The French fashion of selling houses with lifelong usufruct is coming to Portugal

The right to live in a home while selling it piece by piece is more common among retirees / Gtres
The right to live in a home while selling it piece by piece is more common among retirees / Gtres
16 August 2018, Redaction

There is a certain real estate practice that seems to be gaining ground in Portugal, based on a model used in France – the sale of properties with the reservation of the usufruct of the property in exchange, without paying the full amount of the agreed sale price, but rather paying a kind of agreed monthly payment that is maintained until the usufructuary dies. Mutual investment funds are increasingly attentive to this business model.

Usufruct is a legal term which grants the right to enjoy the fruits of property which is not yours. In this context of the latest trend in Portuguese real estate, it refers to the ability of the seller of a home to keep using it even though they are selling it to someone else, either a private buyer or an investment team, in small monthly payments.

According to the Portuguese newspaper Diário de Notícias, sale with life usufruct reserved is not a new phenomenon, even though it is rarely used. The difference in this new solution is in the way in which the income reaches the hands of the person selling the property, namely by a monthly stipend, but who maintains their right to live in it until they decide to rescind that right or they pass away.

In the model used in France, buyers are usually real estate investment funds that agree with the seller to pay a certain monthly amount, calculated on the basis of the value of the property and the average life expectancy of the person. "It's a way for older people to have a supplement to their pension," said one expert in this area.

However, this business model can also bring some disadvantages, especially when those who sell the property with usufruct have direct heirs. "Taking into account rising house prices, the new generations are only able to gain access to housing in the centres of cities like Lisbon and Porto by inheriting real estate in these places," said a real estate agent, adding that if the assets, upon the death of the parents, are passed directly to third parties, the children will hardly have any income to buy a house in a similar location.

Also, contrary to what happens when the sale with reservation of usufruct is accompanied by the full and immediate payment for the property, in this new model there are still no certainties about the way in which this monthly income should be declared and taxed, writes the Diário de Notícias, pointing out that the issue of taxes is one that is being studied, given the existing interest in importing this new business model into Portugal.

From the original Portuguese article: Fundos piscam olho a casas dos idosos acenando com usufruto e renda vitalícia (Diário de Notícias)

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