Promise of Sale of Bare Ownership: Beware of the Usufruct That Extinguishes

Imagine: you own a flat in Aix-les-Bains, but your mother has the usufruct (the right to use the property and receive the rent). You sign a promise of sale of the bare ownership (the property without the usufruct) to a buyer. Before the final sale, your mother dies: the usufruct extinguishes. What happens? Does the promise still relate to bare ownership or to full ownership?

This is exactly the question put to the Cour de cassation in the judgment of 28 January 2009 (No. 08-12.649). A question that every owner or buyer should know before signing. Because the answer can change the financial position.

The Court ruled: unless there is a clause to the contrary, a promise of sale of the bare ownership of a property encumbered with a usufruct necessarily has, in the event of extinction of the usufruct, full ownership as its object. In other words, the buyer can demand full ownership at the same price. A decision that protects the buyer, but may surprise the seller.

The facts: a story that happens every day

Mr Y, owner of a building in Cognin, had granted a promise of sale of the bare ownership of his property to a buyer. The building was encumbered with a usufruct in favour of his mother, Mrs X. The promise was signed, the price fixed. But before the repetition by notarial deed (the final sale before the notary), the mother dies. The usufruct therefore extinguishes, in accordance with Article 617 of the Civil Code (which provides that usufruct ends on the death of the usufructuary).

The buyer, then being entitled to claim full ownership, sues Mr Y for forced performance of the sale (to compel him to sell full ownership at the agreed price). Mr Y refuses, arguing that the promise only related to bare ownership, and that the extinction of the usufruct changes the subject matter of the contract. He argues that the buyer must pay an additional price to acquire full ownership.

The Chambéry Court of Appeal ruled in favour of Mr Y. But the buyer appeals to the Cour de cassation. The Cour de cassation quashes the appeal judgment and refers the case to the Lyon Court of Appeal. For the High Court, the promise of sale of bare ownership is analysed, in the event of extinction of the usufruct, as a promise of sale of full ownership. The seller cannot therefore demand a higher price.

The reasoning of the Court — dissected

The Cour de cassation relies on Article 617 of the Civil Code, which sets out the grounds for extinction of usufruct: death of the usufructuary, expiry of the term, merger (reunion of usufruct and bare ownership in the same hands), etc. In this case, the death of the usufructuary extinguished the usufruct.

But the reasoning goes further. The Court considers that the promise of sale of the bare ownership of a property encumbered with a usufruct has "necessarily as its object, in the event of extinction of the usufruct, the full ownership of that property". Why? Because the intention of the parties, when they sign such a promise, is to transfer ownership of the property eventually, and not to leave a usufruct that no longer exists. If the usufruct disappears before the sale, the subject matter of the contract becomes full ownership, without the price having to be renegotiated.

This solution is a confirmation of previous case law (Civ. 3e, 12 May 1999, No. 97-13.869). It is not a reversal. But it is often unknown to practitioners and individuals. The Chambéry Court of Appeal made the mistake of reasoning as if the usufruct were a lasting element, whereas the contract anticipated its possible extinction. The lower court judges violated Article 617 by not drawing the consequences of the extinction of the usufruct on the subject matter of the promise.

What this changes for you — concretely

For an owner (the seller): if you sign a promise of sale of bare ownership and the usufructuary dies before the final sale, you will be obliged to sell full ownership at the same price. Potential financial loss: the value of the usufruct, which can represent 30 to 50% of the property's value depending on the age of the usufructuary. Example in Cognin: a property worth €200,000 in full ownership, the usufruct of a 70-year-old is worth about 30% (€60,000). If you sell the bare ownership for €140,000 and the usufruct extinguishes, you must deliver full ownership for €140,000. That is a loss of €60,000.

For a buyer: this is a protection. You can demand full ownership without paying more. But be careful: if you instead wish to acquire only bare ownership (for example for tax reasons), you must include a reserve of usufruct clause in the promise, as mentioned in the title of the judgment. Otherwise, the promise will relate to full ownership.

For a property professional (agent, notary): you must inform your clients of this rule. Insert a clause specifying the fate of the promise in the event of extinction of the usufruct. Without this, the seller may be trapped.

Four tips to avoid this type of dispute

• Include a reserve of usufruct clause in the promise: if you want the sale to remain limited to bare ownership even after extinction of the usufruct, write it in black and white. Example: "This promise is granted on condition that the usufruct subsists until the repetition. In the event of extinction, the sale will be cancelled or the price reduced."
• Have the value of the usufruct estimated: before signing, calculate the value of the usufruct according to the tax scale (age of the usufructuary). This will allow you to anticipate the financial impact of an early extinction.
• Provide for a short completion period: the longer the time between the promise and the notarial deed, the higher the risk of death of the usufructuary. Set a reasonable deadline (3 to 6 months).
• Consult a specialist lawyer: before signing a promise of sale of bare ownership, have the contract checked by a property lawyer. This will cost you a few hundred euros, but will avoid much more costly disputes.

Further reading: related case law and developments

This decision is part of a consistent line of the Cour de cassation. Already in 1999 (Civ. 3e, 12 May 1999, No. 97-13.869), the Court held that a promise of sale of bare ownership entailed, in the event of extinction of the usufruct, an obligation to sell full ownership. The 2009 judgment merely confirms this solution, by specifying it: "unless a reserve of usufruct is stipulated".

Conversely, if the buyer refuses to acquire full ownership after extinction of the usufruct, he may be ordered to pay damages for breach of contract. The trend of the courts is therefore to maintain contractual balance, but by protecting the buyer against an unexpected price change.

For the future, it is likely that notaries and lawyers will systematically include a clause in promises of sale of bare ownership to clarify the position in the event of extinction. The case law is now well established.

Checklist before acting

• Am I a seller of bare ownership? → Check if the usufructuary is elderly or in poor health. If so, insert a reserve of usufruct clause.
• Am I a buyer of bare ownership? → Know that you can demand full ownership if the usufruct extinguishes before the sale, without additional payment.
• Does the promise contain a clause on extinction of the usufruct? → If not, ask your notary or lawyer to add one.
• What is the age of the usufructuary? → Use the tax scale to assess the financial impact of extinction.
• What is the period between promise and notarial deed? → The longer it is, the greater the risk. Negotiate a short period.

In a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →