Usufruct

Usufruct
We have referred to the situation before, mostly in communist or former communist countries, where the buyer of a property does not get title to the land. They merely get the right to develop or use the land. Normally this is done with state-owned or communally owned properties. There will normally be a lease on the land for an indefinite period or somewhere between 40 and 99 years. The process is called “Usufruct”. It means loosely “to use the fruit”.
While westerners seem to think this is unusual or a less than ideal situation, the same thing is done in capitalist countries. Almost all of the land in Israel is owned by the “Israeli Land Authority”. Many service stations, branch banks, fast food restaurants and shopping centers are built on long term leased land. Beach front land in Hawaii is rarely sold. The USA tax code recognizes only depreciation on the improvements on a property. If the land is leased, the lease has a definite life and the rent on the land is deductible as a business expense. There are advantages to this form of ownership for both the land owner and for the owner/developer of the improvements.

David Segrest is a REALTOR in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com