Today is: 17 May 2012
Please note that law is a complex subject and you should not rely on this article without professional advice on the facts of your case.
A nue-propriété sale of a property is where the different parts of ownership of a property are divided. The seller retains the “usufruit” (akin to a life interest). This means the seller can not only remain in the property for their lifetime, but also move out and rent out the property receiving the rent. The buyer buys the nue-propriété which is in effect the underlying interest in the property. On the death of the seller, the buyer automatically becomes the owner of the whole property. The transaction is well established in France and the conveyance is documented by notaires.
It is possible to adapt this further so that what the seller retains is simply a “réserve d'usage et d'habitation”. In this case the seller can use and reside in the property, however if he moves out his right is extinguished.
Calculating the price of a nue-propriété
The property is valued and this value or price is then divided based on the seller's age to give a value for the nue-propriété and for the usufruit. Obviously the older the seller is the more valuable the nue-propriété becomes. This is set in the French Tax Code and is as follows:
| Age of person owning usufruit | Value of usufruit | Value of nue-propriété |
| Up to 20 years | 90% | 10% |
| From 21-30 years | 80% | 20% |
| From 31 to 40 years | 70% | 30% |
| From 41 to 50 years | 60% | 40% |
| From 51 to 60 years | 50% | 50% |
| From 61 to 70 years | 40% | 60% |
| From 71 to 80 years | 30% | 70% |
| From 81 to 90 years | 20% | 80% |
| After 91 years | 10% | 90% |
Although it is possible to negotiate the price for the nue-propriété, the way the French Tax Code treats it for tax purposes is usually followed. As an example a 68 year old woman owning a €400,000 house would typically receive €240,000 for a sale of the nue-propriété. The buyer receives no rent and takes the risk of the longevity of the seller.
Husband and wife successive usufruits
In addition it is possible to have a purchase of nue-propriété where the usufruit will last for a specific duration and not for the lifetime of the seller. The value of the usufruit is then 23% for every 10 year period. However the value determined in this manner cannot exceed the lifetime based usufruit value. It is also possible to have successive usufruits, for example a husband and wife may wish to sell the nue-propriété and ensure that after the first death the usufruit will continue for the surviving spouse so that the buyer can only take possession on the second death. This will affect the price as two lives are involved before the buyer can take possession of the property.
If you opt for a purchase of more than the nue-propriété i.e. where the seller retains only a réserve d'usage et d'habitation, this is significantly more expensive as this right retained by the seller is valued at only 60% of the value of the lifetime usufruit.
No rent paid
During the lifetime of the seller you will not receive any rent for the property, but you will have some outgoings. The outgoings relate to work known as “gross travaux” or big repairs and are akin to those carried out by a landlord. The exact details of what obligations you are under should be fixed contractually in the purchase contract.
Selling the property
You can sell the nue-propriété before the seller's death; you either sell with the seller's agreement in which case the whole property is sold and the purchase price is divided between you and the seller based on their age at the time of this sale. Alternatively, you sell the property without their agreement and only sell your nue-propriété.
In summary
Purchasing the nue-propriété of a property can be a useful investment for a buyer who does not want rental income and who wants a property at a discounted price for future occupation. Likewise for a seller it is a useful way of releasing capital without paying fees to a bank or equity release company.
July 2011
David Anderson
Solicitor and Chartered Tax Adviser
Nicole Gallop Mildon
Solicitor
Sykes Anderson LLP
9 Devonshire Square
London EC2M 4YF
Telephone 020 3178 3770