The Netherlands

This can be achieved by creating a hereditary land lease (emphytheusis) (Burgerlijk Wetboek, art. 5:85). Taking into account the financial crisis, emphytheusis has gained renewed interest. This can also be achieved by creating a usufruct, which, however, seems to be less frequently used than emphytheusis.

A hereditary building right (superÞcies) (Burgerlijk Wetboek, art. 5:101) can also be employed. It is, for instance, used in the case of a sports club that owns its club house, but is not the owner of the grounds.

Poland

In practice, A will simply conclude a contract with a building contractor to carry out the work necessary for the construction of the building. If A does not want to manage the structure, he/she can hire a licensed real estate manager for this purpose (Law on Management of Real Property, arts. 184–90).

Theoretically, there are other possibilities. A can grant B (the developer) an income-producing lease, which confers a title on B to apply for building permission and to begin constructing the building. If this right is entered in the Land Register, it will be effective against all subsequent purchasers of A’s land. A similar possibility will be offered by employing the contract of leasing (Civil Code, arts. 709.1 to 709.18), which can additionally contain B’s option to purchase. Again, if this right is entered in the Land Register, it will be effective against all subsequent purchasers of A’s land. However, in practice, developers are either owners of land or have a perpetual usufruct registered over the land. If not, the whole investment process usually involves close co-operation between the owner and the developer, who sometimes obtains powers of representation from the owner.

Portugal

Portuguese law accepts the principle of freedom of contract and thus allows parties to use any contract or combination of contracts to achieve their intended goal.

A may employ a hereditary building lease (superÞcies) which entitles the holder to erect a building on another’s property, perpetually or for a fixed term. The building lease will expire if the holder does not

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complete the building before the time limit set by the parties or the legal limit of ten years. Termination will occur on expiry of the fixed term. Decree-Law 257/91 of 18 July 1991 stipulates that the purpose of a contract creating a building lease may be the construction or the management of a building constructed below someone’s land. The aim of this provision is to clarify the current legal regime of building leases by expressly including in its scope the construction of an underground car park. This solution does not, however, properly suit A’s needs. B will become owner of the building and A will not retain control over the structure.

A can conclude a building contract (contrato de empreitada) with B to build a block of flats, a shopping centre, an industrial building or a football stadium. The contract must be concluded in writing according to the new regime dealing with construction activity (Decree-Law 12/2004 of 9 January, art. 29).44 The contract must contain an identification of the parties, the licences required for the construction and the property (including a copy of the building or site plan), the contract price, the date for the completion of the building and the conditions of payment. If the contract does not comply with these conditions, it is void (DecreeLaw 12/2004 of 9 January, art. 29). After completion of the block of flats, shopping centre, industrial building or football stadium, the owner (A), may conclude a lease, a management contract or a contract of services with B or with someone else to manage the property. A is the owner of the construction and he/she controls the structure.

Finally, a situation may be conceived where an enterprise, usually a construction company, takes the initiative to construct the building. These enterprises act as developers (promotores imobilia«rios) and the owner is offered to engage in a development project (for example, a tourist resort). In this situation, it is common that parties agree that the developer will be entrusted with the management of the building.

Scotland

There are no particular legal forms which A will have to use in order to achieve these goals. A may, subject to the general law, enter into any contract he/she wishes regarding the use of the property. The precise

44Some other formalities related to the construction company have to be complied with e.g. the identification of the company and the number by which it is registered (Decree-Law 12/2004, art. 24, n. 2).

structure of the transaction will depend upon the landowner’s and the counter-party’s commercial objectives. One possibility is for the landowner to grant a long lease to a developer.45 It will oblige the developer to complete the development within a particular period of time. The developer will use the lease as security to raise finances and will therefore need to obtain a real right by registration so as to be able to grant a standard security over the lease to the lender.46 In this context, 175-year leases are not unheard of: the shorter the lease, the more depreciating an asset it is and the less attractive as security to lenders. (The grant of a lease may be preceded by an initial agreement for lease which will be subject to suspensive conditions, such as that the developer obtains the necessary planning permissions. Once they are satisfied or purified, the landowner’s obligation to grant a lease to the developer is triggered.) Typically, the developer will pay the landowner a substantial premium (a one-off payment at the outset) for the grant of the lease. The developer will enter into the various contracts required to develop the site, for example, with builders, engineers and architects. Many of these are standard form documents. The developer will also enter into agreements for lease with occupational tenants (for example, retailers in the case of the shopping centre and a football club in the case of the stadium). These will most likely be concluded before the building is completed. Indeed, a lender will probably wish to see that certain key tenants are lined up before agreeing to fund the project. These agreements for lease will have to strike a balance between the tenant’s interests (for example, in ensuring that the development is completed on specification and on time to allow them to trade as envisaged) and the developer’s interests (for example, in retaining sufficient freedom to react to unforeseen problems in the construction process). The developer may well enter into a management agreement in respect of the building so that he is not troubled by day-to-day management issues, selecting new tenants and the like. The lender may insist that all of these contracts contain a ‘step-in’ clause allowing the lender to step into the developer’s shoes and complete the development if, for some reason, such as insolvency, the developer is not able to do so. Once the development is completed, the developer may well transfer the entire building to an investor as an income-producing asset. (The transfer will

45On commercial leases generally, see Cockburn, Commercial Leases; Ross and McKichan,

Drafting and Negotiating Commercial Leases; Gerber, Commercial Leases.

46CFR(S)A 70, s. 9.

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be by way of assignation of the lease.) The lease from the landowner to the developer may provide for the rent to be linked to rental income from sub-tenants.

The parties can provide in the head-lease for the degree of control which the landowner is to retain. This is particularly relevant when it comes to granting a sub-lease to an occupational tenant. The lease may require the landowner’s permission in order for a sub-lease to be granted and may set down criteria in accordance with which permission will be granted or refused. If the landowner’s income is dependent upon rental received by the developer from sub-tenants, it will be particularly concerned about the financial strength of any sub-tenant. A common clause is to provide that the developer may sub-let only with the landlord’s consent which shall not be unreasonably withheld. The head-lease will probably also contain an irritancy clause, allowing the landowner to terminate the lease in the event of breach by the developer of its obligations, such as paying the rent or complying with its obligation to develop the building. Termination has potentially disastrous consequences for the developer, who will lose the value of his capital investment unless there are provisions in the lease for him to be compensated by the landowner for the value of improvements.47 There are legislative controls over the use of irritancy.48 If the breach is of a non-monetary obligation, the court may only enforce the irritancy if, in all the circumstances, a fair and reasonable landlord will do so.49 If, however, the breach is of a monetary obligation, the only restriction is that the landlord must give fourteen days’ notice to pay the arrears due. If then the arrears are still outstanding, the court must enforce the irritancy.50 In CIN Properties Ltd. v. Dollar Land (Cumbernauld) Ltd.,51 the House of Lords upheld the irritancy of such a development lease for non-payment of rent, despite the windfall that this will provide to the landlord, and in Dollar Land (Cumbernauld) Ltd. v. CIN Properties Ltd.,52 held that the tenant had no claim in unjustified enrichment against the landlord.

47Dollar Land (Cumbernauld) Ltd. v. CIN Properties Ltd. 1998 SC (HL) 90.

48Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, ss. 4 and 5.

49On which see Blythswood Investments (Scotland) Ltd. v. Clydesdale Electrical Stores Ltd. (in Receivership) 1995 SLT 150 (OH) and Aubrey Investments Ltd. v. DSC (Realisations) Ltd. (in Receivership) 1999 SC 21 (OH).

50CIN Properties Ltd. v. Dollar Land (Cumbernauld) Ltd. 1992 SC (HL) 104.

511992 SC (HL) 104. 52 1998 SC (HL) 90.