interfere with his/her right to use the object (Civil Code, § 974).44 A loan for use can be for a fixed or an indefinite period. If not agreed otherwise, a reasonable termination period applies in the case of the latter.45

If the borrower is obliged to give the object back whenever the lender asks him to do so, the loan is deemed to be a precarium. Principally, a precarium is governed by the provisions regarding the loan (Civil Code, § 971). However, unlike the borrower under a ‘normal’ loan, the borrower under a precarium does not have any possessory remedies against third persons who interfere with his/her rights.46

With the exception of limited possessory protection, the lender is not protected against third parties. As such, this report will not deal further with loans.

Belgium

The owner, A, must decide whether to grant rights in personam or rights in rem to B. B will be referred to as the ‘tenant’ if rights in personam are granted, and as the ‘holder’ if rights in rem are granted.

Rights in personam are rights that only have effect between the parties. They do not confer an interest in the property itself. The rights in personam that could be granted to B in the case above are the residential lease, the agricultural lease, the loan for use and precarium. These rights in personam will be discussed briefly in this section. The residential and agricultural leases will be dealt with in this report only to the extent that they confer (some kind of) interest in the property itself.

Rights in rem usually offer more stability to their holders than rights in personam. They usually grant a right of use and exploitation with regard to the property and thus guarantee a source of income from the property for the holder over a long period of time. From a tax point of view, the constitution of a lease with regard to a building does not allow the owner/constructor to deduct the input VAT paid on the erection or purchase of the building from the rent, whereas the constitution of rights in rem may enable him to do so under certain conditions. Moreover, in certain circumstances, the acquisition of rights in rem might be considered as an alternative to a purchase. The rights in rem that could be granted to B in the case above are usufruct, use, the right

44 Ibid. 203. 45 Binder, in Schwimann, Praxiskommentar, vol. 4, § 971, para. 14. 46 Welser, in Koziol and Welser, Bu¬rgerliches Recht, vol. 2, p. 203.

of habitation, the hereditary building lease (superÞcies) and the hereditary lease of land (emphyteusis).

In general, the aforementioned rights are constituted between parties without any formalities (unless indicated otherwise hereafter). Nevertheless, for evidentiary purposes, also between the parties, the Belgium Civil Code, art. 1341 in principle requires a deed prepared by a notary or a written contract if the value of the property exceeds EUR 375.47

A residential lease (woninghuur, bail de re«sidence principal) is defined as a lease of accommodation used by the tenant with the landlord’s express or tacit agreement, as his/her principal residence, in return for payment of an agreed rent. The Law on Residential Lease of 20 February 1991 art. 1bis, as amended, suggests that a residential lease contract should be in writing and should contain specific clauses. A written document is, however, not required for the validity of the contract nor as proof for its existence (notwithstanding the application of the rule of Civil Code, art. 1341 mentioned above). However, any party can demand the reduction of the contract to writing and its completion or signing by the parties to the contract.

In principle, residential leases are concluded for a period of nine years. If the contract is reduced to writing, it is possible to conclude a residential lease for a period of between nine and ninety-nine years, and even for the life-time of the tenant, or for a shorter period of up to a maximum of three years. The tenant has a statutory right to terminate a nine-year (or longer) lease at any time subject to three months’ notice. If the tenant terminates the lease during the first three years, the landlord can claim an indemnity.48 The landlord may terminate the lease subject to six months’ notice, at any time, if the premises are required for his/ her own use or for the use of specified close relatives. He/she may also terminate the lease at the end of a three-year period, subject to six months’ notice, if he/she intends to reconstruct or renovate the residential premises in a substantial manner. He/she is also entitled to terminate the lease at the end of a three-year period, subject to six months’ notice, without such intention, subject to the payment of an indemnity of nine months’ rent at the end of the first three-year period and of six months’ rent at the end of the second three-year period.

47As opposed to proof between and against commercial parties which is free (Code of Commerce, art. 25).

48An indemnity of three, two or one month’s rent, if the lease ends during the first, second or third year respectively (Law on Residential Leases, art. 3, s. 5).

If no party terminates the lease at the end of the lease period of nine years, the contract is prolonged automatically by another three-year period. A lease for a shorter period than three years cannot be terminated by either party prior to the end of the lease term. If no party terminates such a lease three months before the end of the term the lease is automatically converted into a nine-year lease coming into effect from the start of the short-term lease. A lifetime lease cannot be terminated by the landlord: it ends by operation of law upon the death of the tenant, or on termination by the tenant.

An agricultural lease (landpacht, bail a` ferme) is a contract by which the landlord grants the tenant the right to exploit land mainly for agricultural purposes in return for payment of an agreed rent. Agricultural leases are governed by the Law on Agricultural Lease of 23 October 1969, as amended. This Law is clearly made to protect the farmer tenant. An agricultural lease must be concluded in writing (Law on Agricultural Lease, art. 3), not for validity, but merely for evidentiary purposes (ad probationem), at least for the landlord. Agricultural leases must be concluded for a minimum period of nine years (but not exceeding ninetynine years) and also for the lifetime of the tenant. In the absence of a notice of termination, the lease is automatically extended for consecutive periods of nine years. If the tenant wants to terminate the lease, he/she must give a notice period of at least one year. The landlord may terminate the lease only in limited circumstances and subject to a notice period of between three months and four years.

A can grant B a right of usufruct (vruchtgebruik, usufruit) (Civil Code, arts. 578–624). Usufruct is a right in rem which allows the holder to use and enjoy property belonging to another for a limited period of time, provided that the substance of the property is preserved and that the holder exploits the property like a reasonable man. If it is granted to a private individual, it may not exceed his/her lifetime and will expire on death, even if death occurs before the expiry of the term for which the usufruct was granted. The duration of a usufruct constituted in favour of a legal person such as a company or a foundation may not exceed thirty years. Usufructs may be created by law, prescription, testament or will or by contract. If A grants a right of usufruct on agricultural land to B for a fixed term, the usufruct will be subject to the provisions of the Law on Agricultural Lease. Apart from the death of the usufructuary, the usufruct will also terminate on expiry of the term for which it has been granted, complete destruction of the property, merger (acquisition of the ownership of the property by the holder, acquisition of the nude

property by the usufructuary or the acquisition of both rights by a third party), non-use for thirty years, renunciation of his/her rights by the holder, dissolution in case of mismanagement (Civil Code, art. 618), or cancellation of the title.

The right of use or habitation (recht van gebruik of bewoning, droit dÕusage ou dÕhabitation) (Civil Code, arts. 625–35) is analogous to usufruct, with the addition of a few nuances. It is a right in rem to use and reside in immovable property. If constituted by agreement, parties can freely decide on the scope and content of the right of use and habitation. Contrary to the right of usufruct, the holder of the right of use and habitation may not transfer his/her right (Civil Code, arts. 631 and 634). The provisions relating to usufruct apply to the extent compatible to use and habitation. Comments related to usufruct further in this report equally apply to the right of use and habitation, unless otherwise indicated.

A can conclude a hereditary land lease (emphyteusis, erfpacht, droit dÕemphyte«ose) with B, governed by the Law on Emphyteusis of 10 January 1824 and subject to the agreement between the owner and the tenant (leasehold tenant/emphyte«ot/erfpachter). A heritable land lease constitutes a right in rem in favour of the holder to use and exploit the property of the grantor in return for payment of an annual charge (a significant payment in advance may also be agreed upon). It is essentially a temporary right: it must be contracted for a period of not fewer than twentyseven years and not more than ninety-nine years.

It can be created by prescription, contract or will. The holder may exercise all the rights of enjoyment and exploitation of land, provided that the value of the property is not reduced. It includes inter alia the right to rent out the property and to improve the land by cultivation thereof and by the construction of buildings. At the expiry of the land lease, the tenant will not be entitled to claim compensation for this cultivation or for the constructed buildings, unless otherwise agreed. Apart from the death of the holder, the leasehold ends at the end of term for which it has been granted, at complete destruction of the property, merger, non-use for thirty years, renunciation of his/her rights by the holder, dissolution or cancellation of title.

A can grant B a hereditary building lease (opstalrecht, droit de superÞcie) governed by the Law on SuperÞcies of 10 January 1824 and subject to the agreement between the parties. It is a right in rem in favour of the holder and entitles the holder to own buildings, works or agricultural improvements effected by him/her on the land of another. It is time-limited with a

maximum duration of fifty years, but it can be renewed indefinitely. The hereditary building lease can also be granted with regard to existing buildings on the land, provided the holder compensates the owner for the value of the buildings at the inception of the right.

While the grantor of the right remains the owner of the land, the holder is – for the duration of his/her right – the sole owner of everything erected or planted on the surface of the land. He/she is entitled to use, enjoy and even demolish these items, provided he/she returns the land in the condition in which he/she received it. When his/her right expires, the holder is entitled to claim compensation for the actual value of the plants, works or buildings he/she erected and the existing plants, works or buildings he/she acquired from the landowner at the inception of the lease. Apart from the death of the holder, the heritable building lease ends on expiry of the term for which it has been granted, complete destruction of the property, merger, non-use for thirty years, renunciation of his/her rights by the holder or cancellation of title. The possibility of dissolution is disputed.49

A loan for use (bruiklening, commodat) (Civil Code, arts. 1875–91) is a gratuitous contract by which the lender grants the temporary use of movable or immovable property to the borrower. The sole obligation of the borrower is to return the property to the lender after the borrower has used it as permitted under the contract or on expiry of the agreed term. In exceptional circumstances it is possible for the lender to reclaim the property if he/she needs it urgently and unexpectedly. The traditional view (although contested in recent doctrine) is that the loan for use is a real contract, meaning that the contract is only constituted validly between the parties by the actual delivery of the property.

Precarium (bezetting ter bede, occupation pre«caire) is a contract where the owner of immovable property allows another party to use and occupy that property temporarily in return for payment and at will. This means that the owner can terminate the contract at any time, subject to reasonable notice being given. Although the occupier may use and enjoy the property, his/her right is very precarious as it lasts only as long as it pleases the owner. This type of contract has been created by case law and practice for situations where it is not suitable to conclude an ordinary contract of lease, for instance, in situations where it is prudent to give only a temporary right before entering into a more

49Derine, Vanneste and Vandenberghe, Zakenrecht, B, no. 1034; Sagaert, Tilleman and Verbeke, Vermogensrecht, no. 1013.