Among the various possibilities offered by the real estate market is that of buying "bare ownership," many people ask us what it is, what consequences it has, and whether it is really convenient.
The sale of bare ownership is an option that, especially in times of economic uncertainty, carves out a fair amount of space within the real estate market and is a type of sale that can bring several advantages for both sellers and buyers.
Meanwhile, let us begin by understanding what the meaning of this term is.
We must, first, make a distinction between bare owner and usufructuary:
The bare owner is the person who transfers his or her right of enjoyment (i.e., the right to enjoy and dispose) of the property to another person. It will be the true owner of the property but will not be able to exploit it. In essence, the bare owner is "stripped" of part of his or her right of ownership.
L'usufructuary, on the other hand, is the one who transfers to the bare owner his right of enjoyment but not the right of ownership. The seller can continue to live in the house for life, and the buyer can take possession only after the death of the seller.
Let's take an example: if we decide to buy the bare ownership of a house we will become the actual "owners" of the house but we will not be able to use it immediately. On the other hand, the person who sells is the usufructuary who can continue to live in the house until the date stipulated in the contract of purchase and sale or the end of the usufructuary's life (if he is a natural person and it is not specified in the contract it ends with his life instead if he is a legal person it ends after thirty years). In addition, the usufructuary has the option to rent the property or sell the usufructuary right, if the contract allows it but in any case, the right, even if transferred, cannot exceed the life of the original usufructuary. After the stipulated term, the bare owner can make full use of the property, such as by deciding to live there or rent it out to a third party.
Let us now look at what are the advantages of the buyer ( the hypothetical bare owner) and those of the seller ( the usufructuary) :
- The usufructuary will sell his or her right to dispose but can remain living in his or her house and, most importantly, has opportunities for immediate liquidity without waiting to sell his or her house outright
- The bare owner has the opportunity to buy house has an affordable price but without going to live in it right away but can consider the deal as an investment.
But how do you calculate the bare ownership of a property?
The valuation is done through parameters set by the Ministry of Finance. Generally speaking, however, we can say that bare ownership is more expensive when the usufructuaries are elderly since we expect their life expectancy to be shorter than that of younger usufructuaries and therefore our expectation of being able to dispose of and enjoy the asset will be shorter.
To calculate the value of bare ownership, several indicators must be taken into account. The indicators are:
- The value of full ownership;
- The age of the usufructuary in completed years.
Based on the age of the usufructuary, the value of the property will be divided in percentage between usufruct and bare ownership.
The purchaser of bare ownership of a property will incur a purchase cost equal to the market value of the property discounted by the usufruct. The purchaser will not be able to enjoy the property until the usufruct right is present.
How is usufruct calculated by age?
The reference standard for calculating the age of the usufructuary is Ministerial Decree Dec. 12, 2019 - in Official Gazette No. 293, Dec. 14, 2019 - effective Jan. 1, 2020
Based on the age of the usufructuary, we report some percentages of distribution:
from 0-20 years 95% usufruct and 5% bare ownership;
from 51-53 years 70% usufruct and 30% bare ownership;
from 64-66 years 50% usufruct and 50% bare ownership;
from 83-86 years 20% usufruct and 80% bare ownership;
from 93-99 years 10% usufruct and 90% bare ownership;
Over 100 years is not expected.
Now that we have clarified all concepts, you are aware of all the pros and cons of bare ownership. If you were thinking of considering such a purchase, please do not hesitate to contact us for any clarification as well
You can find us at 1209 Via Pesciatina or contact us at 0583/997201
Until the next post !