ᐅ Moving in before transfer of ownership / usufruct / rental agreement – disadvantages?
Created on: 31 Mar 2021 13:22
F
Frelili
Hello everyone,
I am completely new here and also new to the topic of homeownership and property, and I feel a bit like I’m in a vast, bottomless pit.
I would like to ask a first question here for orientation and try to keep it as brief but precise as possible. Thank you.
So:
The question:
Is it allowed (I think yes), but is it somehow disadvantageous if the child already moves into the apartment now, i.e., before the gift transfer and rental agreement, and lives there rent-free for three months?
Are there any disadvantages regarding the tax authorities, the gift, the property valuation for the gift contract, or anything else? Or does it not matter at all?
Thank you very much!
Good luck
I am completely new here and also new to the topic of homeownership and property, and I feel a bit like I’m in a vast, bottomless pit.
I would like to ask a first question here for orientation and try to keep it as brief but precise as possible. Thank you.
So:
- An apartment was purchased by the parents and has remained empty ever since, but it would basically be move-in ready immediately (more or less, there is a functioning bathroom and an old kitchen with old but working appliances).
- The apartment is therefore empty and unoccupied, never lived in by the parents, and never rented out.
- The apartment is supposed to be gifted to the child within the next three months, at the latest by June of the current year.
- The child (the recipient of the gift and thus the future owner) wants and is allowed/able to move into the apartment as a tenant.
- The rental agreement between the parents (the usufruct grantors) and the child (the future owner but also tenant) is planned to be signed only on the day/date of the gift transfer.
The question:
Is it allowed (I think yes), but is it somehow disadvantageous if the child already moves into the apartment now, i.e., before the gift transfer and rental agreement, and lives there rent-free for three months?
Are there any disadvantages regarding the tax authorities, the gift, the property valuation for the gift contract, or anything else? Or does it not matter at all?
Thank you very much!
Good luck
@nordanney:
Sorry, I can’t follow.
I’ll try again:
1.
You say it’s unusual to establish a life usufruct, ok, we thought it was common.
2.
You say the usufruct has nothing to do with the donor’s use, and that "we" have no right to it. Who has no right to what? I can’t follow. The right is supposed to be reserved for the donor. He/she should keep the right to do with the apartment what they want during their lifetime. And what that is, the personal use in the near future as a second home, I already explained. Before that, it can and should gladly be rented out—not to strangers, but to their own child. That fits well. What’s unclear or wrong about that?
3.
You further say, “around that,” like the rent-free use. Yes, exactly—and for the first 1 to max. 3 months until the transfer and the arrangement of how much rent can and should be charged later, and whether it’s financially reasonable, etc. What’s wrong with letting the child live rent-free for the first max. 3 months, instead of hastily signing an unconsidered lease before sorting out the later details? Especially since a transfer is already planned. Only if it drags on, like the mentioned 1 to 3 years, should money/rent be paid, after all, the apartment has been empty long enough, and asking a reasonable market rent from your own child, after the gift has been given, we consider legitimate and fair/reasonable.
4.
“Non-pledgeability for the bank,” sorry, I don’t understand—what does that mean?
5.
“You still haven’t said why you actually want to do this”
What??? That’s everything! It’s all there. 🙄
Sorry, I can’t follow.
I’ll try again:
1.
You say it’s unusual to establish a life usufruct, ok, we thought it was common.
2.
You say the usufruct has nothing to do with the donor’s use, and that "we" have no right to it. Who has no right to what? I can’t follow. The right is supposed to be reserved for the donor. He/she should keep the right to do with the apartment what they want during their lifetime. And what that is, the personal use in the near future as a second home, I already explained. Before that, it can and should gladly be rented out—not to strangers, but to their own child. That fits well. What’s unclear or wrong about that?
3.
You further say, “around that,” like the rent-free use. Yes, exactly—and for the first 1 to max. 3 months until the transfer and the arrangement of how much rent can and should be charged later, and whether it’s financially reasonable, etc. What’s wrong with letting the child live rent-free for the first max. 3 months, instead of hastily signing an unconsidered lease before sorting out the later details? Especially since a transfer is already planned. Only if it drags on, like the mentioned 1 to 3 years, should money/rent be paid, after all, the apartment has been empty long enough, and asking a reasonable market rent from your own child, after the gift has been given, we consider legitimate and fair/reasonable.
4.
“Non-pledgeability for the bank,” sorry, I don’t understand—what does that mean?
5.
“You still haven’t said why you actually want to do this”
What??? That’s everything! It’s all there. 🙄
saralina87 schrieb:
Usufruct rights are quite common in agriculture in the context of advance inheritance. In your situation, I would have thought something more like a right of residence would apply. If, after the described 1 to max. 3 years, the child moves out, but at the same time the timeframe for the parents’ planned personal use of the property as a secondary residence is delayed (because who can predict what might happen in between, illness, frailty, etc.), then the right of residence does not allow subletting to third parties. This would result in the property standing empty again without rent and without personal use. Therefore, usufruct rights are preferable to a right of residence because they offer more flexibility.
Or are we making a fundamental mistake in our reasoning here?
S
saralina8731 Mar 2021 22:31Frischluft schrieb:
If, after the described period of 1 up to a maximum of 3 years, the child moves out, but at the same time the parents’ planned timeframe for their own use of the apartment as a secondary residence is delayed (because no one can predict what might happen in the meantime—illness, frailty, etc.), the right of residence cannot be leased to third parties, which would result in the property being vacant again, without rent and without personal use. Therefore, usufruct rights are preferable to a right of residence, as they are more flexible.
Or are we making a fundamental mistake in this reasoning? Why exactly should the apartment now be gifted to you? To save on inheritance tax?
N
nordanney31 Mar 2021 22:36Frischluft schrieb:
"You still haven't explained why you really want to do this"
What??? That’s everything! It’s all written there. No. Why do you want to gift it and have a usufruct registered? I don’t want to know who is using the property or how.
Frischluft schrieb:
"Unmortgageability for the bank", sorry, I don’t understand that – what does it mean? It means that the owner (the son) will not be able to get a loan from the bank if, for example, the roof of the house needs to be replaced, which he has to pay for. Or if the apartment needs renovation at some point.
saralina87 schrieb:
Why exactly is the apartment supposed to be given to you as a gift now? To save on inheritance tax?Yes, acquaintances have said, "What, why don’t you already transfer it during your lifetime, or haven’t you done so already? That way, if everything goes well, you can make use of the tax exemption and, as mentioned, if all goes well, still benefit from passing on or gifting the remaining amount tax-free."nordanney schrieb:
No. Why would you want to give it away... See #28. Lifetime gift. Use the tax exemption. As I said/wrote, many people do this and it is common practice.
nordanney schrieb:
...
... + Have usufruct registered...
... I have explained this several times. It means preserving the right to use the property for/by the donor.
nordanney schrieb:
...
It means that the owner (the son) will not be able to get a loan from the bank if, for example, the roof on the house needs to be renewed, which he would have to pay for. Or if the apartment needs renovation. Why wouldn’t the child be able to get a bank loan? Maybe I am missing something, but the child will earn money, have a regular job, and if money is needed for the roof or similar, we will cover that. I don’t see why, in an emergency, the child couldn’t also get a loan from the bank. But as I said, I’m not very familiar with that.
Hope that answers it well now? But maybe also briefly regarding my earlier explanations in response to your previous questions: perhaps you could answer these follow-up questions I raised based on your contributions (see the quote below)? Otherwise, it somehow just remains unresolved...
Frischluft schrieb:
@nordanney :
Sorry, I can’t follow.
I’ll try again:
...
2.
You say usufruct has nothing to do with use by the donor and that “we” have no right to it. Who has no right for what? I don’t follow. The right is supposed to be reserved specifically for the donor. He/she should keep the right to do with the apartment whatever they want during their lifetime. And what that is—themselves using it soon as a second home—I have already stated. Before that, it can and should be rented to their own child instead of a stranger. That fits well. What is unclear or wrong about that?
3.
You continue saying “around that,” like free use for example. Yes, exactly—free use for the first 1 to maximum 3 months until the gift is finalized and it is worked out how much rent should be charged later and if it all is worthwhile, etc. What’s wrong with letting the child live rent-free for the first maximum 3 months instead of blindly signing an unconsidered lease before the later details are worked out? Especially since a gift is pending anyway. Only if it takes a long time, meaning the said 1 to 3 years, should rent be charged; after all, the apartment was empty long enough, and charging reasonable market rent from your own child after a gift has been made is, in our view, legitimate and fair/reasonable.
... Good luck 🙂