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Lifetime habitation is a strictly personal right, which is neither transferable nor transmissible on death of the holder. It may not be mortgaged (Law on Management of Real Property, art. 65). Because of the close link with the person of the holder, lifetime habitation does not form part of the executable or bankruptcy assets of B.

A hereditary land lease (perpetual usufruct, emphyteusis) is transferable (by, for example, sale, donation, exchange or contribution in kind to a company) and transmissible on death. It may be mortgaged (Law on Management of Real Property, art. 65, § 3) and encumbered by servitudes, usufruct or contractual rights without the consent of the landowner (Civil Code, art. 233). A hereditary land lease is a very valuable right, with a market value often as high as the market value of ownership. It is therefore an important asset in B’s estate which can be attached and sold in both execution and bankruptcy proceedings. In both cases, the provisions concerning attachment and sale of immovable property are applied (Code of Civil Procedure, art. 1004).121

Portugal

Under a lease, the tenant is not entitled to grant anyone the total or partial use of the leased property or to cede his/her rights gratuitously or for consideration by sub-letting the property or lending it out for use except if permitted by the law or authorised by the landlord (Civil Code, arts. 1038 ff.).122 When permitted or authorised, the tenant has a duty to inform the landlord within fifteen days that he/she has granted the use of the property to another (Civil Code, art. 1038g). Notification, but not in a specific form, is required. Failure to notify entitles the landlord to terminate the contract.

The rent under a sub-lease may not be more than 20 per cent above the principal rent (Civil Code, art. 1062). If a higher rent is contracted, the principal landlord may cancel the lease. The sub-lease will terminate with the expiry of the principal lease.

The commercial or industrial lease is considered an asset of the enterprise. As such it can be attached in execution proceedings and can also form part of the insolvency assets of the debtor.

121See also Case 3.

122Law on Agricultural Leases, arts. 13 and 21e and the Law on Forest Leases, arts. 23 and 17e.

The usufructuary is entitled to transfer his/her right in terms of the usufruct indefinitely or for a fixed term to a third party, subject to restrictions imposed by his/her title and the law. He/she will remain liable for damages caused to the property by the transferee (Civil Code, art. 1444). According to the general principle, nemo plus iuris in alium transferre potest quam ipse habet, the usufructuary is not allowed to transfer more rights than he/she has. Consequently, he/she is unable to transfer his/her right or create servitudes or burdens which endure for longer than his/her usufruct (Civil Code, art. 1460 no 1). The rights of any third party will therefore expire along with expiry of the usufruct.

The usufructuary is entitled to burden his/her usufructuary interest with a mortgage which will also be extinguished on termination of the usufruct. However, when the usufruct is terminated by renunciation, acquisition of ownership of the property by the usufructuary or assignation of the rights of the usufructuary to the owner, the mortgage remains effective until the usufruct expires for another reason (Civil Code, art. 699).

The usufructuary is entitled to create a sub-interest with regard to his/ her usufruct in the form of, for example, a lease or a loan (Civil Code, art. 1444). However, the usufructuary cannot burden the property for a term exceeding that of the usufruct. Hence the lease (Civil Code, art. 1051b) or the loan (Civil Code, art. 1130 no 1) will normally expire when the usufruct expires. However, the nude owner may only demand possession of the leased property or the property on loan six months after expiry of the usufruct in the case of urban property and at the end of the harvesting season in the case of agricultural property (Civil Code, art. 1053). In two exceptional cases the sub-interests will not expire together with the usufruct, namely where the usufructuary acquires the nude ownership of the property or where the usufructuary renounces the usufruct. In the latter case, the sub-interest will remain until the usufruct expires for another reason or on the term initially agreed (Civil Code, art. 1052 read with art. 1130, no. 2).

Since a usufruct is an economic asset, it can be attached in execution proceedings against B and can be included in his/her insolvency assets.123 The right of use entitles the usuary to use the property and to take its fruits to the extent necessary to meet personal and family needs (Civil Code, art. 1484, no. 1). Owing to its close link with the person of the

123Decision of the Court of Appeal of Lisbon of 10.03.1995 [Process 0007481] and Decision of the Appeal of Porto of 22.01.2001 [Process 0051482], available at www.dgsi.pt.

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usuary (intuitus personae), the usuary cannot sell, donate or create a mortgage or a further right in respect of his/her right of use (Civil Code, art. 1488). Similarly, B’s right of use cannot be attached in execution proceedings and cannot be included in B’s insolvency assets.124 The same applies to a right of habitation.

Under a hereditary building lease (superÞcies), B is entitled to sell or donate his/her time-limited right. The right of superÞcies is transmissible both inter vivos or mortis causa (Civil Code, art. 1534). The owner of the soil has a right of pre-emption when the right of superÞcies is offered for sale (Civil Code, art. 1535). The right of superÞcies may also be mortgaged (Civil Code, art. 688, no. 1 C) or burdened with a sub-interest like a lease. The expiry of the superÞcies will cause the extinction of the mortgage or the sub-interest (Civil Code, art. 1539), according to the principle resoluto jure dantis resolvitur jus accipientis.

If a building lease granted for a fixed term expires for any reason before the term ends, real rights created during the course of the superÞcies remain effective. For example, if a mortgage was created over a building lease with the right set to expire in 2015 and that right actually expired in 2010 (for example, because the holder acquired the land), the mortgage remains effective until 2015 (Civil Code, art. 1541). If, for any reason, execution proceedings have to proceed against B, only the building lease will be sold in execution.

Since the right of superÞcies has economic value, it can be attached in execution proceedings against B and can be included in his/her insolvency assets.

Scotland

Sale or donation of B’s lease will be given effect by an assignation: that is the mechanism by which an incorporeal right such as a lease is transferred. Assignation of a lease125 transfers not only the tenant’s rights but also the tenant’s obligations under the lease. It is, therefore, the transfer of the contract.126 The existing tenant is known as the assignor

124Decision of the Court of Appeal of Lisbon of 22.06.89 [Process 0002359] and Decision of the Court of Appeal of Porto of 03.09.1999 [Process 9850162], available at www.dgsi.pt.

125See generally Rankine, Leases, ch. 9; Paton and Cameron, Landlord and Tenant, ch. 10; Gordon and Wortley, Land Law, paras. 18–28 to 18–34.

126Hugo and Simpson, ‘Lease’, pp. 324–6, note that there may be room for Scots law to recognise a transfer of only the tenant’s rights and not his obligations. This is, however, certainly not common in practice.

and the transferee as the assignee. The assignor is discharged from future liability,127 but not from liability for arrears. The assignee assumes liability for arrears and for future obligations.128 Assignation is possible if the landlord consents. Whether the tenant can assign without consent depends upon whether he/she has the power to do so. Typically, this will be addressed in the lease. If the lease is silent, then default rules apply.

At common law, there is a presumption in respect of certain types of lease that delectus personae exists, in which case the lease cannot be assigned without the landlord’s consent.129 When the doctrine of delectus personae applies, it is presumed that the landlord deliberately chose the tenant for his/her personal qualities such as his/her financial standing or agricultural skills.130 Delectus personae applies to the majority of leases, namely all rural leases, furnished urban leases, sporting leases and mineral leases. It is not presumed to exist in respect of unfurnished urban subjects and rural leases of extraordinary duration (the distinc-

tion between usual and extraordinary length is probably drawn at twenty-one years).131

Statutory regimes augment this position. In respect of residential tenancies, it is an implied term of every assured tenancy that the tenant shall not, except with the consent of the landlord, assign the tenancy in whole or in part.132 B can therefore not assign the tenancy in implement of a sale or donation if it is an assured tenancy or a short assured tenancy unless the landlord consents. There are also statutory rules regarding agricultural tenancies. A short limited duration tenancy may not be assigned.133 A limited duration tenancy may be assigned, provided the landlord consents. There is a procedure which the tenant must go through in order to obtain consent (involving serving written notice on the landlord giving details of the proposed assignee and the terms of the assignation). The landlord may withhold consent if there are reasonable grounds for doing so (for example, where he/she is not satisfied

127Lord Elphinstone v. Monkland Iron and Coal Co. Ltd. (1886) 13 R (HL) 98, 102; Rankine, Leases, pp. 193–4. This was a marked change from the previous law, as Rankine notes.

128Rankine, Leases, pp. 194–5; Paton and Cameron, Landlord and Tenant, pp. 162–4.

129The doctrine applies even where the tenant is a body corporate: Scottish Ministers v.

Trustees of the Drummond Trust 2001 SLT 665 (OH), para. 15.

130Rankine, Leases, pp. 172–6; Paton and Cameron, Landlord and Tenant, p. 149.

131Paton and Cameron, Landlord and Tenant, p. 151. 132 H(S)A 88, s. 23.

133H(S)A 03, s. 6(1). Given the contrast with s. 10A AH(S)A 91, this seems to be the case even where the landlord consents.

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that the proposed assignee will be able to pay the rent).134 The procedure in respect of a 1991 Act tenancy is the same as for a limited duration tenancy but it may only be assigned to a limited class of persons, namely those who will be entitled to succeed to the tenant’s estate in the event that he/she dies intestate. This category includes children, parents, spouse and other relatives.135 This is a mandatory rule and provision to the contrary in the lease is void.136

Land can only be mortgaged by means of a standard security.137 A standard security can only be granted over a right which is capable of being recorded in the Register of Sasines or registered in the Land Register. A security can therefore only be created over a registrable lease. In the examples being discussed, a standard security can therefore only be granted over a limited duration tenancy or a 1991 Act tenancy. The creditor will carefully examine the provisions of the lease concerning assignation as these will restrict what he/she can do if he/she enforces the security.

A tenant may also, in certain circumstances, create a separate limited right by sub-letting the subjects.138 Unlike in an assignation, where he/she sub-lets, the tenant remains contractually bound to the landlord but enters into a separate contract of lease with the sub-tenant. (The original lease is from then on referred to as the head-lease and the tenant sometimes as the mid-tenant.) The head-landlord has no contractual right against the sub-tenant (unless one is specifically provided for in the sub-lease, which will be unusual). The circumstances in which this is permitted at common law mirror those regarding assignation. A prohibition in the lease of sub-letting will not, however, encompass assignation, and vice versa: each must be separately provided for.

Again, there is a statutory overlay. A tenant of a short limited duration tenancy may not sub-let139 and a tenant of a limited duration tenancy

may sub-let only on such basis as the lease expressly permits.140 The position in respect of the 1991 Act tenancies is unclear.141

134AH(S)A 03, s. 7.

135AH(S)A 91, s. 10A. Succession (Scotland) Act 1964, s. 2 lists those entitled to inherit.

136AH(S)A 91, s. 10A(5). 137 CFR(S)A 70, s. 9.

138See, generally, Rankine, Leases, ch. 9; Paton and Cameron, Landlord and Tenant, ch. 10; McAllister, Leases, ch. 6; Gordon and Wortley, Land Law, paras. 18–35 to 18–39.

139AH(S)A 03, s. 6. 140 AH(S)A 03, s. 7(7).

141The statutory provision which purports to cover sub-letting does not do so: AH(S)A 91, s. 10A.

In the case of assignation, the assignee acquires B’s right: no more, no less (assignatus utitur jure auctoris). A security is a limited real right in B’s right and is therefore only as good as the parent right. Similarly, as a matter of property law, B cannot confer on a sub-tenant a greater right than he himself/herself has. He/she can, of course, do so as a matter of contract law, but this will leave him/her open to remedies for breach if the head-landlord (A) takes steps to enforce his/her right against B in a manner which prevents B from fulfilling his/her obligations to the subtenant. Granting an incompatible sub-lease will probably also place B in breach of the head-lease. There is a statutory derogation from the general rule for assured tenancies: if an assured tenant sub-lets, termination of his/her lease will not bring the sub-tenant’s right to an end. Instead, the sub-tenant becomes the head-landlord’s tenant.142

B’s right as tenant is one of his/her assets and can therefore in principle be attached by B’s creditors by way of diligence. Two types of diligence are available against land. One is inhibition, which prohibits the party inhibited from any future voluntary act conveying the property or otherwise granting a right in property over which the inhibition has effect.143 A transfer in breach of this prohibition may be reduced by the inhibiting creditor. Inhibition is, however, not an ‘attachment’ as it does not give the creditor a real right in the property. It merely preserves the existing position. Adjudication is the diligence by which B’s creditors can actually attach the lease.144 Both of these diligences only affect leases which are assignable. However, it is only an express prohibition of assignation which renders a lease unadjudgeable: default rules of lease law do not do so, as the doctrine of delectus personae only applies to voluntary and not to judicial assignations.145 If the lease expressly prohibits assignation or provides that it cannot be assigned without consent, it cannot be adjudged and an inhibition will also be of no effect in respect of it. There are doubts about the treatment of a lease which qualifies the landlord’s ability to refuse consent, typically by providing that it may not unreasonably be withheld.146 If the legislation providing for land attachment is brought into force, these doubts will be removed and all leases which provide that they cannot be assigned

142 H(S)A 88, s. 28. 143 Bankruptcy and Diligence (Scotland) Act 2006, s. 160.

144The effects are detailed in the response to Case 3.

145Paton and Cameron, Landlord and Tenant, p. 150; Stair, Institutions, II. ix. 6; Bell,

Principles, s. 1216.

146See Gretton, Inhibition and Adjudication, pp. 73–4 and Maher and Cusine, Diligence, paras. 9.23 and 9.42.

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without the landlord’s consent will be attachable, regardless of whether it is a condition that this consent should not be unreasonably withheld.147 It is unclear how the rules on diligence interact with the rules regarding transfer of statutorily protected tenancies.

In the event that B becomes insolvent, the lease will form part of his/her insolvent estate. Assuming B to be an individual, the relevant insolvency regime is sequestration. The bankrupt’s estate vests in the trustee in sequestration and that includes leases. As with other contracts of the bankrupt, the trustee has the choice whether to ‘adopt’ the lease. Only if the trustee does so (which will be very unusual),148 does he/she become personally liable for performance of the tenant’s obligations.149 If the trustee does not ‘adopt’ the lease, the landlord ranks in the sequestration as an ordinary creditor. If the lease contains an express exclusion of assignees, the landlord has an option to refuse to consent to a transfer to the trustee or his/her nominee.150 As with diligence, an implied exclusion, resting on delectus personae, does not affect the position.

A liferenter cannot assign his/her right to another with the effect that the assignee becomes the liferenter instead of the assignor. The real right cannot be transferred.151 However, a liferenter can assign his/her interest so as to allow the assignee the enjoyment of the subjects of the liferent, unless the constitutive deed prohibits this.152 The assignee does not obtain title to the land in place of the liferenter. His/her entitlement endures only for the liferenter’s life (or for whatever other shorter period the liferent endures). An improper liferenter may be assigned. The exception is an alimentary liferent (one created to provide for the maintenance of the beneficiary and to protect him/her against his/her own possible improvidence),153 although even this can probably be assigned to the extent to which it exceeds a reasonable allowance.154

A proper liferent (as a real right in land) may be the subject of a standard security. A standard security cannot be granted over an improper liferent, for that is not a real right in land. Such a right can,

147Bankruptcy and Diligence (Scotland) Act 2006, s. 82.

148Paton and Cameron, Landlord and Tenant, p. 196.

149Cuthill v. Jeffrey 21 Nov 1818 FC. 150 Elliot v. Duke of Buccleuch (1747) Mor 10 329.

151Stair, Institutions, II. vi. 7; Erskine, Institute, II. ix. 41; KerÕs Trs. v. Justice (1868) 6 M 627 (IH) 631; ChaplinÕs Trs. v. Hoile (1890) 18 R 27 (IH) 33.

152ChaplinÕs Trs. v. Hoile (1890) 18 R 27 (IH) 33, under reference to Pothier, Traite« du contrat de vente.

153Gordon and Wortley, Land Law, para. 17–04.

154ClaremontÕs Trs. v. Claremont (1896) 4 SLT 144 (OH); cf. Cuthbert v. CuthbertÕs Trs. 1908 SC 967 (IH).