Two people can hold entirely different rights over the same property, and that completely changes what can be done with it.

It is common to hear people say, “My parents transferred the bare ownership of the house to me” or “My mother holds the usufruct,” without it being entirely clear what each concept actually entails in practice. These are two distinct legal rights over the same property, and understanding the difference is crucial—whether you are inheriting, receiving a gift, buying bare ownership as an investment, or simply structuring your family estate.

What Exactly Are Bare Ownership and Usufruct?

When full ownership (dominio pleno) of a property is divided, one party (the usufructuary) holds the right to use and enjoy the asset—including renting it out and keeping the rental income—for life or for a agreed fixed term. Another party (the bare owner) holds legal title to the property, but without the right to use or occupy it for the duration of the usufruct. Neither party individually holds full ownership: it is the combination of both rights that reconstitutes complete ownership.

This legal arrangement is governed by Articles 467 onwards of the Spanish Civil Code and commonly arises in two scenarios:

• Gifts/Donations: Parents transfer bare ownership to their children while retaining a lifetime usufruct (usufructo vitalicio) so they can continue living in the home.
• Inheritances: A surviving spouse receives the usufruct of the family home, while the children receive the bare ownership.

Who Can Do What: Rights, Obligations, and Expenses

The usufructuary may live in the property, rent it out, and retain the rental income, but is obligated to maintain it. They cannot sell full ownership because they do not hold it; they may only transfer their usufruct right.

The bare owner may sell their interest (the bare ownership) without needing the usufructuary’s consent. However, anyone who purchases that bare ownership still cannot use or occupy the property until the usufruct is extinguished.

Regarding costs, the standard statutory framework is set out in Articles 500 and 501 of the Civil Code:

• Ordinary repairs are the responsibility of the usufructuary.
• Extraordinary repairs (structural works) fall to the bare owner.

With local property tax (IBI), the position is somewhat more nuanced than usually explained: local tax legislation designates the usufructuary as the liable taxpayer, but that does not mean the financial burden always and invariably falls on them. Cadastral bills do not always reflect this split accurately, and there is nothing to prevent the usufructuary and bare owner from agreeing a different allocation in the title deed.

The same applies to community fees (cuotas de comunidad): common practice assigns ordinary fees to the usufructuary and special assessments (derramas) to the bare owner. However, as far as the homeowners’ association is concerned, the registered legal owner is formally liable, and internal distribution can vary according to what has been agreed. It is therefore advisable to stipulate this explicitly in the deed of creation rather than assuming the law will automatically resolve future doubts.

How Each Right Is Valued

The tax value of both the usufruct and the bare ownership is calculated using a formula set out in Article 26 of the Spanish Inheritance and Gift Tax Act (Ley del Impuesto sobre Sucesiones y Donaciones).

For a lifetime usufruct (the most common type), the value of the usufruct—as a percentage of the total property value—is equal to 89 minus the age of the usufructuary, subject to a statutory minimum of 10% and a maximum of 70%. The bare ownership accounts for the remaining percentage up to 100%.

• 60-year-old usufructuary: The usufruct is worth 29% ($89 – 60$), and the bare ownership is worth 71%.
• 75-year-old usufructuary: The usufruct is worth 14% ($89 – 75$), and the bare ownership is worth 86%.
• Usufructuary aged 82 or over: The result of the subtraction would be under 10, so the legal minimum of 10% applies to the usufruct, leaving 90% for the bare ownership.

The older the usufructuary, the lower the taxable value of the usufruct and the higher that of the bare ownership, as statistically the usufruct will last for a shorter period.

A Worked Example

Consider a property valued at €300,000, where a 70-year-old parent transfers the bare ownership to their daughter while retaining a lifetime usufruct.

• The usufruct percentage is 19% ($89 – 70$), giving a value of €57,000.
• The remaining 81% represents the bare ownership, valued at €243,000.

This calculation determines the taxable base on which the daughter will pay Inheritance and Gift Tax upon receiving the bare ownership, subject to any applicable allowances and relief in her autonomous region.

The Andalusian Relief That Changes the Practical Outcome

While the calculation above determines the taxable base, in Andalusia the actual tax bill payable is often considerably lower. Since 2021 (under Law 5/2021 on Transferred Taxes, which consolidated relief first introduced in 2019), Andalusia has applied a 99% tax credit to Inheritance and Gift Tax for Group I and II beneficiaries (spouses, children, grandchildren, parents, and grandparents) for both inheritances and lifetime gifts between these direct family members.

In practice, this means that a gift of bare ownership between parents and children in Andalusia—even with a taxable base of €243,000 as in the example above—will result in a final tax payment close to zero. This relief is not automatic: a formal self-assessment tax return (autoliquidación) must be filed within the statutory deadline to claim it.

This same tax credit may also benefit the bare owner later when the usufruct expires and full ownership is consolidated (discussed below). However, the precise rules applying at that future point depend on how the usufruct was originally created and the legislation in force at the time, so it should always be reviewed with a tax advisor when the time comes rather than taken for granted in advance.

Practical Applications

Beyond gifts and inheritances, there is a lesser-known and increasingly popular use: selling bare ownership to raise capital.

An elderly property owner can sell the bare ownership to an investor or specialized fund, receive the lump sum corresponding to that percentage (for instance, 71% of the value if they are 60 years old), and retain a lifetime usufruct—meaning they remain in the home for the rest of their life without paying rent. It functions as an alternative to an equity release scheme or reverse mortgage, following a similar rationale: unlocking capital tied up in property without having to move.

A key tax incentive supports this transaction when the seller is 65 or older and the property is their main residence: the capital gain generated from selling the bare ownership is 100% exempt from Personal Income Tax (IRPF), just as it would be if selling full ownership. The Spanish Tax Agency (Agencia Tributaria) explicitly confirms this: the primary residence exemption for individuals over 65 extends to selling bare ownership while retaining a lifetime usufruct. (This does not apply in the reverse scenario—transferring only the usufruct while retaining bare ownership is not exempt under the same criteria).

This arrangement makes sense for individuals who have no heirs to prioritize leaving the complete property to, or who prefer to secure income during their lifetime rather than leaving an intact estate. It is not the only option available, and the purchase price offered for bare ownership should be compared against alternatives (such as sale-and-leaseback or reverse mortgages) before deciding.

What Happens When the Usufruct Extinguishes?

A lifetime usufruct expires upon the death of the usufructuary (or, in the case of a fixed-term usufruct, upon the expiration of the agreed term). At that moment, the bare owner automatically consolidates full ownership without requiring a new property transfer in the strict legal sense; however, taxes must still be settled for that consolidation.

The general approach applied by the Tax Agency and regional authorities usually references the valuation the usufruct had when it was originally created, applying whichever tax relief was in force at that time. However, this is not a universal rule: the exact tax treatment depends on how the split was originally generated (gift, inheritance, or other legal transaction) and the specific rules governing Inheritance Tax in each autonomous region at the relevant time. Before assuming how a future consolidation will be taxed, it should be reviewed with a tax advisor when it actually occurs.

Key Points to Check Before Buying Bare Ownership

If you are considering buying bare ownership as an investment, ensure you clarify:

• The exact age of the usufructuary.
• Which ongoing expenses fall to you as the bare owner during the usufruct.
• Whether there is an explicit agreement regarding maintenance and property improvements.
• The current physical condition of the property, as you will not be able to intervene or alter it until the usufructuary’s right comes to an end.

Frequently Asked Questions

Can the bare owner enter the property?

No, unless explicitly authorized by the usufructuary. The bare owner holds legal title, but has no right of use or occupation while the usufruct remains in effect.

Can the usufructuary sell the house?

They cannot sell full ownership because they do not own it. They may transfer their usufruct right to a third party, but not the property itself.

Can the usufructuary rent it out?

Yes. The usufructuary is entitled to let the property and retain all rental income without requiring permission from the bare owner.

Who pays for building works or repairs?

It depends on the nature of the work. Ordinary maintenance and repairs are paid by the usufructuary; structural or extraordinary works fall to the bare owner, unless agreed otherwise in the title deed.

What happens if the bare owner dies before the usufructuary?

The usufruct is unaffected and remains fully valid over the property. The bare ownership passes to the deceased bare owner’s heirs, who receive it subject to the exact same restriction: they cannot occupy the home while the usufruct lasts.

Can a property encumbered by a usufruct be sold?

Yes, in two ways: by selling only the bare ownership (the buyer acquires title, not occupation), or by selling full ownership if the usufructuary and bare owner reach an agreement and sell jointly.

Can the usufructuary renounce their right?

Yes. Renouncing the usufruct automatically consolidates full ownership in the bare owner. However, relinquishing this right carries its own tax implications, which should be thoroughly reviewed prior to signing.

Before You Decide

Every case carries distinct civil and tax implications depending on how the usufruct was created and the autonomous region in which the property is located. If you are planning to gift, sell, or purchase bare ownership, it is advisable to review the transaction before signing to understand its specific legal and fiscal consequences.

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