such time the court may compel the borrower to return the thing to the lender if the lender can prove that he has an urgent and unforeseen need of the property. Initially, the Cour de cassation interpreted these two provisions in the case of the loan of an apartment in the sense that return of the apartment is only merited if it has been established that the need of the borrower has ceased or that the lender has an urgent and unforeseen need to reclaim his/her property.81 However, the Cour de cassation has since reversed its position. Reasoning that the borrower’s obligation to return the thing borrowed, after having made use of it, is the essence of a loan for use (Civil Code, art. 1875), the Cour decided that in the absence of an agreed foreseeable term in the case of a ‘thing of lasting use’ (including an apartment), the lender is entitled to end a loan for use at any moment, by giving reasonable prior notice.82

By this contract, the parties agree that the occupant shall only have a right of precarious enjoyment in return for a modest financial counterperformance. The precariousness of the enjoyment is characterised by the fact that the contract can come to an end at any time, whether by will of the owner or by the occurrence of an event contemplated by the parties. It is of no use to stipulate a term, since this contract is subject to interruption at any moment, without serving notice or owing any indemnity, even if it has lasted for a good number of years. The case law ensures that the aim of an agreement for precarious occupation is not to circumvent the mandatory provisions of the law in a fraudulent manner. Hence the compensation to be paid by the precarist must be modest to avoid the contract being re-characterised as a lease. If the contract allows the precarist to reside on the property, the case law looks to the intention of the parties and requires a legitimate reason to justify the non-application of legislation pertaining to residential leases. As for agricultural leases, art. L 411–2 of the Rural Code specifies the instances in which one may agree to a precarious occupation of agricultural land.

Germany

A can grant B a residential lease with regard to the residential property (Wohnraummiete) and an agricultural lease (Landpachtvertrag Civil Code, § 585) in respect of the farm.

81Civ. 1, 3 Feb. 1993; D 1994 248; Civ. 3, 4 May 2000; Bull. civ. III no. 97.

82Civ. 1, 3 Feb. 2004; Bull. civ. I, no. 34; Civ. 3, 19 Jan. 2005; Bull. civ. III, no. 12.

The lease of residential property is governed by the provisions of the contract of lease (Mietvertrag, Civil Code, § 535). Mietvertrag is a contract whereby the landlord undertakes to provide the tenant with the use of movable or immovable property during the term of the lease in return for the payment of an agreed rent. While writing is not a strict legal requirement for the constitution of a valid lease, lease agreements of immovable property are typically reduced to writing. The vast majority of residential leases (Wohnraummiete) are based on standard form contracts prepared by various homeowners’ associations. The aim of these contracts is to deviate as far as legally permissible from the detailed set of ‘tenant-friendly’ rules contained in the German Civil Code. The law places no limit on the duration of a lease. A residential lease that is not in writing will be deemed to have been entered into for an indefinite period of time (German Civil Code, § 550). In practice, most residential leases are entered into either for an indefinite period or a fixed period of between one and five years. Under German law, a lease is not capable of registration in the Land Register (Grundbuch)83 as the right of lease is not recognised as a real right. We shall see below, however, that although not strictly a real right, the right of lease does have certain proprietary effects.

Where the property concerned comprises a farm, an agricultural lease can be granted (Landpachtvertrag Civil Code, § 585), which is a special type of lease (Pacht Civil Code, § 581). The conceptual difference between a normal lease (Miete) and Pacht is that Pacht entitles the tenant not only to use the leased property but also to enjoy the fruits. Pacht and Landpacht are each subject to a set of special rules supplementing or superceding the general rules on lease.

A can grant B a usufruct (Nie§brauch) over the property (Civil Code, § 1030). Usufruct is a highly personal limited real right which entitles the holder to use another’s property and to enjoy its natural and civil fruits (for example, to receive the rent if the property is let out). Writing is not required for an agreement to create a usufruct. However, since a usufruct is recognised as a limited real right under German law, registration in the Land Register is a formal requirement for its creation (Civil Code, § 873). The recording officer at the Land Register (Grundbuchamt) will only register the usufruct if the landowner’s consent to the registration (Eintragungsbewilligung) is certified by a notary (Land

83In this regard German law differs from Swiss law (cf. Swiss Law of Obligations, arts. 260 and 282) and from Austrian law (cf. Austrian Civil Code, § 1095).

Register Code (Grundbuchordnung), § 29). It is not, however, necessary for registration to have the agreement itself executed notarially. A usufruct cannot extend beyond the lifetime of the usufructuary (Civil Code, § 1061).

A can grant B a limited personal servitude (beschra¬nkte perso¬nliche Dienstbarkeit) over the property (Civil Code, § 1090). The limited personal servitude entitles the holder to use the property in a specified way as agreed to between the parties. The right of habitation (Wohnungsrecht), namely the right to use a building or a part of a building as a residence to the exclusion of the owner, is specifically dealt with in Civil Code, § 1093. If the owner and the holder of the limited real right are both entitled to use the building (for example, where the right-holder is the owner’s spouse), only a limited personal servitude can be granted according to Civil Code, § 1090. Like a usufruct, a limited personal servitude or a right of habitation cannot extend beyond the lifetime of its holder (Civil Code, §§ 1090(2) and 1061). Creation of these rights follows the same rules as those for the creation of a usufruct. In practice, Wohnungsrecht as well as Nie§brauch are often established in the context of inter vivos transactions between elderly people and their children in order to avoid or reduce inheritance tax. Under such an arrangement, the parents would convey their property to their children (transfer of ownership) and would in return be granted a usufruct or a right of habitation over the property.

A can grant B a permanent right of habitation (Dauerwohnrecht) in accordance with, § 31(1) of the Law on Apartment Ownership (Wohnungseigentumsgesetz) of 1951.84 The main difference between this right and a limited personal servitude is that while the latter is a strictly personal limited real right, this right is transferable and transmissible to heirs (inheritable). Unlike the creation of a limited personal servitude, the creation of a permanent right of habitation requires the inclusion of certain mandatory provisions to regulate certain aspects of the right (Law on Apartment Ownership, § 32(3)). Again, registration in the Land Register (Grundbuch) is a formal requirement for the creation of the right.

84In addition to the permanent right of habitation (Dauerwohnrecht), the Law on Apartment Ownership (Wohnungseigentumsgesetz) also provides for a permanent right of exploitation (Dauernutzungsrecht), which affords a right to exploit a building for non-residential purposes (Law on Apartment Ownership, § 31(2)).