Comparative observations

claim damages for breach of contract,2 to use a special procedure to evict the tenant3 or to obtain an injunction to stop the conversion.4

In principle, it makes no difference if such alteration will enhance the value of the property or if the property can be converted back into its former condition at low cost. The South African report mentions that Roman-Dutch law allowed alterations more readily in the initial period of a long lease, subject to the qualification that the tenant must not damage the property and be able to reconvert the land to its former condition at the end of the lease. The default position can obviously be changed by initial or subsequent contractual arrangements.

In England, there is a judicial jurisdiction to discharge any covenants which are obsolete or which obstruct some reasonable private use of the premises. Change in the character of the land or locality or economic changes which render the covenants obsolete or otherwise oppressive can therefore lead to the discharge or modification of these covenants. Leasehold covenants restraining the use of the leased premises are in practice challenged on that footing.

The default position under the Danish Private Housing Act is somewhat different: the tenant is not, without the landlord’s consent, allowed to use the premises for any purpose not agreed upon. If the tenant proceeds with the alteration without the landlord’s consent, the landlord can terminate the contract without notice. Conversion such as that discussed here would probably need the approval of the relevant public authorities even if the alteration enhanced the value of the premises, the character of the neighbourhood changed or conversion back to the original condition was possible at a low cost.

Although change in the manner of exploitation of agricultural as opposed to residential land under a lease without the landlord’s consent is, on the whole, more readily allowed by most European jurisdictions, it is not permitted where the alteration is so substantial that it affects the manner in which the owner can exploit the property when the lease expires. The farm must be exploited consistently with its intended purpose and maintained in a good condition of productivity. Consequently, B will not be allowed to convert the farm (agricultural purpose) into a hotel (commercial purpose) without the

2 See the Austrian, Portuguese and Spanish reports. 3 See the Spanish report. 4 See the Austrian report.

318 c a s e s t u d i e s

landlord’s approval.5 Such conversion will be a ground for cancelling the lease.6

In most European jurisdictions, the fact that the value of the property is enhanced by the conversion or that the farm can be reconverted to its original state at low cost before expiry of the lease will not affect the situation. While Italian law, for example, expects the tenant to manage the property dynamically so as to increase its productivity and profitability, the agricultural purpose of the land must always be respected.

Change in the character of the neighbourhood will also not affect the situation except that the tenant may be required to obtain approval from public zoning authorities, in addition to consent from the landlord. If a radical and unforeseen change of circumstances were to render the original use of the property absurd, the tenant can demand dissolution of the lease in continental jurisdictions but he/she will still not be allowed to alter the purpose of the property.7

Under a usufruct, the usufructuary must exploit the property in an orderly fashion, preserve its economic purpose and not introduce substantial changes to the property. He/she is obliged to return the property without impairment of its substance. The usufructuary may improve the property but not change its economic purpose. Converting a dwellinghouse into a warehouse or a farm into a hotel will be regarded as a substantial transformation of the property and is not allowed without the nude owner’s consent.8 In some jurisdictions, a change of purpose may be agreed upon in the constitutive agreement inter vivos, or with the permission of the owner or the court of first instance.9 In France, case law allows a usufructuary to change a leisure residence into a place of business as long as this does not constitute an ‘abuse of enjoyment’. Poland recognises an exception by allowing the usufructuary, which is an agricultural co-operative, to change the substance and use of state treasury land granted in usufruct.10

Most European jurisdictions will further agree that the mere fact that the alteration enhances the value of the property or that the property can be

5See e.g. the German, Greek, French, Belgian, Spanish, Italian, South African, Hungarian and Polish reports. But cf. the Scottish report.

6See e.g. the Belgian and Spanish reports.

7See the Greek, Italian and Spanish reports. But see the Scottish report which refers to a procedure to change the title conditions of the property.

8See e.g. the German, Austrian, Belgian, Portuguese, Italian, Scottish, South African and Polish reports.

9See the Spanish and Dutch reports. 10 See the French and Polish reports.

reconverted at low cost will not change the situation.11 Academic opinion in Portugal and the Netherlands supports certain minor changes, for example, the conversion of a garage into a restaurant if the property’s economic purpose could be maintained,12 while South African and Hungarian sources support the view that an enhancement of the value of the property will suffice to allow the usufructuary to change the purpose of the property as long as it does not alter the fundamental function of the property. Greek law will allow the conversion if the property can be returned to its former condition at low cost. 13

Some jurisdictions accept that radical changes in the neighbourhood which interfere with the business foundation of a usufruct constituted inter vivos as an estate planning mechanism14 may affect the legal position.15 In Belgium, changing circumstances may qualify as a socioeconomic factor outside the control of the usufructuary, which will justify altering the intended purpose of the property. The French report also hints at the possibility of changing the exploitation of a usufruct if the zoning of the neighbourhood changes. The Italian report states that circumstances that radically change the original use of the property may probably make a difference but that there is no direct authority on the point. An article in the Spanish Civil Code on forced sales provides that, in the event of a radical change in the neighbourhood, the nude owner may subrogate the property, either by providing the usufructuary with another property of similar condition and value or by taking over the property and paying the usufructuary legal interest on the proceeds of the property for the duration of the usufruct. A similar solution is found in South African law, not on the ground of changing circumstances but on the ground that exploitation of the property by a widow caused such severe hardship to her that it was financially prudent (and also to the nude owner’s advantage) to sell the property and allow the widow a usufruct on the interest earned on the proceeds of the sale.16

Most national reporters reported that the holders of the lesser rights of use and habitation will not be entitled to do the above conversions under any of the circumstances mentioned above.17

11See the German, Belgian, Portuguese and Spanish reports.

12See the Portuguese and Dutch reports.

13See also the South African, Hungarian and Scottish reports.

14See the German report. 15 See the Belgian, French and Italian reports.

16See the Belgian, French, Italian, Spanish and South African reports.

17See e.g. the Greek and South African reports.