Did you know that you can live in or rent out a property without actually owning it? This right is known as the usufruct of a property and is one of the most important, yet often least understood, legal concepts in the real estate sector.
Many owners and investors are unaware of how this right can affect the management of their assets or common transactions such as inheritance, donations, or the sale of property. A lack of understanding can lead to mistakes, tax liabilities, poor investment decisions, or ownership disputes.
In this article, we explain exactly what a property usufruct is, how it works, what tax implications it entails, and when it can be a useful tool for planning or protecting your real estate investment. This clear and practical guide has been prepared by our experts, who accompany our clients through every stage of the investment and asset management process, including the legal and fiscal aspects of property ownership.
What is the usufruct of a property?
Before anything else, let’s clarify what this concept actually means. Usufruct is a real right that allows a person, called the usufructuary, to use and enjoy an asset that belongs to another person, known as the bare owner. In real estate, this means the usufructuary can live in the property, rent it out, or even generate income from it, without being its full owner.
Let’s take an example: imagine your grandparents own a home in Madrid and grant you the usufruct so you can live there during your first working years. During that time, you could even rent it to colleagues, but you could never sell it, as ownership still belongs to them.
In this case, your grandfather would be the bare owner and you the usufructuary. According to the Royal Spanish Academy (RAE), it means “said of a person: who possesses and enjoys something”. When the usufruct ends, the home becomes once again the exclusive property of your grandfather.
In practical terms, the usufructuary has the right to live in or make use of the property, while the bare owner retains legal ownership. Once the usufruct expires, whether due to death, renunciation, or the agreed-upon term, full ownership of the property reverts to the bare owner.
Characteristics of the right of usufruct in property
- It is a real right over another person’s property. It does not form part of the usufructuary’s estate.
- It grants full rights of use and enjoyment.
- It is a right with a fixed or predetermined duration.
Types of usufruct in property
- Depending on its duration, the usufruct may be:
- Lifetime usufruct: In this case, the right of usufruct lasts for the lifetime of the usufructuary. In other words, it remains valid until their death. This is the most common type of inheritance or family property transfer.
- Temporary usufruct: it is established for a fixed period of time, for example, 10 or 20 years.
- According to its origin, usufruct can be:
- Legal usufruct: this type is established by law. The most common example is the legal usufruct of the surviving spouse, where the right arises when one of the spouses passes away.
- Voluntary usufruct is created by agreement between the interested parties and can take two forms:
- Inter vivos, when it is agreed upon during the lifetime of the parties through an agreement or contract. For example, a person buys a property and reserves the usufruct for their parents, allowing them to enjoy it for as long as they live.
- Mortis causa, when it is established through a will. In this case, the testator may decide to grant the usufruct of the home to a child and the bare ownership to a grandchild, thus distributing the property rights among different heirs.
Possible causes for the termination of a usufruct
The legal causes that may lead to the termination of the right of usufruct over a dwelling are as follows:
- Death of the usufructuary.
- Expiration of the agreed term.
- Consolidation of ownership, when, for example, the usufructuary acquires the bare ownership.
- Renunciation by the usufructuary.
- Total loss of the property subject to usufruct.
- Termination of the rights of the grantor.
- Prescription.
- Compulsory expropriation.
Professional advice: the key to efficient management
Although the concept may seem simple, the practical application of usufruct requires proper legal, tax and financial guidance. That’s why having an expert real estate consulting firm is essential. At Prime Invest, we help investors, developers and property owners structure their operations with legal certainty, tax efficiency and a long-term vision.
The usufruct of a property not only determines who lives in it, but also how real estate assets are protected, monetised and transferred. Understanding this is the foundation of smart investing.
Would you like to know how to apply usufruct to your real estate strategy or estate planning? Contact us to discover how we can help you make your investment both secure and profitable, with a long-term vision and flexibility.
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