Usufruct agreement sours relationship

This week our experts help a reader sort out a rather complex and emotional legal problem involving her parents and their right of use on part of her property.

The reader’s situation did not begin as a usufruct-related issue. She had initially invited her parents to come and live on her property and build a cottage there.

After the building was completed, her parents suggested that they enter into a usufruct arrangement to protect their rights to the property and/or their dwelling.

The reader confesses that she did not quite understand all the implications of granting a usufruct to her parents, beyond the obvious aspect that it gave them the right to live on her property.

Unfortunately, after some time and ostensibly due to a souring of their relationship, her parents no longer wished to stay in the cottage and wanted to buy a property elsewhere.

The reader’s solution was to try to obtain a bond on her property to assist her parents in financing another property. They, however, insisted on a rather large amount of money, disproportionate to the valuation of her whole property, as compensation for “cancelling” the usufruct.

She has approached our panel with her concerns about the situation and the demands made by her parents.

When the cottage was built, it became part of the reader’s land, says Brian Kinnear, principal of Fresh Lifestyle Properties in East London.

Brian Kinnear - Fresh Lifestyle Properties

Brian Kinnear - Fresh Lifestyle Properties

“No mention is made as to who paid for the building, although we can probably assume it was her parents.”

Nevertheless, says Kinnear, any improvements to fixed property are considered part of that property.

“However, creating a usufruct is one way in which the owner of the property can provide certain rights to another party.”

Kinnear says property ownership can be viewed as an accumulation of rights, which includes the use and enjoyment thereof.

“In the case of a usufruct, the owner surrenders this right – either on the property as a whole or a portion of it – to another.”

There is, of course, a monetary value that can be attached to this right, says Kinnear.

“What could have happened, from a legal perspective, is that our reader’s parents funded the building of the cottage and received the usufruct in exchange.”

Grant Berndt - Abdo & Abdo Attorneys

Grant Berndt - Abdo & Abdo Attorneys

Grant Berndt from Abdo and Abdo Attorneys in East London says the usufruct holder certainly has a say with regard to a portion of the landowner’s property rights.

“Aside from the use and enjoyment of a portion of the land, the holder is, for example, entitled to lease out the area over which he or she has the usufruct and receive the income generated by it.”

Berndt says the original agreement between the reader and her parents should stipulate what rights were created with regard to terminating the usufruct.

“If the usufruct was granted for a specific period, then it will automatically terminate once that period has lapsed.”

The more likely scenario, says Berndt, is that the usufruct was granted for the remainder of her parents’ lives, in which case it will only terminate upon the last one’s death.

“The usufruct can, however, be cancelled by way of a notarial agreement.”

According to Berndt, the value of a usufruct is calculated according to a formula contained in the Estate Duty Act.

“The reader should obtain an expert opinion as to the valuation of the property, and by using this formula, she will be able to determine the value of the usufruct to which her parents are entitled.”

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