Usufruct is among the limited rights in rem, conferring on the beneficiary the power to use and to derive benefit from an asset while ownership of that asset continues to rest with another person. It is one of the instruments to which practice has recourse most often in arrangements of assets for old age, in gifts, in estate planning and in transfers of immovable property made within the family.
The holder of the right may live in the immovable property, let it and enjoy its fruits. The bare ownership of the immovable property, by contrast, remains with another person. Usufruct therefore does not extinguish ownership altogether; it merely narrows the powers of use and enjoyment to a certain extent.
In this briefing note we examine in detail the legal nature of the right, the ways in which it is created, the powers conferred on its holder, the obligations it imposes and the grounds on which it comes to an end.
The Concept of Usufruct
A limited right in rem conferring on a designated person the power to use and to derive benefit from an asset owned by another is called usufruct. The holder of the right may use the immovable property in fact, let it and obtain income from it; the bare ownership, however, continues to rest with the owner. Recourse is had to this right most often in contracts of maintenance until death, in estate planning, in gifts and in transfers of immovable property within the family. It is a well-established method in practice for parents to create a usufruct in their own favour when transferring an immovable property to their children.
Although broad powers of use and enjoyment are conferred on the holder of the right, ownership does not change hands entirely. For that reason usufruct and bare ownership describe two distinct positions that diverge from one another as regards the powers they contain.
Legal Nature of Usufruct
This right is among the limited rights in rem regulated within the Turkish Civil Code No. 4721. The provision of Turkish Civil Code No. 4721, Art. 794 provides that this right affords its holder full powers of enjoyment over its subject matter.
The right gives its holder direct powers of use and enjoyment over the thing and may be asserted against everyone. As a rule it has the character of a limited right in rem that does not pass to heirs, that cannot be transferred and that is strictly personal to its holder. As regards immovable property, registration on the land registry is required for the right to arise.
How Is a Usufruct Created?
Usufruct, whose regulation is found in Turkish Civil Code No. 4721, Art. 794 et seq., gives its holder full powers of use and enjoyment over its subject matter. The subject matter of the right may be a body of assets, a right, an immovable property or a movable.
Creation of a Usufruct by Contract
The most frequently encountered form of creation in practice is a contract concluded between the owner and the holder of the right. Usufructs created in this way over immovable property in particular are frequently met with.
Where immovable property is concerned, the parties must make a contract drawn up in official form and the right must be registered on the land registry. The transaction is completed by way of the drawing up of an official deed at the land registry directorate.
The creation may be gratuitous, in the nature of a gift, but it may equally be effected against payment of a consideration. In both cases ownership does not change hands entirely: the bare ownership remains with the owner, while the powers of use and enjoyment pass to the beneficiary.
Creation of a Usufruct by Will
It is also possible for the right to be created by a disposition upon death. By a will or an inheritance contract that they draw up, an owner may leave to a person the usufruct over a particular asset or immovable property.
In that event the right takes effect upon the death of the deceased. In the case of immovable property, however, the acquisition of the character of a right in rem again depends on registration on the land registry. In practice, recourse is had to this method most often with a view to continuing the use of the family residence, to securing the right of use of a particular heir and to protecting the surviving spouse.
Creation of a Usufruct by Court Decision
In certain special cases a usufruct may also arise by judicial decision. That possibility acquires importance particularly in disputes arising from the law of inheritance.
The family residence and inheritance: Within the framework of Article 652 of the Turkish Civil Code No. 4721, the surviving spouse may request that a usufruct be granted to them over the dwelling in which the spouses lived together and over the household goods, to be set off against their share of the estate.
Compulsory registration: Where, notwithstanding the existence of a valid legal ground, the requisite transactions at the land registry are being withheld, the person in whose favour the usufruct is to be created may bring an action for compulsory registration. Registration on the land registry is effected in accordance with the decision issued by the court.
Duration of a Usufruct
The right may be created limited to a particular period, but unless otherwise agreed it subsists, in the case of natural persons, for the lifetime of the holder of the right.
In usufructs created in favour of legal persons, the upper limit of the period is one hundred (100) years.
Subject Matter and Scope of a Usufruct
The scope of the right may differ according to the nature of the asset or right over which it is created. The core power that does not vary, however, is that the holder of the right has the opportunity to use, to derive benefit from and to enjoy the fruits of its subject matter.
Usufruct Over Immovable Property
The most widespread manifestation in practice is a usufruct created over immovable property. In that context the holder of the right may use the immovable property, let it, enjoy its produce and obtain economic benefit from it.
Take a usufruct created over a dwelling: the holder of the right may live in the immovable property in person, or may equally let it to third parties and appropriate the rental income.
By contrast, since the holder of the right does not have the bare ownership, they have no power to sell the immovable property or to transfer ownership of it. Ownership continues to rest with the bare owner.
Position as Regards Movable Property
The right may also be established over movables. Income-producing movables, valuable objects, animals, commercial equipment and vehicles are among the assets that may be the subject matter of this right.
A usufruct over a movable gives its holder the power to use the asset and to obtain economic benefit from it. Care must, however, be taken during its use that the substance of the asset not be harmed and that it be preserved.
In the case of movables, the right is most often created by way of the transfer of possession.
Position as Regards Rights and Claims
Under the Turkish Civil Code No. 4721 the subject matter of a usufruct is not limited to physical assets alone; the right may also be created over certain rights and claims.
Income arising from bank accounts, shares, intellectual property rights and the financial rights arising from company shares may be given as examples in this context. In such a case the holder of the right enjoys the economic benefits arising from the right or claim concerned. Usufructs over company shares are a heading that frequently forms the subject of disputes in practice.
Whether a Usufruct May Be Transferred
Usufruct is as a rule a right strictly personal to its holder. For that reason it is not possible for the right to be transferred in its entirety or passed to another person.
The holder of the right is not, however, prevented from leaving the exercise of the right to third parties to a certain extent. By way of example, a person holding a usufruct over an immovable property may let it or leave its use to another.
That does not, however, amount to a transfer of the right. The moment the usufruct comes to an end, the rights of the third parties who have taken over the power of use likewise fall away of themselves.
Rights of the Holder of a Usufruct
- Enjoyment of produce and fruits: The power of enjoyment over the natural produce and the legal fruits of the immovable property belongs to the holder of the right; agricultural produce and rental income are assessed in this context.
- Power of use: The holder of the right may use in fact the immovable property forming its subject matter; they may live in the immovable property or may equally derive benefit from it directly.
- Power to let: The letting of the immovable property to third parties and the collection of the rent fall within the powers of the holder of the right; that power does not, however, extend to the transfer of ownership.
- Enjoyment and the obtaining of income: The benefits arising from the economic use of the immovable property remain with the holder of the right; the income arising from its use belongs as a rule to them.
- Seeking the prevention of interference: Claims for the prevention of encroachment and similar claims may be advanced in order to bring to an end unlawful encroachments directed at the usufruct.
- Powers relating to the protection of possession: It is possible to bring actions relating to the protection of possession against interferences directed at factual control over the immovable property.
- With a view to forestalling harm to the immovable property, the holder of the right may resort to the necessary legal avenues and seek the protection of their right.
- Position as regards insurance and compensation sums: Where the immovable property forming the subject matter of the right is damaged, the legal interest of the holder of the right is protected as regards any insurance or compensation sums that may arise.
Obligations of the Holder of a Usufruct
- Duty of careful use: The immovable property must be used carefully and in accordance with its purpose, and uses capable of causing harm must be avoided.
- Duty to observe the economic purpose of allocation: The immovable property may not be used contrary to its nature and to the purpose of use to which it has been allocated. Using an immovable property allocated as a dwelling for other purposes may give rise to legal problems.
- Duty to bear maintenance and preservation costs: The expenditure required for the ordinary maintenance and preservation of the immovable property is met by the holder of the right.
- Duty to bear taxes and ordinary charges: Taxes connected with use, service charges and ordinary expenses are as a rule placed on the holder of the usufruct.
- Duty not to impair the rights of the owner: Conduct that would infringe the rights of the holder of the bare ownership must be avoided.
- Duty of return when the right ends: When the usufruct falls away, the immovable property must be returned to the owner.
Grounds on Which a Usufruct Comes to an End
A usufruct is not a right of perpetual duration; it comes to an end upon the occurrence of one of the grounds prescribed by law. With the ending of the right, the powers of use and enjoyment fall away and full power of disposal over the asset is once again gathered in the bare owner.
The ground on which the right ends may vary according to its subject matter, its duration and the manner of its creation. The principal cases regulated in the Turkish Civil Code No. 4721 are addressed below.
Expiry of the Period
If the right has been created for a particular period, it falls away of itself upon the expiry of the agreed period.
For example, a usufruct established over an immovable property for ten years comes to an end upon the completion of the period, without the need for any further transaction. The bare owner thus regains full power of disposal over the immovable property.
In usufructs created in favour of legal persons, the upper limit of the period is one hundred years.
Death of the Holder of the Usufruct
The right is as a rule strictly personal to its holder. For that reason a usufruct created in favour of a natural person comes to an end of itself upon the death of the holder of the right.
The right does not pass to heirs and cannot be transferred by way of inheritance. Upon death the powers of use and enjoyment lapse; the right over the immovable property is once again consolidated in the bare owner.
The establishment of a lifelong usufruct in favour of a parent in transfers made within the family is among the arrangements to which practice frequently has recourse.
Waiver
It is possible for the holder of the right to waive the usufruct they hold. As regards immovable property, the waiver must be registered on the land registry.
With the waiver the right comes to an end and the powers of use and enjoyment over the immovable property pass entirely to the bare owner.
In practice, recourse is seen to be had to waiver most often with a view to facilitating the transfer of the immovable property, in the course of banking and credit transactions, before a sale and in transfers within the family.
Total Destruction of the Immovable Property
If the asset or immovable property forming the subject matter of the right disappears entirely, the usufruct also comes to an end. For the continued existence of a right having the character of a right in rem depends on the existence of its subject matter.
In cases such as destruction as a result of a natural disaster, complete demolition or expropriation, the continuation of the right may not be possible. That said, whether the usufruct continues over the expropriation sum or the insurance sum is assessed separately according to the features of the particular case.
Ending by Judicial Decision
In certain cases it is also possible for the right to fall away by court decision. Judicial intervention comes onto the agenda where the right is exercised contrary to law, where the asset is seriously damaged or where the right is abused.
Within the framework of the Turkish Civil Code No. 4721, where the holder of the right acts contrary to their obligations, the bare owner may ask the court that the necessary measures be taken and, where the conditions exist, that the right be removed. A serious reduction in the value of the asset, use of the immovable property otherwise than for its purpose and failure to show the care required for the preservation of the asset are frequently encountered subjects of dispute in this context.
Independent Legal Assessment
Although a usufruct may appear to be a simple entry created by a single land registry transaction, it is a structure that affects the economic value and the transferability of the immovable property for many years. Particularly in files where the bare ownership is made the subject of a sale, the buyer realises only afterwards that they have taken over an immovable property they cannot use in fact, and it is at that point that the dispute arises.
Sharing out the obligations of the parties clearly in the contract at the stage at which the right is created — in particular maintenance costs and liability for taxes — removes at the outset a significant proportion of the later disputes. In making a particular arrangement we recommend that the following headings be considered:
- Stating clearly in the official deed whether the usufruct is to be created for a fixed period or for life
- Sharing out in writing between the parties the burdens of ordinary maintenance, service charges and taxes
- Regulating in advance the fate of the rental income should the immovable property be let
- Assessing the effect of the usufruct entry on the buyer where a transfer of the bare ownership is contemplated
- Analysing in advance the balance of reserved portions in a usufruct created within the scope of estate planning
- Not neglecting the land registry transaction in cases requiring waiver or deletion
Independent Legal provides advisory and litigation services throughout the whole of the process in disputes relating to limited rights in rem, from the creation of a usufruct through to its deletion.