B’s time-limited rights cannot be attached in execution proceedings. The lease may be included in the bankruptcy estate where such inclusion, in the opinion of the Bankruptcy Court, is deemed to be reasonably justified by the financial interest of the estate’s creditors (cf. Law on Bankruptcy, ss. 37 ff.).

The tenant may assign a lease of buildings for non-housing purposes on identical terms to a sub-tenant carrying on the same kind of business unless the landlord objects to such assignment on substantial grounds, such as the proposed assignee’s financial position or knowledge of the relevant line of business (Law on Commercial Premises Rent, s. 55). This provision can and will often be deviated from in order to deprive the tenant of this right. This right may be donated under the same circumstances. Mortgaging the right itself is not possible, but under s. 47a(2) of the Law on Registration of Property it is possible to pledge, for example, livestock and crops. The tenant is not entitled to sub-let the buildings unless otherwise agreed.

B’s time-limited rights cannot be attached in execution proceedings. The lease can, as a synallagmatic agreement, be adopted by the bankruptcy estate if it is found to be profitable (Law on Bankruptcy, s. 55). This is often the case where B is entitled to transfer his/her right to another tenant. If the contract is not adopted by the estate, it may be repudiated by A.

England

Again, regard must be had to the nature of the lease and to its terms. Public sector residential tenancies may, as a general principle, not be assigned (Housing Act 1985, s. 95). In principle, private lettings are freely assignable though, in practice, landlords impose covenants to either preclude any alienation in whole or in part absolutely, or else make such alienation subject to permission. By statute, those qualified covenants (namely, subject to permission) are subject to a reasonableness requirement (Landlord and Tenant Act 1927, s. 19(1)(a) and Landlord and Tenant Act 1988, s. 19).83 In English law, B is only permitted to assign (or sub-let or mortgage) his/her own property, so that the reversion is unaffected by his/her dealings with the lease. Any sub-lease

83The statute does not operate in absolute covenants against assignment (see Bocaro SA v.

S. and M. Hotels Ltd. [1980] 1 WLR 17).

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

granted is carved out of B’s lease, and will therefore be for a shorter term (if it is for the equivalent term, it counts as an out-and-out assignment).

B’s lease is property, and can therefore be subjected to any procedure that any other property may be subjected to. It ought to be added, however, that creditors’ acquisition of interests in a lease, or the bankruptcy or insolvency of a tenant, are frequently events which trigger the operation of forfeiture, so that the landlord acquires a right to re-entry on that event. There are now restraints on the circumstances in which a landlord may exercise the right to forfeit: as a rule, leave of the court is required in order to re-take the lease.84 Aside from this qualification, however, leases form part of the bankrupt tenant’s estate and may be disclaimed or sold by the trustee in bankruptcy or other relevant entity.85

France

Under the general law of lease, the tenant only acquires a personal right in the leased property. Consequently, he/she may not sell, donate or burden the lease with a mortgage. However, if the lease does not turn on the identity of the tenant, the tenant may sub-let or even assign the lease to another person unless he/she has been forbidden wholly or partially to exercise that faculty (Civil Code, art. 1717). The tenant can also allow the land to be used by a partnership or grant a loan for use of the leased property.

B’s time-limited right can neither be attached in execution proceedings against B, nor be included in B’s insolvency or bankruptcy assets.

Since a residential lease typically turns on the identity of the tenant, the Law of 1989 forbids sub-letting or assignment of the lease without the written consent of the landlord. Although this Law does not forbid a loan for use of the dwelling, this may be forbidden in the contract. By contrast, the contract cannot forbid the tenant from lodging people who are part of his/her close family in the residential premises (CEDH, art. 8–1).

B’s time-limited right can neither be attached in execution proceedings against B nor be included in B’s insolvency or bankruptcy assets.

84See the amendments to the Law on Insolvency 1986 and the Rules made by the Law on Enterprise 2002.

85See Berry, Bailey and Shaw Miller, Personal Insolvency, ch. 25 for the general procedures in respect of natural persons. See Bailey, Groves and Smith, Corporate Insolvency, paras. 15–32 ff. for the detailed rules in relation to legal persons.

The third party then assumes all rights and obligations arising out of the lease (Vertragsu¬bernahme).

Since a lease merely creates contractual rights, B cannot mortgage his/ her right(s). In theory, a pledge (Verpfa¬ndung) (Civil Code, § 1273) or a security assignment (Sicherungsabtretung) (Civil Code, § 398) of certain rights flowing from the lease will be possible. The inefficiency of practical execution against these rights renders them unacceptable collateral in practice.

As a general rule, the tenant may not sub-let either residential or agricultural property without the consent of the landlord (Civil Code, §§ 540 and 589). Special rules relating to residential leases prevent the landlord from withholding his/her approval to a sub-lease of parts of the property if the tenant can show a justifiable interest (berechtigtes Interesse) in sub-leasing these parts (Civil Code, § 553). A sub-lease does not create a contractual relationship between the original landlord and the sub-tenant. However, a sub-tenant’s right to the property is dependent on and determined by the title of the original tenant. Consequently, the original landlord can eject the sub-tenant through termination of the original lease.

Because of its highly personal character, a personal servitude

(Nie§brauch, Wohnungsrecht, beschra¬nkte perso¬nliche Dienstbarkeit) cannot be transferred from the holder to a third person (Civil Code, §§ 1059, sent. 1 and 1092(1), sent. 1).90 Although these rights as such are inalienable, the entitlements under a personal servitude can, however, be

¬

alienated (Uberlassung der Ausu¬bung) (Civil Code, §§ 1059, sent 2 and 1092(1), sent 2).91 The contractual right gained by the third party expires when the usufruct expires.92 The right to a dwelling (Wohnungsrecht) is so personal that it cannot be transferred (Civil Code, § 1093). Civil Code, § 1059, sent. 1 is not applicable to the right to a dwelling.

Since personal servitudes are inalienable, they cannot be mortgaged.93

90There is a very limited exception regarding a usufruct held by a juristic person (cf. Civil Code, § 1059a ff.).

91With regard to usufruct, the default rule is that the entitlements of the usufruct can be alienated (Civil Code, § 1059 sent 2). The usufructuary’s right to alienate the entitlements can be excluded by agreement between the parties. Conversely, the holder of a limited personal servitude (beschra¬nkte perso¬nliche Dienstbarkeit) or a right of habitation (Wohnungsrecht) is not entitled to alienate the entitlements unless otherwise agreed.

92See Palandt, Bu¬rgerlichen Gesetzbuch, § 1059, no. 3. 93 Ibid., § 1092, no. 6.

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

The holder of a usufruct is not entitled to create a separate real right, for example, to grant a right of habitation to a third party. The usufructuary may, however, lease out the property since a lease only creates contractual rights under German law. The holder of a right of habitation (Wohnungsrecht) is in principle only allowed to use the property for himself/herself and his/her family. He/she may only let the property to someone else with the consent of the nude owner.

The main difference between the permanent right of habitation (Dauerwohnrecht) and the Wohnungsrecht is that the Dauerwohnrecht is alienable and transmissible (Law on Apartment Ownership, § 33(1)). As a holder of a Dauerwohnrecht, B will thus be able to sell or donate it, usually only with the approval of the owner as stipulated in the constitutive agreement (Law on Apartment Ownership, § 35).

The Dauerwohnrecht cannot be mortgaged.94

The holder of a Dauerwohnrecht can lease the property to someone else with the lease expiring on termination of the Dauerwohnrecht (Law on Apartment Ownership, § 37(1)). However, if the landowner (A) makes use of his/her right to claim retransfer of the right (Heimfall) (see Case 8), he is substituted for B in the lease with the third party (Law on Apartment Ownership, § 37(2)).

In addition, the holder of a Dauerwohnrecht is entitled to create a usufruct as a sub-interest.95

A hereditary building lease (Erbbaurecht) approaches full ownership in the sense that it can be alienated and mortgaged (Regulations on Hereditary Building Rights, § 1(1)). Moreover, the holder is entitled to create all kinds of separate limited rights as sub-interests. Such interests are dependent on the title of the original holder. The Regulations on Hereditary Building Rights (§ 5) allow parties to stipulate in the constitutive agreement that the holder may only transfer or burden his/her right with the approval of the landowner.

As a personal right, a lease as such cannot be attached in execution. However, the rights flowing from the lease (for example, claims for payment for improvements effected by the tenant) may be attached.

While a usufructuary interest can be attached in execution proceedings against the holder,96 the interests inherent in the other personal servitudes (for example, a right of habitation) cannot be attached unless the holder

(B) has obtained permission to alienate the entitlements of the servitude

94 See ibid., § 33, WEG, no. 1. 95 Ibid.

96 See Palandt, Bu¬rgerlichen Gesetzbuch, § 1059, no. 5.