Calculate the bare ownership value

In this article, we explain how the bare ownership value of a property is calculated, and offer specific examples. The division between usufruct and bare ownership is determined by a tax scale based on the age of the usufructuary.

What is bare ownership?

The ownership of a property is made up of several elements:

• Usus, which is the right to use the property, such as the right to live in a house.
• Fructus, which is the right to rent out the property and to receive income from rent, for example.
• Abusus, which is the right to sell, alter, and even to destroy the property.

When speaking about bare ownership or usufruct, it means that there has been a separation of the ownership of these three elements.

• Bare ownership is the right to dispose of the real estate, that is, to own the four walls. The holder of the bare ownership is called the bare owner.
• The usufruct, on the other hand, is the right to use the real estate and to benefit from it, such as to receive income from rent. In other words, the usufructuary has the right to live in the property or to rent it out without being the owner of it.

In this case, no one has full ownership anymore, because ownership has been separated into bare ownership and usufruct. The bare ownership and usufruct values are different from the full ownership value of the property.

How is the bare ownership value calculated?

As we have seen, full ownership of real property includes the right to use the property, to rent it out to earn income, to sell it or give it away, to bequeath it or to even destroy it. However, this ownership can be shared between usufruct and bare ownership, which is known as separation of ownership. Usufruct is the right to use the property and to earn income from it without being the owner, while bare ownership is the ownership of the property without the right to use it or to earn income from it.

To calculate the bare ownership value, we can use real estate agency estimates, but more importantly, we are obliged to involve an expert approved by the French Financial Markets Authority (AMF). This allows us to guarantee that our clients will be able to sell the bare ownership value of their property at the fairest market price.

Usufruct and bare ownership: who pays the taxes and what taxes do they pay?

What taxes does the bare owner pay?

The status of bare owner involves the ownership of a property in the form of bare ownership, that is, owning a property without being able to use it. Bare ownership is considered a real estate asset in its own right, even if the bare owner does not have full control over the property. Payment of the property tax is agreed between the parties at the time of the proposal of the bare ownership sale.

What taxes does the usufructuary pay?

The usufructuary is a person who has the right to use a property which belongs to another person, known as the bare owner.

If the usufructuary decides to rent out the property, the usufructuary is taxed on all income from that rental and may also deduct certain expenses. The usufructuary is also required to report this income on their income tax return.

When should I consider a bare ownership sale?

Selling the bare ownership of a property is recommended in certain situations, including when owners are preparing their estates, want to finance their personal plans or want to improve their financial situation and quality of life.

With a bare ownership sale, sellers can use the capital received from the sale to finance their plans or to get out of difficult financial situations. Sellers may also use the funds received from the sale to make a gift while they are still living. It also avoids the administrative steps involved in the collection of the life annuity as part of a traditional life annuity (tax declarations, etc.). Finally, a bare ownership sale allows sellers to enjoy greater financial freedom for the years to come, to receive more capital, to receive rents from their property, and to enjoy life to the fullest.