Usufruct is one of the most important real rights under Greek law and is frequently used in the management of real estate. It is often encountered in parental gifts, donations, family estate planning or broader arrangements of property relations, where the owner of a property wishes to transfer bare ownership while retaining the right to use and benefit from the property.
Although commonly used in practice, usufruct is not a simple or merely formal matter. Its creation, retention, exercise and possible transfer have significant legal consequences. For this reason, any transaction involving usufruct should be carefully reviewed before a notarial deed is signed.
What Is Usufruct?
Under Article 1142 of the Greek Civil Code, usufruct is a personal servitude granting the usufructuary the real right to use and enjoy another person’s property, while preserving its substance.
In simple terms, the usufructuary may use the property, live in it or receive income deriving from its exploitation, such as rent, provided that such use does not alter the substance and purpose of the property. The usufructuary is not, however, the full owner of the property and cannot dispose of it as such.
Full ownership of real estate may, in practice, be separated into bare ownership and usufruct. The bare owner holds ownership of the property without the right to use and enjoy it, while the usufructuary holds the right of use and enjoyment for as long as the usufruct lasts.
When the usufruct is extinguished, bare ownership is consolidated with the usufruct and the bare owner acquires full ownership.
How Is Usufruct Created?
Under Article 1143 of the Greek Civil Code, usufruct is created by legal act or by usucapion. In practice, where real estate is concerned, the most common form is the creation or retention of usufruct by notarial deed, for example in the context of a parental gift, donation or sale and purchase.
In order to have real effect over real estate, the relevant deed must comply with the required publicity formalities, meaning that it must be transcribed or registered with the competent Land Registry or Cadastral Office, depending on the area.
The exact wording of the notarial deed is particularly important, as it determines the content of the right, its duration, any special terms, and whether the transfer of the usufruct itself or only the exercise of the usufruct has been provided for.
Rights and Obligations of the Usufructuary
The usufructuary has the right to use and enjoy the property, but does not have unlimited power over it. The usufructuary must preserve the substance of the property and use it in accordance with its economic purpose.
Under Article 1152 of the Greek Civil Code, the usufructuary must take care of the repair or renovation of the property and bears the related expenses only insofar as they relate to ordinary maintenance. Issues of extraordinary expenses, substantial interventions, repairs or changes must be assessed on a case-by-case basis, taking into account the law, the deed creating the usufruct and the specific facts.
The usufructuary may generally lease the property and collect rent, provided that he or she does not exceed the limits of the right. The usufructuary may not, however, materially alter the property or act in a manner that infringes the rights of the bare owner.
Transfer of Usufruct: The Basic Rule
The critical point is that usufruct, due to its personal nature, is in principle non-transferable. Under Article 1166 of the Greek Civil Code, usufruct is non-transferable unless otherwise provided.
The same article provides that the exercise of usufruct may be transferred to another person for a period not exceeding the duration of the usufruct. This distinction is very important: transferring the real right of usufruct itself is different from transferring its exercise or exploitation.
In practice, in order to determine whether the transfer of usufruct is permitted, the deed by which the right was created must first be reviewed. If there is no special provision, the usufruct remains, in principle, non-transferable, with only the exercise of the usufruct being transferable within the limits of the law.
Extinction of Usufruct and Death of the Usufructuary
Under Article 1167 of the Greek Civil Code, usufruct is extinguished upon the death of the usufructuary, unless otherwise provided. In that case, bare ownership ceases to be burdened by the usufruct and the bare owner acquires full ownership.
However, since the law allows otherwise to be provided at the time of creation, special contractual arrangements may exist. Greek case law has accepted, under certain conditions, that the transfer of usufruct to a third person may be agreed, even subject to the suspensive term of the death of the original usufructuary, provided that this has been validly stipulated in the relevant deed.
This possibility should not be treated in general or automatic terms. Careful review of the deed, the wording of the relevant clause and the specific facts is required.
What Is Permitted and What Is Not Permitted
Where validly provided in the deed creating the right, the transfer of usufruct to a third person may be agreed. It may also be agreed that usufruct will be transferred after the death of the original usufructuary, under specific terms.
By contrast, unlimited successive transfers of usufruct indefinitely are not permitted. Usufruct is personal in nature and cannot be used as a mechanism for permanently separating ownership from the powers of use and enjoyment. Greek case law has treated such arrangements restrictively, accepting that the transfer of usufruct to a third person may take place only within the limits permitted by the nature of the institution.
For this reason, the wording of any such clause in a notarial deed must be drafted with great care.
Transfer of Bare Ownership
Bare ownership is different from usufruct. The bare owner may, in principle, transfer bare ownership of the property without this extinguishing the existing usufruct. The acquirer receives the property burdened with the usufructuary’s right.
This means that the new bare owner cannot use or exploit the property in a manner that infringes the usufruct. The transfer of bare ownership does not, by itself, affect the duration or content of the usufruct, unless there is a specific legal or contractual basis.
Parental Gift with Retention of Usufruct
The most common practical use of usufruct in Greece is the parental gift of real estate with retention of usufruct. The parent transfers bare ownership to the child and retains usufruct, namely the right to use or exploit the property for as long as the usufruct lasts.
This structure may serve family and estate planning purposes, but it must be carefully reviewed. Critical issues include the content of the right retained, whether transfer of the usufruct is permitted, the relationship with other children or future heirs, and the protection of the parent or the bare owner depending on the needs of the particular family.
Any tax consequences of a parental gift, donation or separation of full ownership into bare ownership and usufruct should be reviewed separately by a notary and tax advisor. The subject of the legal review is the validity, clarity and protective function of the terms of the deed.
Issues That Should Be Addressed in the Deed
A notarial deed involving usufruct must be drafted precisely. Depending on the case, it should be examined:
- who the usufructuary is and who the bare owner is,
- whether the usufruct is lifelong or has another duration,
- whether transfer of the usufruct or only transfer of its exercise is provided for,
- who has the right to use, lease or exploit the property,
- how substantial repairs or changes are handled,
- whether there are restrictions on the use of the property,
- how the bare owner is protected against abuse of the right,
- how the usufructuary is protected against acts that could render the right ineffective.
General or unclear wording may create future disputes, especially in family relationships or in transfers involving high-value real estate.
The Role of the Lawyer
The creation, retention or transfer of usufruct is a transaction with long-term legal consequences. The lawyer reviews the title deeds, the cadastral status, any encumbrances or restrictions, the content of the proposed notarial deed and its effects on the parties’ relationship.
Particular importance must be given to the review of clauses concerning duration, extinction, transferability and exercise of the usufruct. In family transfers, it is also necessary to examine whether the deed may affect the rights of other family members or give rise to future inheritance disputes.
The notary has a central role in drafting the deed, but each party’s lawyer specifically reviews the interests of his or her client and advises on legal risks before signing.
Frequently Asked Questions (FAQ)
Can I transfer the usufruct I hold over a property?
As a general rule, usufruct is non-transferable unless otherwise provided at the time of its creation. The exercise of usufruct may be transferred to another person for a period not exceeding the duration of the usufruct. In order to determine what applies in a specific case, the deed creating the usufruct must be reviewed.
What happens to usufruct when the usufructuary dies?
As a general rule, usufruct is extinguished upon the death of the usufructuary and the bare owner acquires full ownership. If, however, the deed creating the usufruct validly provides for a different arrangement, its content must be specifically examined.
Can the bare owner sell the property without the usufructuary’s consent?
The bare owner may, in principle, transfer bare ownership. However, the buyer acquires the property burdened with the existing usufruct and cannot disregard the usufructuary’s rights.
Can the usufructuary lease the property?
As a general rule, the usufructuary has the right to use and enjoy the property and may therefore lease it and collect rent, provided that he or she does not exceed the limits of the right and does not alter the substance or purpose of the property.
Can a parental gift with retention of usufruct be revoked?
Revocation of a parental gift is a separate legal issue and depends on the provisions of the law, the wording of the deed and the specific facts. It should not be addressed in general terms. Review of the deed and of the specific grounds invoked is required.
Does usufruct affect the tax treatment of a transfer?
The existence of usufruct or bare ownership may have tax consequences, depending on the type of transaction and the characteristics of the case. Such matters should be reviewed by a notary and tax advisor, in parallel with the legal review of the deed.
Do I need a lawyer or is the notary sufficient?
The notary drafts the notarial deed and has an institutional role in completing it. The lawyer, however, reviews the title deeds, examines the clauses protecting the client and assesses the legal risks before signing. In transactions involving usufruct, prior legal assessment is particularly important.
Conclusion
Usufruct is a useful and common tool in real estate management, but it requires careful legal handling. The distinction between usufruct and bare ownership, transferability, duration of the right and the obligations of the parties must be clearly set out.
Especially in family transfers, an unclear or incomplete arrangement may create future disputes. Our office undertakes legal title review, assessment of cadastral status and legal support in transactions concerning the creation, retention or transfer of usufruct, in cooperation with the competent notary and, where required, other specialised professionals.
This article is for informational purposes only and does not constitute legal advice. Each case requires an individual assessment, based on its specific facts and the applicable legal framework. For tailored legal advice, please contact our office.
No comment