Usufruct and Bare Ownership in Spain: Rights, Obligations and Taxation (Arts. 467-529 CC) : Lexiel

Concept of Usufruct (Art. 467 CC)

The Código Civil (Spanish Civil Code) defines usufruct in Art. 467 as the right to enjoy another person's property with the obligation to preserve its form and substance, unless the instrument of constitution or the law authorizes otherwise. It combines two essential elements:

Ius utendi: the right to use the asset.
Ius fruendi: the right to receive the fruits (civil, natural, and industrial).

The usufructuary may not alter the substance of the asset (salva rerum substantia), although they may make useful or recreational improvements provided these do not alter the form or substance of the asset or cause harm to the owner (Art. 487 CC).

Bare Ownership: Definition and Rights Retained by the Bare Owner

Bare ownership (nuda propiedad) is ownership stripped of the right of enjoyment. The bare owner (nudo propietario) retains:

The power of disposition: they may sell, donate, or encumber the bare ownership without the usufructuary's consent.

The right to industrial fruits pending at the time of extinction of the usufruct (Art. 474 CC).
The power to oversee the proper preservation of the asset (negatory action if the usufructuary causes deterioration).
The legal right of first refusal (derecho de retracto) in certain cases of transfer.

When the usufruct is extinguished, bare ownership automatically consolidates into full ownership, with no additional act required.

Ways of Constituting a Usufruct

A usufruct may be constituted by:

Operation of law: the surviving spouse's usufruct over the improvement third (tercio de mejora) (Art. 834 CC), or over the entire estate in certain circumstances; the parents' legal usufruct over their children's assets (Arts. 164–165 CC).

Inter vivos legal transaction: sale, donation, or any onerous or gratuitous contract. A public deed (escritura pública) and registration in the Land Registry are required for enforceability against third parties.
Will: very common in succession planning; the testator bequeaths the usufruct to one heir and the bare ownership to another.
Acquisitive prescription (usucapión): a usufruct held in good faith for 10 years between parties present / 20 years between parties absent; in bad faith, 30 years (Arts. 1957–1959 CC).

Rights of the Usufructuary (Arts. 471–491 CC)

Receipt of Fruits

The usufructuary receives all fruits, whether:

Natural and industrial (Art. 471 CC): fruits pending at the start of the usufruct are distributed pro rata with the owner according to the time elapsed within the productive cycle.
Civil (Art. 474 CC): rental income, deposit interest, dividends. These accrue on a day-by-day basis.

Special Uses

Leasing the usufructed asset (Art. 480 CC): the usufructuary may lease the asset; however, the lease terminates with the usufruct (unless otherwise agreed with the bare owner), which may give rise to compensation for the lessee due to early termination.
Forestry uses: the usufructuary may exploit the woodland in the customary manner but may not fell trees that form an integral part of the asset (Art. 485 CC).
Found treasure: the usufructuary has no right to any treasure found, which belongs to the bare owner.

Rights over Credits and Shares

In a usufruct over credits or shares (Art. 507 CC), the usufructuary may demand collection of matured credits and reinvest the proceeds. If the credit is extinguished through early collection, the capital must be preserved for the bare owner.

Obligations of the Usufructuary (Arts. 491–512 CC)

Inventory and Security Bond (Art. 491 CC)

Before entering into enjoyment, the usufructuary must:

Draw up an inventory of the assets, describing the condition of any immovable property and having movable property appraised.
Provide a security bond (fianza) guaranteeing that they will use and preserve the assets with the diligence of a prudent person (diligencia de un buen padre de familia). The instrument of constitution may waive the bond requirement; parents who hold a usufruct over their children's assets are exempt by operation of law (Art. 493 CC).

Preservation and Repairs (Arts. 500–502 CC)

Ordinary repairs: borne by the usufructuary (Art. 500 CC). These are repairs necessary to keep the asset in good working order.
Extraordinary repairs: borne by the bare owner (Art. 501 CC). However, if the owner fails to carry them out, the usufructuary may do so and claim the cost at the end of the usufruct, with interest from the date of expenditure.

Charges and Taxes

Ordinary contributions: IBI (Spanish council tax/property tax), municipal charges, and annual taxes on the asset, borne by the usufructuary (Art. 504 CC).
Extraordinary charges on capital: borne by the bare owner, who has the right to claim from the usufructuary the interest on the amount disbursed.

Extinction of Usufruct (Arts. 513–523 CC)

A usufruct is extinguished by:

Death of the usufructuary (Art. 513.1 CC): the most common cause in a life usufruct. The usufruct is not transferable mortis causa unless expressly agreed (which converts the usufruct into a fixed-term rather than a life usufruct).
Expiry of the term or fulfilment of the resolutory condition (Arts. 513.2 and 513.3 CC).
Consolidation of the usufruct and bare ownership in the same person (Art. 513.4 CC).
Renunciation by the usufructuary (Art. 513.5 CC): valid even if it prejudices creditors (although creditors may challenge it by means of a Pauline action, Art. 1111 CC).
Total loss of the asset subject to usufruct (Art. 513.6 CC). If the loss is partial, the usufruct subsists over the remaining part.
Termination of the constituting party's title: if the seller who constituted the usufruct was not the owner and the true owner claims the asset.
Extinctive prescription (Art. 513.7 CC): non-use of the usufruct for 30 years (the general limitation period under Art. 1963 CC).
Serious abuse by the usufructuary (Art. 520 CC): the bare owner may seek termination or delivery of the asset subject to a security bond.

In the law of succession, the surviving spouse is entitled to a statutory usufruct share (cuota legal usufructuaria) over the estate (Arts. 834–840 CC), which varies depending on the co-heirs:

With descendants: usufruct over the improvement third (tercio de mejora) (1/3 of the estate in usufruct).
With ascendants, without descendants: usufruct over half the estate.
Without descendants or ascendants: usufruct over two thirds of the estate.

The heirs may commute the spousal usufruct (Art. 839 CC) by providing the surviving spouse with their share in the form of a life annuity, income from specific assets, or a cash payment by mutual agreement.

Tax Valuation of Usufruct and Bare Ownership (ISD)

For the purposes of the Impuesto sobre Sucesiones y Donaciones (ISD ( Inheritance and Gift Tax) and the Impuesto sobre Transmisiones Patrimoniales (ITP ) Transfer Tax), the usufruct is valued using the tables in Art. 26.a) of Law 29/1987 on the ISD:

Life usufruct: the value is calculated as 89 − age of the usufructuary. The minimum result is 10% of the total value.

Usufructuary aged 30: usufruct value = 89 − 30 = 59% of the total value.

Usufructuary aged 60: usufruct value = 89 − 60 = 29% of the total value.
Usufructuary aged 80: usufruct value = 89 − 80 = 9% → minimum of 10%.

Bare ownership: the complement of the usufruct (100% − % usufruct).

Fixed-term usufruct: 2% of the value per year of duration, not exceeding 70%.

Practical examples:

Property valued at €300,000, usufruct in favour of a surviving spouse aged 65:

- Usufruct: 89 − 65 = 24% → €72,000.

- Bare ownership: 76% → €228,000.

In a donation of bare ownership, the donee pays tax on €228,000; when the usufruct is extinguished, the usufructuary pays tax on the consolidation of full ownership based on €72,000.

Usufruct over Company Shares and Equity Interests

A usufruct over shares in a Sociedad Anónima (S.A. ( public limited company) or equity interests in a Sociedad de Responsabilidad Limitada (S.L. ) private limited company) raises the question of how to divide economic rights (dividends → usufructuary) and political rights (voting). The LSC (Ley de Sociedades de Capital; Spanish Companies Act) (Arts. 127–129 LSC) provides that voting rights vest in the bare owner, while the usufructuary is entitled to dividends approved during the term of the usufruct. The instrument of constitution may modify this allocation.

Differences between Usufruct, Use, and Habitation

Use (uso) (Arts. 524–529 CC): the right to use an asset and receive only such fruits as are necessary for the holder's needs and those of their family. More restrictive than usufruct.
Habitation (habitación) (Art. 524 CC): the right to occupy, in another person's home, the rooms necessary for the holder and their family. Limited to residential use; the right may not be leased.
Rights of use and habitation are strictly personal and non-transferable (Art. 525 CC), unlike usufruct, which may be assigned (although the assignor remains liable to the owner).