Germany

If A does not want to engage in the construction himself, it must be financed by the developer (B). In practice, B will only receive a loan from a bank if he/she can provide sufficient collateral. Thus it is essential for B to be granted a real right which can be mortgaged as security for the loan. Any time-limited right that cannot be mortgaged35 will not provide a proper basis for financing the development. Therefore, B can either be granted a hereditary building lease (Erbbaurecht), as discussed in Case 1, or full ownership of the land with A reserving the option to repurchase the land and the structure.

The Regulations on Hereditary Building Rights (ErbbaurechteRangstellenverordnung (ErbbRRVO)) were introduced in 1919 in order to promote the supply of affordable housing (particularly in urban areas) and to combat speculative land transactions.36 Thus the institution of the hereditary building right (Erbbaurecht) has always been a widely used mechanism in housing development, in particular by public institutions. However, the hereditary building right (Erbbaurecht) is also very flexible and thus suitable for a large number of other purposes as well. It is also used for commercial land development in the form of industrial buildings or sports facilities.

Alternatively, B will have to acquire full ownership of the land. A can be granted a right to repurchase the land (including the structure to be built by B) after a certain period of time (Wiederkaufsrecht). A’s contractual right to repurchase the land can be made enforceable against third parties by registering a priority notice (Vormerkung)37 in the Land Register (Grundbuch) (Civil Code, § 883). Such mechanisms are commonly used in sale-and-lease-back transactions regarding commercial property where the seller wants to continue to use the property or to manage it in his/her own name. However, according to the facts of this question, the owner does not want to manage the structure himself. Therefore, it will be much more common (and acceptable to the financing institutions) to create an Erbbaurecht.

35See Case 9.

36For a discussion of the historical background, see von Oefele and Winkler, Handbuch, no. 4.48.

37A priority notice (Vormerkung) is an entry in the Land Register to protect a claim to a registrable right (in this case, ownership) in the land. Any disposition that conflicts with such notice is void vis-a`-vis the person in whose favour the notice has been registered.

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Greece

The Greek Law of Obligations (Civil Code, art. 361) allows contracting parties the freedom to define the content of their contractual relationships and thus to conclude contracts, which, if necessary, deviate from the most frequently encountered contracts regulated in the Special Part of the Law of Obligations (Civil Code, arts. 496–945).38 This freedom has resulted in a great variety of atypical and mixed contracts. Accordingly, A may create an atypical mixed contract with B, with the content desired by the parties: B undertaking to construct the building and also to manage the structure once completed in return for an undertaking by A to pay the remuneration agreed upon. This mechanism – a combination of a contract for work and a management contract – will allow A to retain full ownership over the land and the structure developed on it.

The most commonly used mechanism in Greek practice is, however, the contract by which the contractor undertakes to use his/her own materials to construct a building, usually a block of ßats, on the vacant plot of land and the landowner in return undertakes to transfer the ownership of the majority of the units or apartments, along with the proportionate percentage of co-ownership in the land, to the contractor or to third persons indicated by the latter, while the landowner retains the rest of the units along with the proportionate co-ownership of the land. In this contract, the parties submit themselves to the provisions of Civil Code, arts. 1002 and 1117 and Law 3741/1929, which regulate apartment ownership in Greece.39 The obligations of all owners are regulated in the model rules of the block of flats (Law 3741/1929, art. 4, § 1), which are contained in a notarial deed which is recorded in the Conveyance Records (Law 3741/1929, art. 13, § 1), thus binding successors-in-title. This form of contract is used when the landowner cannot afford to finance the construction of the building. It is a mixed contract combining a contract for work (Civil Code, arts. 681 ff.) with a contract of sale as far as the results of the work are concerned (Civil Code, arts. 520 and 562).40

38Georgiades, New Contractual Forms, pp. 7, 8.

39Law 3741/1929 remained in force after the introduction of the Greek Civil Code according to art. 54 of the Introductory Law of the Greek Civil Code. For an analysis, see, among others, Georgiades, Property, vol. 1, pp. 659 ff.; Karasis, in Georgiades and Stathopoulos, GCC, Collective Analysis, art. 1117.

40Filios, Obligations, p. 453.

Hungary

Hungarian law follows the principle of aediÞcium solo cedit, with some exceptions relating to the situation where a new structure is built on the land of somebody else. The owner of the land is, in principle, also the owner of the structure. The builder may, however, be the owner of the structure if the law or the contract concluded with the proprietor of the land provides so. The owner of the land has a right of preemption regarding the structure and vice versa, that is, the proprietor of the structure has a right of pre-emption regarding the land (Civil Code, § 97).

If the builder acquires ownership over the structure on account of an agreement or a court order, he/she has a right in rem to use the land as long as the structure exists. The builder is entitled to use the land and to collect its fruits (for example, by leasing out the building), and is obliged to maintain the property. If ownership over the structure is subsequently acquired via inheritance or transfer of title, the new proprietor of the structure is entitled to use the land under the same conditions (Civil Code, §§ 155–6).

The right to use the land is a limited right in rem, which is not restricted in time. The right does, however, cease to exist once the proprietor of the structure acquires title over the land or vice versa, that is, the owner of the land acquires title over the structure. Accordingly, in the above scenario, the owner of the land has to arrange for the future transfer of the ownership of the structure. The following contract law arrangements are suitable for that purpose: sale with retention of title, right of pre-emption, option, instalment sale and sale combined with lease.

The builder may sell the structure to the owner of the land with retention of title. The seller will retain title over the property in the contract of sale until the last instalment on the price is paid. While the title is retained, the buyer cannot alienate or encumber the property. This provision does not affect the rights of third persons who acquire the property in good faith and for value. However, it is to be emphasised that sale with retention of title can be entered into the Land Register according to the Law on Land Registration. The buyer of immovable property who enters into possession of the property can collect its fruits and must bear the cost of maintenance and the risk of damage (Civil Code, § 368).

The builder may establish a right of pre-emption over the structure for the benefit of the landowner. This deed constituting the right of

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pre-emption must be in writing.41 Once registered in the Land Register, it has an erga omnes effect and will prevail over rights related to the property subsequently acquired. The right of pre-emption is not transferable or transmissible and thus cannot be transferred or inherited (Civil Code, § 373).

The owner of the building may grant a written option42 to the land owner that entitles him/her to purchase the property by unilateral declaration. An option is not really suitable for the purpose stated in the present case since it can be established for at most five years (Civil Code, § 375).

The owner of the land may, at the outset, when agreeing with the builder of the structure that the latter can build the structure on the land, simultaneously conclude an instalment sale contract with the builder through which the owner of the land is able to buy the structure through an instalment system (Civil Code, § 376). Accordingly, the latter will become the owner of the structure at the end of the requisite period.

Finally, the owner of the land may conclude a building contract with the builder under which he/she will acquire title of the building. Moreover, the owner may combine this contract with a lease contract of the structure, which will allow the builder to use the structure for a fixed term. Instead of a lease contract, the owner of the land may establish a usufruct or a right of use on the structure for the benefit of the builder. This construction is not commonly used in practice as usufruct and right of use are usually closely linked to matters of succession within a family.

Italy

The most obvious option will be for A to create a hereditary building lease (superÞcie) (Civil Code, arts. 952 ff.). Art 952 provides that ‘the owner can

41In this case, should the builder envisage selling the building, he/she must first transmit the offer received to the holder of the right of pre-emption, except where such a transmission would cause extraordinary inconvenience or delay due to the residence or other circumstances of the holder of the pre-emptive right. If the latter accepts the content of the offer in a declaration addressed to the owner, the contract is concluded. If the holder of the pre-emptive right does not accept the content of the offer within a period of time that is normally applicable to the acceptance, the owner may sell the property according to the conditions of the offer or on better conditions (Civil

Code, § 373).

42The grant of an option must clearly determine at least the property concerned and the price.

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right to erect a building) and on the building (ownership or at least a real right on it) are protected, and only the nude ownership of the soil can be included in the attachment. If the building right is created for a fixed term, ownership of the soil will lead to full ownership of the soil and of the building vesting in A upon the expiry of the term.

After registration of the building lease, the land owner can only mortgage his/her reversionary nude ownership in the land. If the building lease is registered after the registration of the mortgage, the rights of the holder of the building lease on the land and on the building will be included in the assets of the nude owner on attachment of the land by his/her mortgage creditors.

Once registered, the holder of the building lease (superÞciario) receives full proprietary and possessory protection and in fact he/she is considered to be the owner of the building during the term of the building lease.

Since, in our case, there is no existing building to provide a point of reference in the absence of contractual agreements, neither the owner of the soil nor the superÞciario is bound to maintain it in good repair. For the same reason, in the absence of contractual agreements, the holder of the building lease (superÞciario) is free to choose and subsequently alter the intended economic purpose of the building. It is disputed whether a contractual provision concerning the intended economic purpose of the building is enforceable against third parties (third party transferee if the building right is transferred). There is no case law on the point.

Civil Code, art. 954 provides that the termination of the building right by expiry of the term for which it was constituted results in the extinction of real rights imposed on the building right. Lease contracts concerning the building do not continue beyond the year in which the term of the building lease expires.

In principle, the holder of the building lease may freely transfer his/ her right. He/she can also mortgage it. Mortgages granted over a building lease are extinguished upon reversion of such lease to the owner of the soil when the term of the building lease is completed. However, if the holder/owner of the building lease is entitled to remuneration, such remuneration will be burdened by mortgages registered against the building lease. If, on account of other causes, the rights of the owner of the soil and of the holder of the building lease are merged, the mortgages encumbering both rights will continue to affect each of these rights separately (Civil Code, art. 2816).