Bare ownership is growing in popularity in Spain, but some warn against the practice, saying it is wrong to bet on an individual's life expectancy.
ADVERTISEMENTAngeles Plaza decided a few months ago to sell the home she has lived in since the age of 13 in Madrid’s Estrella district for half of the market value.
The 72-year-old made the deal with one crucial condition — that she can continue living there until she passes away.
Angeles is one of a growing number of people in Spain entering into 'bare ownership' deals, which allows the seller to continue living in the house until they die.
While there are no official statistics available, real estate consultant Eduardo Molet told Euronews that an estimated 2,000 to 3,000 homes were purchased this way in Spain in 2017.
He predicts that bare ownership sales rose by 150% in Spain in 2017, and will go up to 300% this year.
For Angeles, a retiree with no surviving relatives, the scheme offered a financial lifeline after she was forced to shell out on large vet bills for one of her pet dogs.
“There came a point when I was so economically choked that I did not know what to do. That’s exactly when I saw an ad on television that talked about the sale of bare ownership," she told Euronews.
"At the beginning, I was a bit afraid because it seemed too good to be true. Also, I am a very cautious person,” she added.
"But I informed myself well and decided to sell the bare ownership of my house. We showed it to four people and one of them, an American gentleman, bought it."
Real estate consultant Molet said that despite the rise in popularity, many people in Spain still do not know about the option of bare ownership.
“Most people don’t know that they can sell their house and continue living in it forever," he said.
"It is a widespread practice in countries like France, Italy and the United States, although it is not well known in Spain yet. Anyone can sell the bare ownership of his or her house while maintaining its lifetime usufruct. This means that the owner of the usufruct can enjoy and use the house until his death.”
Isidro García bought the bare ownership of a house a few months ago.
"Having money in the bank is not profitable, so I decided to purchase a flat through this method that allows you to buy between 30% and 50% cheaper," he told Euronews.
Molet explained that the level of discount on a property purchased through bare ownership depends on the real market price, the location of the house and the age of the proprietor.
“We apply an algorithm based on those three factors. To give you an example, if the owner is a 72-year-old gentleman, the discount would be of around 50%. The older he is, the lower the discount will be,” he explained.
In terms of location, the “better the district, the less reduction is applied because the lower is the risk of depreciation,” he added.
But not everyone is a fan of bare ownership.
ADVERTISEMENTLawyer and financial expert José María Granados believes that the sale of bare ownership is a way of betting on someone's life expectancy and will never be beneficial to both parties.
"Someone will always get the worst part of the deal with this type of operation. For example, it may happen that a 70-year-old retiree sells the bare ownership for half the real price of the apartment and he dies the following month. On the contrary, it may be that the usufructuary survives the investor and the latter never gets to enjoy the house, " he said.
Last year, José founded Lisback, a company that provides legal advice on property purchases and sale-leaseback transactions.
"A sale and leaseback agreement provides money to the person who sells the house while guaranteeing that they can continue to inhabit it as a rental for life. This reduces the risks and the speculation of the bare ownership," he said.
But Angeles says she stands by her decision to choose bare ownership.
ADVERTISEMENT“I don’t have to worry about paying rent or dealing with a landlord. This will continue to be my house until I die and I can do anything I want with it, even renting it,” she said.
She added that the money from the bare ownership sale had given her financial freedom.
"I have finally been able to go to the New Year concert of the Vienna Philharmonic Orchestra with the money that this has given me. I have no intention of dying soon; I am here to stay. So, American, don't hold your breath.”