Written for YourProperty
A reader has posed a question to our Property Poser panel relating to the rights and obligations of a usufruct holder.
The person, who is entitled to the usufruct of the property in question, has lived there for seven years, but is no longer able to maintain it.
She has considered giving it to the family members who will ultimately inherit full ownership upon her death, but is concerned about donations tax issues.
In the meantime, the property is being let and our reader would like to know which of the parties should be responsible for the payment of the rates and taxes.
Justin Strömbeck from Du Toit Strömbeck Attorneys in Port Elizabeth says a usufruct is a legal right to use and derive profit from a property belonging to someone else. “Profits may include rental income as well as, for instance, that derived from farming activities.”
The typical scenario where a usufruct is used is where, say, a father and husband wishes for his wife to be able to stay on in a property after his passing, but also wants to ensure that he has authority over who ultimately inherits it, according to Strömbeck.
“Should he leave it to his wife outright, she will have the discretion as to who will inherit it at her death. He will no longer have any say after his death.”
So, says Strömbeck, in his will he can bequeath the property to his children, while giving his wife a lifelong (or for a specified period) usufruct over the property. “After his death, his wife will be known as the usufructuary and the children as the bare dominion holders.”
Strömbeck says the right of the usufructuary is an asset in her estate. “It can be valued and there could therefore be certain implications should she choose to end this right during her lifetime or before the prescribed period for which it was granted, expires.”
One way of ending it, says Charlotte Vermaak from Chas Everitt in PE, would be to no longer enforce her usufructuary rights and to let the bare dominion holders have the property “free and clear”.
The usufruct would be endorsed against the title deed of the property, and accordingly the necessary documentation to record the cancellation will have to be registered at the deeds office by the usufructuary and the bare dominium holders, says Vermaak.
“She would effectively be donating her rights away and currently one can only donate R100 000 per year without incurring donations tax.”
Vermaak says when the property is let, the usufructuary is of course entitled to receive the rental instead of living in the property.
“The rights and obligations of the various parties in other respects remain the same. Therefore, typically, the bare dominion holders will be responsible for the payment of insurance premiums and maintenance and repairs due to normal wear and tear.”
The usufructuary will be liable for the payment of rates and taxes and there is a duty on the reader to maintain the property on an ongoing basis, excluding repairs due to normal wear and tear, according to Vermaak.
There may however be a deviation from the normal obligations, as stated above, if so imposed by the deceased in his or her will, says Vermaak. “Essentially, each case must therefore be assessed on its own merits.”
Ask your property related questions here.