Various factors play a role in the valuation of real estate, including the location, size and condition of the property. But what happens if there is a usufructuary right to the property? In this article, we inform you about property valuation in the case of an existing usufructuary right and explain what needs to be considered when valuing houses and apartments.
What does usufruct mean?
Usufruct is a right to use a property. The usufructuary may use the property and benefit from it without being the owner of the property. This means that the usufructuary can, for example, live in an apartment or house and at the same time rent it out for their own financial benefit, even though they do not own it. Ownership of the property remains with the owner during the usufruct – even if the owner neither lives in the property nor rents it out.
How does usufruct affect property valuation?
As the usufruct represents a right to use the property, it has an influence on the property valuation, as the value of the property depends, among other things, on its potential use. Usufruct restricts the possibilities of use for the purchaser. Usufruct therefore regularly has a negative impact on the market value of the property.
What factors influence the valuation of real estate with usufruct?
Various factors must be taken into account when valuing a property with an existing usufructuary right. One important factor is the term of the usufructuary right. The longer the term, the greater the impact on the market value – because the longer the usufructuary can use the property, the more limited the owner’s options are.
The right of usufruct can exist for life or be limited in time. A lifelong usufruct generally results in a greater reduction in the market value than a temporary usufruct.
In addition, the condition of the property must also be taken into account when valuing properties with usufruct. The older and more in need of renovation the property is, the greater the impact of the usufruct on the market value. This is because in this case, the owner’s ability to use the property is already restricted by its condition.
How is the value of a property with usufruct determined?
There are various methods for determining the market value of a property with usufruct. One possibility is the comparative value method. This involves comparing similar properties in the area that are not encumbered with a usufructuary right. The differences in value between the comparable properties and the property to be valued with an existing usufructuary right are then taken into account to determine the value.
Another option is the income capitalization method. Here, the value of the property is calculated on the basis of the expected income from letting or leasing. The value of the usufructuary right is taken into account as a burden, as the usufructuary can generate income from the use of the property that the owner does not receive.
A third option is the asset value method. Here, the value of the property is determined on the basis of the production costs that would be necessary to construct a new building of the same type and quality. Here too, the value of the usufructuary right is taken into account as a burden, as the usufructuary can use the building without having to bear the production costs.
Conclusion
Property valuation with usufruct is a complex issue that takes various factors into account. The value of a property with an existing usufructuary right depends on the term of this right, the type of usufruct and the condition of the property. Various methods can be used to determine the market value of the property, such as the comparative value method, the income value method and the asset value method. However, it is advisable to consult a real estate valuation expert in order to obtain the most accurate result possible.
