Property-related usufructs are another means of providing for dependants after death, but its critical to be aware of the implications as you may be burdening the recipients instead of helping them.

Sifiso Msomi of Shepstone & Wylie's property department explains that the purpose of a usufruct is to provide an income after death to one person by allowing them use of a property while entitling someone else to ownership of that property.

Msomi provides the following two examples:

Mr Blackberry is the owner of a fully furnished unit in an office building which is let for a period of 10 years. In his will he bequeaths this furnished unit to his son subject to a usufruct of 10 years in favour of his daughter. This means that his son is the owner of the unit, but that his daughter is entitled to the rental for a period of 10 years.

or

In his will Mr Blueberry leaves his farm, with the cattle and implements to his son Blueberry Junior, subject to the lifelong usufruct of Mrs Blueberry. So while Blueberry Junior would own the farm, Mrs Blueberry would be allowed to use the farm for as long as she lives and be entitled to the yield of the farm.

The person who enjoys the usufruct is referred to as the usufructuary ("the holder") and the person who owns the property is known as the bare dominium owner ("the owner").

"It is important to understand the rights of these two parties to adequately assess whether the usufruct will be a benefit or a burden to the parties involved," explains Msomi.

The usufruct gives the holder, in their personal capacity, the rights to the use, the enjoyment and the fruits of the property although that person does not own the property. In return that person is required to look after the property for the entire length of the time that the usufruct exists which may be a specified period of time or could end with an event in the future e.g. the death or remarriage of the person.

"This right cannot extend beyond the lifetime of the holder due to its personal nature, namely, that it relates to a particular person," adds Msomi.

Similarly, the right over the property cannot be transferred to another person as it is inseparably linked to her as its holder, but its does allow for a third party to exercise certain entitlements in terms of an agreement between the holder and the third party. For example, a holder may rent out the house, farm or right of grazing to another person to generate an income which she may keep for herself. But it is important to remember that the rental period may not go beyond the period of the usufruct.

Whatever the owner does to the property he must do subject to the usufruct. The holder and the owner may together transfer the property to a third person, free of the usufruct, but if the owner transfers the property on his own, it will remain subject to the usufruct. Also, if the owner were to mortgage the property on his own the mortgage will be subject to the usufruct, but the holder could waive her preference in favour of the bondholder and this waiver of preference would be like an act of suretyship.

When the usufruct terminates, the usufructuary is required to restore the property to the owner, in the same good condition it was received, and he may be required to provide security as a guarantee that this will be done.

"It is also critical to establish whether the usufructuary has the means to upkeep the property," advises Msomi.

Ordinary expenses such as the painting of a house cannot be reclaimed from the owner (although an owner may undertake or consent to pay). The usufructuary is also responsible for any rates and taxes levied on the property during the period of the usufruct, unless the testator has directed otherwise, but he is not bound to maintain any insurances on the property against fire, storm or other damage, although prudence would dictate this course and it could be done in co-operation with the bare dominium owner.

There is also a financial burden is placed on the bare dominium owner as the usufructuary is not obliged to do large scale repairs resulting from normal wear and tear and even if an item were to perish due to daily use, he/she would not be obliged to replace it. Extraordinary expenses relating to the maintenance of things such as replacing a roof of a house that is in danger of collapsing, can be reclaimed by the usufructuary from the owner.

As the bare dominium owner may not have enough money available to finance such repairs, it is important that a testator makes financial provision for the maintenance of the usufruct asset otherwise he/she could cause the bare dominium owner financial hardship.

Msomi suggests a life-policy as being a cost-effective way of assisting with this potential problem.

While the usufruct is operative, the owner of the property may not interfere with the use or enjoyment of the asset; although he does have the right to protect his interests should the usufructuary misuse the property.

When the usufruct lapses the usufruct usually reverts back to the bare dominium owner who then owns the property in full. If the owner dies before the usufruct lapses, his share of the usufruct asset is transferred to his heirs, but it remains subject to the existing usufruct. The usufructuary does not acquire the bare dominium unless the bare dominium owner leaves it to him in his will.

Property24 03/07/2008