Bare ownership Italy: what it is, how it works and advantages

Selling or buying bare ownership of a property means entering into a real estate transaction without involving the right to live within the walls of the house in question. This type of transaction is fairly well known in Italy, but can be a shock to foreign buyers and sellers who are less familiar with the idea of bare ownership. SO, who should sell and who should buy a house in bare ownership? What does bare ownership mean and how does it work? Let's look at everything you need to know about bare ownership in Italy, including its advantages.

What is bare ownership?

Bare ownership is a right in rem over a house that does not include the right of usufruct. The meaning of usufruct in this case is the right to enjoy the use and advantages of another's property. In particular, the bare owner is the possessor of the walls, but does not live there; it is usually someone else who lives there. The bare owner is thus someone who has no need to use the property, nor to make a profit from it, at least not in the immediate future.

What does it mean to sell the bare ownership of a property in Italy?

Selling the bare ownership of a house implies that the person who does so has a need to obtain liquidity, but without having to go and live somewhere else, or while retaining the possibility, as usufructuary, of renting it out, thus obtaining additional income. It is usually the choice of older people looking for a way to supplement their retirement.

What does buying a house in bare ownership mean?

Someone who buys a house in bare ownership is someone who has no immediate need to live in the house, and at the same time can often buy it at a reduced price. Without the right of usufruct, in fact, a house obviously costs less. Such an investment may make sense in the long term, for example if one wants to assign the house to a young child, who will also become the owner of the right to inhabit the house upon the death of the usufructuary.

Buying bare ownership: what taxes have to be paid?

The purchase of bare ownership involves the payment of ordinary taxes depending on whether it is a main residence or not; if it qualifies as a main residence you pay 2% on the price or cadastral value (net of the value of the usufruct); if a second home, you pay 9%. Extraordinary maintenance is also the responsibility of the bare owner, while IMU property tax, condominium expenses and ordinary maintenance are the responsibility of the usufructuary. For more information about buying a house in Italy as a foreigner and the taxes required, check out our guide. 

Bare ownership and "first home" concessions

It is possible to purchase a bare ownership with Italy's "first home" or main residence concessions, but in this case the Italian Tax Authority has clarified that, as always, it is mandatory to transfer residence. In particular, the Inland Revenue has recalled that these benefits for main residences 'apply not only to the purchase of ownership of residential homes other than those classified in cadastral categories A1, A8 and A9, but also to the deeds of transfer or constitution of bare ownership, usufruct, use and habitation relating to the same homes.

When is bare ownership worthwhile?

Buying bare ownership is worthwhile when you intend to make a long-term investment, because you pay a lower price, since the value of the house is reduced by the value of the usufruct, but you do not take possession of it until the death of the usufructuary, or at any rate when you decide to terminate the right of usufruct.

Selling bare ownership makes sense when you need liquidity but do not want to live elsewhere. The liquidity can be paid all at once or in the form of an annuity; in this case, however, you must be sure that the buyer does not later default.

Bare ownership and inheritance

The heirs of the usufructuary of a house in the case of bare ownership do not inherit the property nor the usufruct. This may be a disadvantage, but not necessarily. It may be a house that the heirs are not interested in, so selling the bare ownership is also a way for the elderly person to relieve his or her children of troublesome tasks after death.

Bare ownership and mortgages in Italy

It is possible to buy a bare property by taking out a mortgage. However, the amount of the loan will be reduced as it is commensurate with the value of the property less the value of the usufruct.