Bare ownership (nue-propriété)

Nue-propriété (bare ownership) is what remains of the ownership of a property once the usufruit (usufruct) has been taken away, that is, the right to use it and to receive its income. The bare owner has the property without enjoying it; the bare owner waits. The French Civil Code defines usufruct as the right to enjoy things owned by another, as the owner would, subject to preserving their substance; bare ownership is the right of that “other”. When the usufruct ends, most often on the death of the usufructuary, the bare owner becomes full owner without formality or transfer duty.

The situation most often arises from an inheritance (the surviving spouse opts for the usufruct, the children receive the bare ownership) or from a gift with a reserved usufruct. It is also found in viager sales (life annuity sales with the seller remaining in occupation) and in certain investment structures.

Where the rule comes from

Articles 578 et seq. of the French Civil Code define usufruct and, by implication, bare ownership; article 617 lists the causes of termination; article 621 provides that, on a simultaneous sale, the price is apportioned between the usufruct and the bare ownership according to the respective value of each right, unless the parties agree to transfer the usufruct onto the price. Article 669 of the French General Tax Code sets a statutory scale according to the age of the usufructuary: the bare ownership is worth 10 % of full ownership if the usufructuary is under 21, 50 % between 51 and 60, 70 % between 71 and 80, 90 % over 90, in ten-year bands. This scale is compulsory for calculating duties; it is not a market value.

In a valuation report

I first establish the market value of the property in full ownership. For the tax value of the bare ownership, I apply the scale of article 669 and say so. For an economic value (partition, sale between usufructuary and bare owner, apportionment of a price, liquidation), I calculate the value of the usufruct as the present value of the net income over the probable duration of the usufruct, taken from mortality tables for a life usufruct or from the contractual term for a fixed-term usufruct, and derive the bare ownership by difference. The report presents both approaches, the discount rate and the table used, and explains the gap.

Example

A flat worth €300,000 in full ownership, net market rent €10,800 a year, usufructuary aged 78. Statutory scale: usufruct 30 %, bare ownership 70 %, that is €210,000. Economic value: life expectancy adopted 11 years, discount rate 3.5 %, value of the usufruct 10,800 × 9.0 = €97,000 rounded, bare ownership €203,000. The two figures are close here; for a usufructuary aged 62, the scale would give 60 % (€180,000) whereas the economic approach, over twenty-five years, would give about €122,000: the gap becomes decisive in a partition.

Not to be confused with

Usufruct is the complementary right. Démembrement (division of ownership) is the operation that separates the two. A viager sale with the seller in occupation combines a bare ownership and an annuity; the right of use and habitation is narrower than usufruct.