Usufruct

Usufruct is a legal term used to describe the situation in which an individual is granted the legal right to utilize the property or asset belonging to someone else. While using the property, the individual is granted access to the profits derived from the asset so long as it's not altered or destroyed in the process.

The Usufruct combines the two property rights, namely Usus and Fructus. The right is often for the length of the recipient's life and can include different property types. The person to whom the law grants the right is called a usufructuary.

• Usufruct is a legal term used when the law grants an individual the right to use and receive profits from another person's property.
• It's derived from the Latin expression usus fructus, which means to use and enjoy, respectively.
• The property does not just include land. It can also mean things like real estate, livestock, businesses, etc.
• A usufruct is a tool for retaining and maintaining a property or ensuring the safe passing of property rights to spouses and children.

The Usufruct that grants rights over property or an asset will turn the jurisdiction into a divided “ownership” of the resource. It comprises two groups of people - usufructuary and naked owner.

The former is the individual with the privilege or right to use the property belonging to someone else. In addition, they can also profit from the benefits the asset produces. On the other hand, the naked owner is the individual or party that owns the property but has turned over the rights to the usufructuary. Once the Usufruct ends, the naked owner regains control of the property, and the profits also change hands.

The term usufruct originated from the Latin expression Usus Fructus, which, when taken apart, gives us two words. They are Usus which means to use, and Fructus, which means fruit or enjoyment. The legal term was used in ancient Roman law and meant the right to use and receive fruits and profits from another person.

Though the property is free to be used by the people granted rights over it, the usufruct agreement clearly mentions that one may not alter or destroy the granted property at any cost.

The property was typically physical land in Roman law in this context. But today, it can include a wide range of belongings or assets, including:

• Land
• Real estate
• Machinery
• Businesses
• Livestock
• Bank accounts

A usufruct is a common tool for estate planning and a way for individuals to ensure that their spouses or children will have a place to stay and take care of themselves after their passing.

One can often find usufructs included in wills or testaments to pass the property to someone while also allowing another individual to benefit from it for a certain period.

One can use it for intellectual property or intangible assets in certain situations. The person is free to use the property but should not harm or ruin the property in any way. Plus, one individual cannot transfer property rights to another person. On the other hand, the quasi-usufruct allows the usufruct to use consumable goods like money freely. When the time duration for Usufruct ends, the property rights go back to the original owner.

The court uses usufructs typically in civil law cases worldwide, including Europe, Japan, and the Philippines, among others. In the United States, most states practice common law, although there are exceptions, including Louisiana and Georgia.

The rest of the United States acknowledges life estate rather than Usufruct. The life estate is the lifelong ownership of an immovable property that ends at death. Life estate shares many of the same qualities as Usufruct but typically relates to estate planning situations.

Here are a few common Usurfruct examples that will help us understand its applications.

Example #1 - Farm Land

Suppose a farmer owns a plot of land and uses it to harvest various crops while possessing a handful of livestock. One day the farmer becomes ill and cannot take care of the land and the livestock anymore.

Without having any family to help with the farm, the farmer grants this agreement to his neighbor as they are the closest to them, making them the usufructuary.

Once the law grants them the right, the neighbor can take care of the land and produce the crops that grow on it. They have the right to claim any profits made from taking care of and harvesting the land.

Although it states that the recipient cannot alter or destroy the property, this is an example of an imperfect or quasi-usufruct situation. Changing the land is required to make a profit and fulfill the duties of being a usufructuary. The tenure of the Usufruct will remain effective depending on the terms of the jurisdiction. It can specify a certain length of time, or it can also stay in effect until the farmer passes away, during which the farm would then be sold, and the neighbor would be relieved of the Usufruct. It can also remain in effect until the neighbor passes away or for the remainder of their lives in some cases.

Example #2 - Real Estate

Real estate is commonplace to find the usage of Usufruct. Suppose a person’s grandparents own a rental property and are starting to get older and don’t have the energy to take care of the property anymore.

As a way of estate planning, the grandparent transfers ownership of the rental property to the person, the grandchild. However, they don’t think the grandchild is ready to manage the profits and reap the property’s benefits. So, they give the right to Usufruct to their child, the father of the person.

In this instance, the father has the right to take care of the property and receive the profits generated from renting it. Here, he becomes the naked owner, while the grandchild does not receive the rights to the property. By law, the father, in this case, would not be liable to share the profits made with the grandchild. This Usufruct would remain in effect as long as the father is still alive. Once he passes away, the grandchild is entitled to become the property’s sole owner and can do as they please with it. When the deed of Usufruct is no longer in effect, they can begin collecting the profits derived from the rental property.

This has been a guide to Usufruct meaning. Here we explain how it works in different states in the US along with examples, its purpose, and uses. You may learn more about financing from the following articles –

• Gentlemen’s Agreements
• Sales And Purchase Agreement
• Non-Compete Agreement