Bare ownership and usufruct in France: the tax scale

Usufruct and bare ownership: who has which rights?

Usufruct is “the right to enjoy things owned by another, as the owner himself would, but with the obligation to preserve their substance” (code civil (Civil Code), art. 578). Service-public.gouv.fr summarises the division as follows:

The usufructuary can live in the property, let it, and even sell or give away their usufruct (art. 595). However, they cannot alone enter into an agricultural or commercial lease: they need the bare owner’s agreement or, failing that, a court authorisation. Residential leases of more than nine years that they sign alone are binding on the bare owner, when the usufruct ends, only for the nine-year period then running (art. 595).

The sale of full ownership requires the agreement of both. The price is then divided according to the respective value of each right, unless they agree to transfer the usufruct to the sale proceeds; and selling the property without the usufructuary’s agreement does not take away their usufruct (art. 621).

Who pays for what: upkeep, major works, taxes

The Civil Code draws the line: the usufructuary is only liable for maintenance repairs; major repairs remain the owner’s responsibility, unless they result from a failure to maintain (art. 605). Major repairs are those “to main walls and vaults, the restoration of beams and of entire roofs”, as well as of dykes and of retaining and boundary walls in their entirety; “all other repairs are maintenance” (art. 606).

On the tax side, service-public.gouv.fr states that the usufructuary of a property pays the taxe foncière (property tax) and, depending on the value of the property, the impôt sur la fortune immobilière (property wealth tax); if they let it, they are taxed on the rent. They must also draw up an inventory of condition before using a property.

The tax scale in article 669 of the CGI

For registration duties and the taxe de publicité foncière (land registration tax) (gift, inheritance, sale), the value of each right is a fraction of full ownership:

Source: CGI, art. 669, I. Example: a 65-year-old parent gives the bare ownership of a flat valued at €300,000 and keeps the usufruct. They are under 71 completed years: the bare ownership is worth 60%, i.e. €180,000, the basis for gift duties. On the usufructuary’s death, the child recovers full ownership with no further tax (CGI, art. 1133).

For a fixed-term usufruct, the age scale does not apply: the usufruct is valued at 23% of full ownership “for each ten-year period of the duration of the usufruct, without fractions and regardless of the age of the usufructuary” (art. 669, II). A twenty-year usufruct is thus worth 46%.

Where does split ownership come from?

Service-public.gouv.fr cites the most common situations: parents have the usufruct of the property of their children under 16, and the surviving spouse can receive the usufruct of the deceased’s estate, the children becoming bare owners. The Civil Code gives the spouse this choice when the deceased leaves children: the usufruct of all the property, or full ownership of a quarter where all the children are children of both spouses (art. 757). Split ownership can also arise from a will, a court decision or a contract: a gift or sale of a usufruct or a bare ownership.

Buying the bare ownership

Buying only the bare ownership means paying a fraction of the full-ownership price, giving up occupation and rent for the duration of the usufruct, then becoming full owner when it ends. If the usufruct is granted for a fixed term, article 669, II gives the tax basis: 23% per ten-year period for the usufruct, the balance for the bare ownership. When the usufruct comes to the end of its term, the reunion takes place free of any tax or duty (CGI, art. 1133).

During the split, the bare owner bears major repairs (art. 605 and 606) and must let the usufructuary occupy or let the property. Finally, service-public.gouv.fr points out that when the usufruct ends, a settlement of accounts determines what each owes the other, and that the usufructuary cannot claim any compensation for having improved the property.

Which professional to consult

The notaire (the public official who drafts property deeds) draws up the split gift or sale and applies the article 669 scale. The agent immobilier (estate agent) provides the valuation of the full ownership, the basis for the whole calculation. The courtier en crédit (mortgage broker) can look into financing for a bare-ownership purchase.