Bare Ownership

There are legal terms that often remain confined to specialized legal circles until economic circumstances bring them to the forefront of the debate and consumers begin to become familiar with them. A notable example is the concept of NUDA PROPIEDAD, which we will briefly explain in this article.

WHY IS JOINT TENANCY BEING DISCUSSED?

Bare ownership is often discussed as an investment alternative because some people are interested in acquiring a property, even if it is not transferred to them for several years. The passage of time does not negatively affect these investors, as the value of the property tends to increase naturally.

On the other hand, the owner sells the property while reserving the right to use it and receiving a sum of money from the sale of the bare ownership. This sum of money can serve as a supplement to the owner’s income, which is often insufficient. During the agreed-upon period or for the owner’s lifetime, the owner can enjoy the property with complete peace of mind, since the sale does not entail any loss of use. Therefore, bare ownership provides a level of security that is highly sought after today.

Naked Ownership

Ownership or the right of ownership over property encompasses various powers, such as the right to dispose of and encumber the property, and the right to use and enjoy it. When we purchase a property, such as a home, we become its owners and have full control over it, with the ability to exercise all of these powers.

In exercising these rights, we can sell the property, which would mean ceasing to be the owners; we can rent it out, granting the right of use for a specified period and subject to certain terms and payments; or we can sell the bare ownership and reserve the right to use and enjoy the property. However, in the case of bare ownership, the right of use and enjoyment is separated from the right of ownership. This means that the owner transfers the right of use and enjoyment for life to a third party, while retaining the ability to dispose of and encumber the property.

Naked Ownership and Usufruct

The establishment of a usufruct—and, consequently, of bare ownership by the owner—is carried out by means of a public deed executed before a notary. Although there are no specific regulations for valuing bare ownership, there are regulations for valuing usufruct, including tax rules governing its assessment and a formula for calculating it.

The established formula is as follows: 89 minus the age of the usufructuary, which results in a percentage (applied with a maximum of 70% and a minimum of 10%). This means that, according to the tax formula, the value of a usufruct can never exceed 70% of the property’s value nor be less than 10%.

Although the parties may agree on specific amounts, they must take into account the Tax Agency’s criteria, which require a tax valuation. The termination of the usufruct—and, therefore, the return of full ownership—occurs in accordance with the provisions of the Civil Code and the conditions set forth in the contract. Causes of termination include the death of the usufructuary, the expiration of the agreed-upon term, or the fulfillment of the conditions specified in the contract, among others.

RIGHTS CONFERRED BY JOINT OWNERSHIP

The rights conferred by bare ownership are as follows:

Right to Dispose of Property Subject to Restrictions:

As the holder of the right of ownership over the property, the owner may dispose of it, but is subject to certain restrictions. The owner may not alter the form or substance of the property or take any actions that would harm the usufructuary.

Lien:

The owner has the right to encumber the real property in the exercise of his or her role as owner.

Improvements Made During the Termination of the Usufruct:

When the usufruct comes to an end, the usufructuary may make improvements—whether for practical or recreational purposes—to the property subject to the usufruct, provided that such improvements do not alter its form or substance. However, the usufructuary is not entitled to compensation for these improvements.

Responsibility for Ordinary Expenses:

The ordinary expenses associated with the usufruct are the responsibility of the usufructuary.

The fundamental right conferred by bare ownership is the termination of the usufruct as agreed, which allows the right to use and enjoy the property to revert to the owner. As a result, bare ownership ceases to exist, and the owner becomes the full and absolute owner of the property.

OBLIGATIONS ARISING FROM JOINT OWNERSHIP

The obligations associated with bare ownership are as follows:

Respect for the Right of Use and Enjoyment:

The principal obligation of the bare owner is to respect the usufructuary’s right to use and enjoy the property. This entails refraining from any action that interferes with or violates the usufructuary’s rights as the owner.

Liability for Extraordinary Repairs:

Extraordinary repairs are the responsibility of the owner. However, the usufructuary is required to notify the owner when such repairs are urgently needed. Therefore, the expenses associated with special assessments and the Real Estate Tax (IBI) are considered attributable to the owner. It is important to note that the parties may agree on specific provisions, but generally, the provisions of the Civil Code will apply.

Naked Ownership in Practice and Everyday Life

Bare ownership is a common option for people seeking a supplementary financial solution. In this type of agreement, the seller may continue to live in the home and receive a lump sum of money, but will lose the right to use the property once the conditions stipulated in the contract with the bare owner are met.