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Usufruct Agreement on Property in South African law

A personal servitude is a right against a property which is to the benefit of a certain person. A Usufruct is a personal servitude, which allows the holder (usufructuary) rights to use property which is owned by someone else, known as "the bare dominium owner". It is registered by way of a Notarial Deed of cession at the Deeds Office and endorsed against the title deed relating to the immovable property. An Usufruct is not transferrable and cannot be sold or bequeathed to another person.

An usufruct is not the only type of personal servitude; others are "habitatio", "usus" and "fideicommissum". An “usus” or right of “habitatio” comprises lesser rights over a property than an usufruct (and their values according to the SARS Transfer Duty Guide are only calculated against the improved value of the property, whereas an usufruct's value is calculated against the full fair value of the property - see details further below of how to calculate the value of an usufruct).

Usufruct Lawyer

Under a fideicommissum, you give a property to somebody, subject to the condition that on their death the property becomes the ownership of somebody else.

Under an usufruct, you give a property to somebody (the owner of the bare dominium), subject to somebody else (the usufructuary) having the right to use the property.

Lifetime usufruct vs fixed term usufruct

A personal servitude of life usufruct ceases on the death of the Usufructuary (proof of death must be provided for a lifetime usufruct to end); which contrasts with a fixed term usufruct which ceases at the end of the fixed term; the property is then restored to the bare dominium owner/s who would have full control over the property from that point.

Testators, ANC's & Property Sales

An usufruct can be granted unilaterally by a testator in a will; bilaterally by agreement between parties intending to get married set out in a Registered Antenuptial Contract; or it can be retained by a Seller of a property when selling a property – this may reduce estate duty or transfer duty.

Many testators consider leaving an usufruct over their immovable property to a spouse or to a second spouse that they may have married later in life. A testator may consider making an usufruct bequest to ensure that a dependent person living with them would not be left destitute; or to ensure that their spouse remains in control of their immovable property; and that they would enjoy the benefits of the property. It may be thought by the testator that the granting of an usufruct would reduce the possibility of family squabbles between a new spouse and children from a previous marriage. It is however a reality that where there are already strained family relationships, a lifelong usufruct may create unpleasant hardships and family disagreements which could continue for many years. Several considerations should be taken into account when considering bequeathing an usufruct, as the granting of an Usufruct could be a huge financial burden on the actual heirs to an estate and even on the person to whom the Usufruct is being granted.

Can somebody purchase an usufruct?

Whilst it is possible for somebody to purchase an usufruct from a property owner in exchange for a sum of money, this is not as common as usufructs being set up as part of inheritance in a will or to be acquired as part of a donation.

An example of an usufruct

A testator leaves his immovable property to his son, subject to the Usufruct of his wife. In so doing the son would become the registered owner of the bare dominium of the property and the wife becomes the Usufructuary holder. Although the son becomes the registered owner of the bare dominium he cannot do anything to infringe on the wife’s rights, he would not be able to use or benefit from the property until the wife dies. The wife as Usufructuary holder has :

• the right to possess and enjoy the property and may rent the property out.
• the duty to ensure property is not damaged or altered; to pay for maintenance and the upkeep on the property; and to pay the rates and levies.
• As a testator one should consider whether the rights to be granted outweigh the duties placed on the usufructuary; and the burden of the usufruct on the heir.

When used in the right circumstances an Usufruct does create certainty and could be beneficial to the Usufructuary holder; it protects their rights to use and benefit from a property and ensures that loved ones and surviving spouse have a roof over their head for the remainder of their life.

Examples of an usufruct clause in a will

Somebody may specify in their will that their spouse (often in the case where the spouse is not the mother of their children) has a lifetime usufruct over the property they currently share, and that their children are the bare dominium holders of the property, so that when their spouse passes, full ownership over the property reverts to their children. The relevant clause in the will may be as follows:

Sample wording 1

"I bequeath the use and enjoyment of my immovable property situated at "220 Nettleton Road, Clifton, 8005, Cape Town South Africa" to my wife, Catherine Farker, as usufructuary for the duration of her lifetime. During her lifetime, she shall have the right to reside in the immovable property, collect rental income, and derive any other benefit from the immovable property as she sees fit. Upon her death, the ownership of the immovable property shall pass to my children, Aiden Farker and Simon Farker, in equal shares, subject to the termination of the usufruct, which shall end on my wife's death."

Sample wording 2

I bequeath my property situated at Erf 98765 Paarl (more commonly known as 321 New Street, Paarl) to my children, Aiden Farker and Simon Farker, in equal sharesY, subject to a lifelong usufruct in favour of my wife, Catherine Farker.

Sample wording from a joint will

"We bequeath the property situated at Erf 12345 Cape Town to our daughter Elaine subject to a lifelong usufruct which is in favour of the last survivor of the two of us".

It's always best and is our strong recommendation to have a legal and tax professional review any wording you use in your will; so that your specific circumstances may be brought into consideration.

Example of Fideicommissum clause in a will

"I bequeath my property situated at 32 Victoria Road, Cape Town, to my eldest daughter, LYNN JONES (Identity Number 8901015454087), subject to a fideicommissum in favour of her eldest daughter, JEAN JONES (Identity Number 2202025454087). This means that upon the death of LYNN JONES, the property shall devolve upon JEAN JONES"

Potential tax advantages of usufructs

In SA estate duty is calculated based on the net value of the deceased estate in excess of R3.5m (at the time of writing)":

• 20% on the first R30m dutiable valuea
• 25% above R30m dutiable value

A usufruct can reduce the value of the estate that is subject to estate duty, as the property is not considered fully owned by the heirs (the usufructuary holds certain rights to use the property, which reduces the overall value of the property to the heirs, and reduces the contribution of the property to the value of the deceased estate).

Calculating Estate Duty for Property subject to Usufruct

An usufruct can reduce transfer duty on a property

Transfer duty is a tax paid when property is transferred from one party to another, and is usually calculated as a percentage of the purchase price or the market value of the property. If a property with an usufruct is sold, the transfer duty may be lower because the buyer is not acquiring full ownership; they are only acquiring the bare dominium, with the usufruct still in place.

Get expert advice

It's important to involve a tax expert in weighing up the advantages and disadvantages, before you set up an usufruct for tax reasons.

How can an usufruct be terminated/cancelled?

If a notarial deed of usufruct is in place, it is possible to execute a "notarial deed of cancellation of usufruct"; which must be:

• agreed and signed by the owner/s of the bare dominium,
• agreed and signed by the usufructuary and
• attested to by the Notary Public.

The notarial deed of cancellation of usufrct is registered at the deeds office against the title deed/s affected; it may include a payment by the bare dominium owners to the usufructuary for giving up her/his rights under the usufruct. There may also be transfer duty to be paid, which would usually be paid by the bare dominium owner/s, the party which benefits from the cancellation of the usufruct.

Section 68(2) of the Deeds Registries Act provides the legal method with whiich to cancel a personal servitude. 

Self-terminating usufructs

If a notarial deed of usufruct has been set to be in place for a certain period of time, the usufruct terminates upon the expiry of the period of time.

If a notarial deed of usufruct has been set to be in place until a person dies, the usufruct terminates upon the death of the person (proof is required that the person has died).

When the usufruct terminates, the property in question reverts fully to the owner of the bare dominium.

Terminating an usufruct in a last will & testament

If the desire to create an usufruct exists only in a person's will, and that person has not died yet, then the person can simply write a new will, revoking the previous will.

FAQ on usufructs in Cape Town

• What is the meaning of an usufruct in law?
  • an usufruct is a legal right that allows somebody to use and enjoy the benefits of someone else's property without actually owning it (ie without needing to buy it). The person who holds the usufruct is known as the "usufructuary", and can use the property and may be allowed to derive income from it (e.g. by renting it out), but their may be also be the obligation to maintain it and not alter it. This arrangement is often used in estate planningto allow one's spouse to remain in the house after one dies, but to be inherited by one's children after the spouse dies. Usufructs are also commonly used in agricultural leases.
• What is the meaning of "usufructuary" in law?
  • An usufructuary is the holder of the rights to use a property which belongs to somebody else (the bare dominium owner).
• What is a contingent usufruct?
  • A contingent usufruct only comes into existence once an existing registered usufruct lapses; the contingent usufruct must be ceded by the owner/s of the bare dominium when the existing usufruct lapses.
• Do you have to register an usufruct?
  • Rights of usufruct are created through a Notarial Deed of cession of Usufruct, which must be registered at the deeds office; but the right can be granted in a person's last will and testament in favour of a specific person, and the right of usufruct will then become effective on death (upon the person's death the notarial deed of cession of usufruct would be executed by the deceased estate's executor, with the assistance of a conveyancing attorney).
• How do you register an usufruct in South Africa?
  • An usufruct agreement over immovable property must be registered in the Deeds Office to be valid and enforceable against third parties;
  • The process of registration is initiated by lodging the usufruct agreement as a Notarial Deed at the Deeds Office in the jurisdiction where the property is situated. A qualified conveyancer usually handles the lodging of the documents at the Deeds Office; and would need to take the following documents to the Deeds Office:
    • A certified copy of the title deed of the property in question.
    • The original version of the usufruct agreement (not a copy).
    • Certified copies of the ID documents or passports of each of the parties involved.
    • A power of attorney authorising the person lodging the documents to act on behalf of the parties (if applicable).
    • Two fair market valuations of the property to upload to SARS.
  • Once lodged, the Deeds Office then processes the registration of the usufruct agreement. If the Deeds Office approves the lodging, a record of the usufruct is entered into the property’s title deed, proving the usufructuary’s rights. This record in the title deed is available for public access and scrutiny, ensuring that the usufruct agreement is legally binding; ie the usufruct is registered. the usufructuary then has the legal right to use and enjoy the property according to the terms set out in the registered usufruct agreement.
  • The usufruct terminates upon death or when the terms agreed upon expire (e.g. if it was for a limited period).




• How long does it take to register an usufruct?
  • In Cape Town it takes about a month.
• What is a deed of usufruct?
  • Rights of usufruct are usually created through a Notarial Deed of cession of Usufruct, but the right can be granted in a will in favour of a specific person, and the right of usufruct will then become effective on death. A Notarial Deed of Usufruct is executed at the Deeds Office and endorsed against the title deed of the immovable property in question. A notarial deed is a legal document that is drafted, executed, and signed by a notary public in South Africa. Notarial deeds are used for various legal purposes, including the transfer or granting of rights over property, such as an usufruct, or other significant legal agreements. Notarial deeds are considered to be a highly reliable form of documentation; as they are authenticated by notaries. Notarial deeds are public documents and are usually registered in the Deeds Office for property-related deeds. A notarial deed carries evidentiary weight in legal proceedings, meaning its contents can be relied upon in court or other legal matters. Outside of the field of property; a couple getting married can enter into an antenuptial contract via a notarial deed.

• Can an usufruct agreement create obligations?
  • In 2012 the South Gauteng High Court dismissed an application for a respondent to comply with his obligations in terms of a "Notarial Deed of Usufruct” agreement in respect of an immovable property in Hyde Park, Johannesburg. Obligations were listed such as getting the property painted and installing curtains. The usufruct agreement read as follows: "Lola shall enjoy the complete and undisturbed occupation of the PROPERTY during her lifetime and OWNER or his estate should keep predecease her shall have the responsibility and the ability to maintain the PROPERTY in which respect LOLA is absolved of her, common-law duty. LOLA shall be entitled to let the property should she not occupy it personally." The Judge ruled that "Whilst I accept that the respondent has a duty in terms of the usufruct agreement to preserve and maintain the property, the applicant has, however, failed to show that the repainting which she is demanding is related to the maintenance of the property or its preservation as envisaged in the usufruct agreement. There is insufficient evidence that the condition of the property has deteriorated to the extent that it can be said that the respondent has failed in his obligation to maintain and upkeep the property."

Usufruct Value Calculation for SARS

Usufruct value calculations for the South African Revenue Service are set out in their Transfer Duty Guide. At the time of writing, the latest version of this was the 6th edition, which they updated on 25 July 2023.

Example: Calculation of a fixed period usufruct's value

In this usufruct example let's assume that a certain Mr Joe Soap sells a house belonging to him to his Trust for R5,000,000 but Joe retains an usufruct for 30 years (ie it's a fixed period usufruct, this detail is important when deciding which table in the SARS guide must be looked up). The formula according to SARS to estimate the usufruct's value is:

• R5m * 8.0552 * 0.12 = R4,833,120 (see table below for where the 8.0552 comes from)
• The value of the Bare Dominium = R5,000,000 - R4,833,120 = R166,880

The 8.0552 is looked up in Table B of the SARS transfer duty guide, if the usufruct is for a fixed number of years (see image below)

The 0.12 (which equals 12%) in the above formula is the yield prescribed by the Estate Duty Act to be used wherever the true rental yield is unknown (be sure to check that the 12% is still valid before using it).

"Bare dominium" is defined in the SARS guide as "In relation to the rights over immovable property, means that the owner of the immovable property does not have the use of the property at their disposal and that the right of use, or usufruct, vests with the usufructuary as a personal servitude."

After 30 years the usufruct lapses and the property is then fully owned by the trust. This is a simple example, be sure to consult with an expert before creating an usufruct.

Calculation of a remainder of life usufruct's value

To quote the SARS Transfer duty guide:

• "In the case where a person has acquired a real right in property for the rest of that person’s life, Table A “The Expectation of Life and the Present Value of R1 per Annum for Life Capitalised at 12 per cent over the Expectation of Life of Males and Females of Various Ages” is used to calculate the value. Table A is commonly referred to as the “life expectancy tables"
• "The life expectancies apply to natural persons who hold limited rights in respect of donations and estates on or after 1 April 1977. In the case of a non-natural person, the expectancy is fixed at 50 years"
• "The tables are used to determine the discounting factors over the various life expectancies or fixed periods involved (as the case may be) which is multiplied by the annual yield in order to arrive at the applicable values (that is by discounting R1 by an annual factor of 12%). The values as determined by these tables are used to calculate valuations of limited rights for purposes of estate duty, donations tax and transfer duty, although in certain cases (not within the scope of this guide), there may be some differences between them."

Example: Calculation of a remainder of life usufruct's value

Suppose:

• 30 Nov 2024 = Transaction date on which Ms Beautiful is granted a lifetime usufruct over the house under consideration.
• 20 Sep 1960 = Date of birth of Ms Beautiful who received a lifetime usufruct over the house.
• 65 = Age next birthday of Ms Beatiful on the transaction date.
• R6,000,000 = Fair value of house.

As Ms Beautiful is female and this is an usufruct for life, we read the annuity factor from the second last column to the right of Table A of the SARS Transfer Duty Guide. The annuity factor provides the present value of an annuity of R1 per annum payable for the remaining life of a female aged 65 next birthday and discounted at an interest rate of 12% p.a.

• 6,84161 = annuity factor per SARS Transfer Duty Guide.
• Usufruct value = (fair value of house) × 0.12 × (annuity factor)
• Usufruct value = R6,000,000 x 0.12 x 6.84161
• Usufruct value = R4,925,959
• Bare dominium value = R1,074,041

Transfer duty on the usufruct is calculated as follows:

• = R97,075 + 11% x (R4,925,959 - R2,722,501)
• = R339,455

Usufruct value calculator

Watch this space, we are in the process of developing South Africa's first usufruct value calculator - warning it is a prototype and subject to errors. In the meantime, you are welcome to email us for a manually calculated official valuation.

Case history

• 2010 Vairetti v Zardo, Zardo & Williams
  • The case was about whether the rights granted were those of "usufruct" or the more limited rights of "usus" (which basically allows the holder to use the property but not to rent it out to others)..

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Next step: Contact a conveyancing attorney to assist with creating your usufruct!