Nuda Propiedad: what it is and how it differs from usufruct and full ownership

Many people tend to confuse the concepts of bare ownership and usufruct when, in fact, they are totally different. In fact, there are many occasions in which both can lead to legal problems. For this reason, here we would like to explain exactly what is involved in these precepts, as well as in the concept of freehold.

What is nuda propiedad?

The meaning of bare ownership refers to the possession of an asset over which one does not have the right to use and enjoy it. The person who disposes of it is referred to for legal purposes as the bare owner.

This definition, which seems complex at first glance, is much easier to understand when analysing what the bare ownership of a property is. It is sufficient to give the example of an elderly person who, having no heirs and in need of financial resources, sells his or her house to a bank in exchange for a certain amount of money. This amount is usually lower than the market rate. The reason? The use and enjoyment of the property is reserved for life, i.e. the usufruct.

Freehold and usufruct: differences

Both concepts are understood as rights in the legal framework. However, they are not comparable. These are the differences between the two:

• The bare owner is the owner of the property. However, if he does not also have the right to use and enjoy it (the usufruct), his possibilities are very limited.
• On the other hand, the usufructuary does have the right to use and enjoy the property, although he does not own it.
• Until the end of the usufruct, the bare owner cannot make use of the property. Generally, this right is for life and only ends with the death of the beneficiary.
• The usufructuary can use and enjoy the property without limitation for the duration of his right.
• The bare owner may sell his right to a third party at any time. However, it is obviously not possible to rent it out.
• The usufruct of a property can be rented and sold to a third party. However, it is not an inheritable right.

After this, it is clear that having the bare ownership, but not the usufruct of an asset is of little use. In fact, even if it can be sold, few investors will be interested in acquiring it if it is not accompanied by the right of use and enjoyment. This is why in many legal circles it is also referred to as dis-ownership.

What are the rights of the bare owner vis-à-vis the usufructuary?

We said earlier that being the bare owner of a property is practically the same as having nothing. However, the Civil Code contemplates a series of rights for this figure:

• Taking out mortgages on the property. This is supported by Article 107.2 of the Mortgage Law. However, it cannot affect the usufruct.
• Carry out works and refurbishments. Always with the aim of improving the conditions of the property. Furthermore, they cannot be detrimental to the usufructuary, as specified in article 503 of the Civil Code.
• Restitution of the usufruct. That is to say, when the right of use and enjoyment that another person has over the property of the bare owner ends, he/she must immediately return to it (article 522 of the Civil Code).

However, the Civil Code, in articles 489, 501 and 505, also foresees a number of obligations for the bare owner. In particular, he will have to pay for any extraordinary repairs that may be necessary. In case of failure to do so, the usufructuary has the right to carry out the repairs himself and to increase the value of the usufruct in proportion to the improvement in the value of the property.

He/she will also have to respect the right of use and enjoyment of the usufructuary property and pay the corresponding taxes and duties. Attention! The payment of IBI (property tax) is the responsibility of the usufructuary, as it is understood that he/she is the taxpayer of this tax. However, the community fees do not have to be paid by him.

On the other hand, if the bare ownership has a mortgage prior to the sale, lease or transfer of the usufruct, it is the owner of that right who will have to pay it. In fact, in the event of failure to do so and if this would lead to the seizure of the property and its subsequent sale in order to settle the debt, the bare owner would be obliged to account to the usufructuary.

The difference between freehold and bare ownership

Freehold and bare ownership are also different concepts. Specifically, in order for a bare owner to acquire the condition of full ownership of a property, it is necessary that he or she manages to acquire the right of usufruct of the property. In that case, he will not only be its legal owner, but will also be protected by the right to use and enjoy it.

The condition of freehold in a single person can occur for two reasons:

• Sale of the usufruct. The owner of the right of use and enjoyment decides to sell it to the bare owner in exchange for a specific amount of money.
• Extinction of the usufruct. This is the most common. The usufruct can be extinguished, in the first place, by the death of its owner. If there are several owners, you will only receive the proportional part that corresponds to you. It can also be terminated by the expiry of the term foreseen and stipulated during its constitution and by the fulfilment of the resolutory condition of the agreement.

Is it possible to sell the bare property with usufruct for life?

Earlier we cited the example of an elderly person who, in the absence of heirs and in need of money, sold his property to the bank, but retained the right to use and enjoy it for life. In this case, originally the bare owner and the usufructuary were the same person, so there is no problem in carrying out such a transaction as long as there is a buyer willing to accept the conditions.

But what happens if the bare owner is different from the beneficiary of the right of use and enjoyment? Nothing. The sale of a house with usufruct for life is totally possible. However, as stated in article 489 of the Civil Code, the new bare owner will have to continue to respect the usufructuary as long as his right of use and enjoyment exists in the same way as the previous owner.

This is the reason why sales of property with maintenance of usufruct practically only take place between elderly people and banks or, failing that, investment funds. In other words, organisations that do not mind waiting, as they expect that what they have invested will be amortised and will yield a return when the time comes.

Conclusions

In short, not having full ownership of a real estate property, i.e. being both the bare owner and usufructuary, is often a problem. However, the Civil Code recognises considerably more possibilities for those who hold the right of use and enjoyment of the property than for those who are its legal owners. This is why it is often a matter of dispute in the courts, for which a good real estate lawyer is necessary.