- •Time-Limited Interests in Land
- •The Common Core of European Private Law
- •Contents
- •General editors’ preface
- •Preface
- •Contributors
- •Abbreviations
- •1 Setting the scene
- •1. The scene
- •2. Balancing the interests: a handful of common problems
- •3. Time-limited interests arising by operation of law
- •2 General introduction
- •1. Overview
- •2. The hybrid character of time-limited interests in land
- •3. The approach and purpose of this study
- •3.1. Background
- •3.2. Drawing a geographical map of the law of Europe
- •4. The genesis of the book
- •4.1. Narrowing down the topic
- •4.2. Terminology
- •5. Structure of the book
- •3 Historical evolution of the maxim ‘sale breaks hire’
- •1. Introduction
- •2. The Roman-law approach
- •3. The ius commune position
- •3.1. Medieval learned law
- •3.2. From medieval learned law to the Prussian Civil Code
- •3.3. From the Prussian Civil Code to the German Civil Code
- •4. Conclusions
- •4 The many faces of usufruct
- •1. Usufruct in tax and estate planning
- •1.1. Transferring assets yet retaining control and income
- •1.2. Overview
- •2. The concept of usufruct
- •3. The traditional face
- •3.1. Control
- •3.2. Income
- •4. The modern face of usufruct
- •4.1. Control
- •4.2. Income
- •5. The Janus face
- •6. The twisted face
- •6.1. Default rules
- •6.2. Contractual expansion
- •6.3. Limits
- •7. Conclusion
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Comparative observations
- •Austria
- •Belgium
- •Denmark
- •England
- •France
- •Germany
- •Greece
- •Hungary
- •Italy
- •The Netherlands
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Case 1
- •Case 2
- •Case 3
- •Case 4
- •Case 5
- •Case 6
- •Case 7
- •Case 8
- •Case 9
- •Case 10
- •Case 11
- •Case 12
- •Belgium
- •Denmark
- •England
- •Germany
- •Greece
- •Hungary
- •Italy
- •Poland
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Bibliography
- •GENERAL BIBLIOGRAPHY
- •AUSTRIA
- •BELGIUM
- •DENMARK
- •ENGLAND
- •GERMANY
- •GREECE
- •HUNGARY
- •ITALY
- •THE NETHERLANDS
- •POLAND
- •PORTUGAL
- •SCOTLAND
- •SOUTH AFRICA
- •SPAIN
- •General index
- •Country index
- •Books in the series
c a s e 7 : c o n v e r s i o n o f i n t e r e s t i n t h e l a n d |
325 |
As to changes in character of the land or the locality, or economic changes, which render the covenants obsolete or otherwise oppressive, there is a judicial jurisdiction to discharge or modify any covenants which are obsolete or obstructive to some reasonable private use of the land (Law of Property Act, s. 84). Leasehold covenants restraining use of the demised premises are in practice challenged on that footing, especially where these leases are long commercial leases. Similarly, restrictions on alteration may be attacked by these means.
France
If B’s lease of the property is regulated by a specific statute, he/she is not entitled to change the intended purpose of the property even if this increases the value of the property. A contrary act renders a residential lease open to cancellation, as the tenant must peaceably use the leased premises in accordance with the intended purpose of the property as set out in the lease (Law of 1989, art. 7). The tenant may, however, use residential premises which constitute his/her principal residence for professional or commercial purposes as long as no clients or merchandise are allowed onto the premises. This entitlement may not be restricted by a contrary stipulation in the lease (Code on Construction and Habitation, art. L 631–7–3).
If a tenant under an agricultural lease puts the leased property to a use other than for its intended purpose, the landlord may cancel the lease and claim compensation for the loss suffered as a result of the change in the intended use of the property (Civil Code, art. 1766).
Under a usufruct, the usufructuary is entitled to use the property in the same manner as an owner, on condition that the substance of the property is preserved (Civil Code, art. 578). Case law, however, allows an exception where a leisure residence is converted into a business concern.33 Moreover, art. 618 Civil Code provides that an ‘abuse of enjoyment’ can lead to forfeiture of the usufruct. Under case law, concluding a commercial lease with respect to premises which are destined for another use can constitute this kind of abuse.34 Finally, the usufructuary is bound to respect the provisions of local planning laws if the property is situated in a residential or agricultural zone. Thus, only if
33 Civ. 3, 5 Dec. 1968; D 1969 274. 34 Civ. 3, 4 June 1975; Bull. civ. III, no. 194.
326 c a s e s t u d i e s
the immovable is no longer within a residential or agricultural zone and the conversion does not affect the substance of the property (for example, if the property can easily and at low cost be restored to its former state), is B able to carry out such a conversion.
Germany
German law distinguishes between residential and agricultural leases. In the absence of a contrary agreement, the tenant of residential property (Wohnraummiete) may only use the property for residential purposes. B will therefore not be entitled to convert the dwelling house into a warehouse. It makes no difference that such alteration may enhance the value of the property or can be reversed at low cost. Any changes in the character of the neighbourhood will only affect the additional requirements of public zoning law.
Under an agricultural lease (Landpachtvertrag), the tenant is in principle allowed to change the manner of exploitation of the property without the landowner’s consent unless the alteration is so substantial that it affects the manner in which the owner may exploit his/her property upon termination of the lease (Civil Code, § 590(2)). Moreover, the tenant is only entitled to abandon the agricultural purpose (landwirtschaftliche Bestimmung) of the property where this is authorised by the landlord (Civil Code § 590(1)). Consequently, B will not be allowed to convert the farm (agricultural purpose) into a hotel (commercial purpose) unless the landlord allows him/her to do so.
Under a usufruct, the usufructuary (B) is not entitled to transform or substantially alter the property (Civil Code, § 1037(1)). Converting a dwelling-house into a warehouse or a farm into a hotel will certainly be regarded as a transformation or substantial alteration of the property and thus cannot be achieved without the owner’s prior consent. The mere fact that the alteration enhances the value of the property will not make any difference.35 Neither will it be permissible to argue that the warehouse or the hotel can be reverted to a house or a farm at low cost.
Changing circumstances (such as the neighbourhood losing its residential character or the farm being incorporated into a town) can only be taken into account if they are so radical as to amount to an interference
35 Petzold, Mu¬nchener Kommentar, § 1037, no. 2.
c a s e 7 : c o n v e r s i o n o f i n t e r e s t i n t h e l a n d |
327 |
with the business foundation (Sto¬rung der Gescha¬ftsgrundlage) of the entire agreement (Civil Code, § 313).36
Under a hereditary building lease, the parties are free to stipulate that the holder may only alter the physical condition or the purpose of the structure with the consent of the landowner. Contractual arrangements of this kind are very common in practice.37 Accordingly, B will not be entitled to make the conversions referred to in this Case without the consent of A.
Greece
Article 1, § 3 of Law 1703/1987 on residential leases stipulates that the lease of residential property is regulated by the terms of the contract and the ordinary provisions on leases (Civil Code, arts. 574–618), unless otherwise stated in these provisions. Although a tenant is not liable for deterioration of or alterations to the property consistent with its agreed use (Civil Code, art. 592), the landlord is entitled to give notice of immediate termination of the lease if the tenant uses the leased property in a manner inconsistent with the agreement (Civil Code, art. 594). The tenant is furthermore bound to restore the leased property to the condition he/she received it on taking possession (art. 599, § 1). Consequently, unless the landlord agrees to the conversion of the house into a warehouse, the tenant will not be entitled to effect such conversion.
In the case of the lease of agricultural property (a farm), the agricultural tenant (tenant farmer) is bound to exploit the leased land with care and in conformity with its intended purpose. He/she has to maintain the property in a good condition so as to assure its continued productivity.38 Furthermore, the tenant is expressly forbidden from changing the existing method of exploitation in a way that may substantially influence the property’s exploitation on the expiry of the lease (Civil Code, art. 623). He/she may therefore not convert the farmhouse into a hotel.
36Interference with business foundations or Sto¬rung der Gescha¬ftsgrundlage is a general concept – primarily, but not exclusively applicable to the law of obligations – intended to take account of (radically) changing circumstances. Though Sto¬rung der Gescha¬ftsgrundlage is similar, in some regards to the clausula rebus sic stantibus, it is commonly regarded as a concept of its own.
37See e.g. the standard form contracts, in von Oefele and Winkler, Handbuch, pp. 487 ff.
38Georgiadou, in Georgiades and Stathopoulos, GCC, Collective Analysis, art. 623 (386–7).
328 c a s e s t u d i e s
It does not make a difference if the alteration enhances the value of the property.39 The conversion of a farm into a hotel cannot be regarded as an improvement which increases the agricultural productivity of the property (Civil Code, art. 622). If the neighbourhood loses its residential character or the farm becomes incorporated within the city limits, it can be regarded as an unforeseeable change of circumstances which can justify the dissolution of the lease by a court (Civil Code, art. 388) on the basis that the economic purpose of the lease can no longer be pursued.
Under a usufruct, the usufructuary is bound to preserve the intended purpose of the property and to use the property in accordance with the rules of orderly exploitation. He/she is not allowed to introduce substantial changes to the property (Civil Code, art. 1148). Converting a house into a warehouse or a farm into a hotel will not only be against the intended purpose of the property and represent non-orderly exploitation of the property but will also amount to a substantial change in the nature of the property.
Since the rights of habitation and limited personal servitudes restrict the holder to a specific use of the property, the holder of the right will not be entitled to change the purpose of the property. The rules governing usufruct are applicable by analogy to the right of habitation and limited personal servitudes (Civil Code, arts. 1187 and 1189 respectively).
The strict obligations on the usufructuary to preserve the substance and economic purpose of the property (Civil Code, arts. 1142 and 1148) do not allow for an exception in the case where the value of the property is enhanced by the change or where the neighbourhood of the property changes. Since the usufructuary has to restore the property upon expiry of the usufruct (Civil Code, art. 1161), the change may not be considered substantial if the substance and intended purpose of the property can be restored at low cost. The same applies to the holders of the right of habitation and limited personal servitudes (Civil Code, arts. 1187 and 1191).
Hungary
The tenant under an ordinary lease or an income-producing lease and the borrower in terms of a loan for use must use the property only in a proper
39Filios, Obligations, pp. 235, 236, 328; Rapsomanikis, in Georgiades and Stathopoulos, GCC, Collective Analysis, art. 594, no. 3 (318); Georgiadou, ibid. art. 623, no. 4 (387).
c a s e 7 : c o n v e r s i o n o f i n t e r e s t i n t h e l a n d |
329 |
manner and according to its function (Civil Code, §§ 425(1), 453 and 457 (2)(b); Law on Agricultural Land, § 18(a)). Accordingly, the tenant and borrower cannot alter the major characteristics of the property, nor can they reconstruct the property irreversibly. Consequently, the tenant and borrower are not entitled to convert the property. It is irrelevant whether the alteration enhances the value of the property, the neighbourhood loses its residential character or the farm becomes incorporated within the city limits.
As regards usufruct and the right of use, the requirement of proper management does not mean that the usufructuary and the usuary must adhere rigidly to the situation that existed prior to the creation of the rights in rem. On the contrary, the requirement of proper management must be determined on the basis of the general function of the property and any changes in circumstances.40 It will be lawful to improve the use of farmland or to enhance the comfort of residential property, but it is prohibited to effect changes that reduce the value or the utility of the property.41 A purported change cannot alter the fundamental function of the property. Residential property can thus not be converted into a business centre or factory, a house cannot be converted into a warehouse nor a farm into a hotel. The fact that the alteration enhances the value of the property makes a difference only if it does not alter the fundamental function of the property. The fact that the neighbourhood loses its residential character or that a farm is incorporated within the city limits is relevant only from the point of view of the public authority which must give permission to build.
The fact that the warehouse or the hotel can be changed back to a house or a farm at a low cost is relevant. If the initial arrangement can be restored at a trivial or relatively negligible cost, the alteration will not be contrary to the requirement of proper use and proper management as the property can be restored before it is returned to the owner.
Unfortunately, the law governing these aspects of usufruct and the right to use is not entirely settled since they are closely intertwined with family relations and inheritance matters. The object of these rights are normally residential properties and smaller farmlands which are meant to satisfy the personal needs of the holder and which are usually
40Reasoning of the ministerial proposal for the Civil Code, interpretation attached to, § 159(2).
41Gelle´rt, Commentary Civil Code, vol 1, p. 537.