Purchase with usufruct: what it is and how it differs from the termination of joint ownership and donation

When purchasing a property in Spain, there are different legal ways of doing so. Three of the most common—and those that generate the most questions—are purchase with usufruct, donation and termination of joint ownership. Although they may seem similar, each has very different legal, tax and financial consequences.

Below, we explain what each one consists of and what the main differences are. Bear in mind that some of these points are generic and, in each case, both parties can negotiate to reach an agreement.

 

What is purchase with usufruct?

Purchase with usufruct allows a person (the usufructuary) to use and enjoy the property for life, even if they do not have full ownership of it.

There are three fundamental elements to a property:

• Use
• Enjoyment (includes receiving income, for example, from rent)
• Bare ownership (ownership without use or enjoyment)

If all three elements are present, we refer to this as full ownership.

In a purchase with usufruct, the usufructuary retains the use and enjoyment of the property, while one or more other owners hold bare ownership.

Key aspects of usufruct

• If the property is rented out, the usufructuary generally receives the rental income, although this can be agreed upon.
• When a property is sold to a third party, the usufructuary must also transfer their right, or the sale will not transfer full ownership.
• This is common in cases of widowhood, to ensure the protection of the surviving spouse.
• The deed must clearly state who the usufructuary is and the value of the usufruct.
• The usufructuary must sign the acquisition of their rights.

Who pays the expenses?

In general, the usufructuary must pay for utilities and maintenance costs. It is always advisable to agree this in writing.

Taxation of usufruct

The value of the usufruct is calculated using the following formula:
89 – age of the usufructuary, with a minimum of 10% and a maximum of 70%.

 

Donation of a home: when it is used

A donation is a free transfer: the recipient does not pay for the property, only the corresponding taxes.

Main characteristics

• Inheritance and gift tax is payable.
• First- and second-degree relatives enjoy a 99% rebate (depending on the autonomous community).
• Full ownership of the property is transferred.
• It must be formalised before a notary, as it is an independent legal transaction.
• Once accepted, the new owner begins to assume the taxes associated with the property.

 

Termination of joint ownership

How it works

The termination of co-ownership is used when there are several co-owners of a property and one of them wants to take over the entire property. It is not a sale as such, but it is similar in practical terms.

What it involves

• One owner buys the proportional share of the property from the others.
• It can only be done between the current owners.
• There must be more than one owner.
• The transaction is completed when there is only one owner left, extinguishing the co-ownership.
• The property is transferred entirely to the purchaser’s name.

Tax

The dissolution of a condominium is taxed at 1.5% for Documented Legal Acts (AJD) (the rate may vary depending on the community).

 

Main differences between usufruct, donation and termination of co-ownership

Transaction	What is transferred?	Is it free of charge?	Who uses the property?	Tax
Purchase with usufruct	Use and enjoyment (usufructuary) / Bare ownership (other owner)	No	The usufructuary	Depending on the transaction and valuation of the usufruct
Donation	Full ownership	Yes	The new owner	Inheritance and donations (with family allowances)
Termination of joint ownership	Percentage of ownership among co-owners	No	The new owner	Stamp duty 1.5%

 

Conclusion

Purchase with usufruct, donation and termination of joint ownership are valid options for managing property ownership, but each has very different legal and tax implications. Choosing the most appropriate option depends on your family situation, financial interests and long-term goals.

If you require advice, at Imont Legal & Taxes we can help you determine the best option and manage the entire process securely and efficiently.