usufruct

Physical relocation does not extinguish the real right; canceling the usufruct requires one of the grounds specified in the Civil Code:

1. Death of the usufructuary: This is the standard cause of extinguishment in life usufructs. Armed with the death certificate, the bare owner can settle the relevant tax and consolidate full ownership.
2. Formal waiver: If the usufructuary executes a formal waiver via a public deed. If the waiver is gratuitous, it will be taxed as a gift; if executed in exchange for financial compensation, it will be taxed as a property transfer.
3. Expiry of the agreed term: In usufructs created for a specified period, the right ends upon reaching the agreed deadline.

To formalise the consolidation of ownership in favour of the bare owner so that it is legally binding against third parties, registering the extinguishment of the usufruct in the relevant Land Registry is essential.