South Africa

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

certain land is still held under ‘quitrent title’ today, this form of land tenure has never been used to resolve the type of situation envisaged by the question.54

Another English form of land tenure transplanted into South African law was leasehold, which could take the form of a perpetual lease, a ninety-nine year lease or a lease for an indefinite period coupled with a right of renewal. This institution was again mainly used where the State did not want to grant state land as freehold but as a lesser tenure. The tendency to equate leaseholders with owners led to the statutory conversion of certain leaseholds to ownership. Thereafter, leaseholds trickled down to a few isolated cases.55 I have come across seaside cottages and timeshares being sold as thirty-year leaseholds, with the rights of the holders expiring after thirty years and the public authority or developing agency being entitled to sell or lease out the cottages on time shares anew.

The only manner in which the result envisaged in the question can therefore be achieved will be by a contractual arrangement between the parties. This will most probably involve a combined building and lease of land contract with the price being the exploitation of the buildings for a certain period of time.

Spain

The parties can create an atypical contract in terms of Civil Code, art. 1255 in order to achieve the result envisaged in the question. It may take the form of a construction contract (contrato de obra) to which certain special clauses are added, for example, granting A a certain measure of control over the structure and affording B the power to manage the structure during a certain period, after which the structure will return to A.

The hereditary building lease (superÞcies) may also achieve the required result. It has already been said that the hereditary building lease grants its holder (B) some form of ‘temporary’ ownership over the structure. There is therefore no need for the owner (A) to manage the structure. In such a situation, A recovers the land and receives the ownership of the structure at the end of the agreed term, but he/she usually has no control over the structure, unless it is agreed in the contract that constituted the building lease.

54See in general Van der Merwe, De Waal and Carey Miller, ‘Property and Trust Law’, ss. 855–9.

55See in general ibid. s. 860.

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

If construed as a limited real right, and registered, some jurisdictions3 make the option enforceable against C, while other jurisdictions4 make them enforceable against C only if constituted as a right of pre-emption (Vorkaufsrecht). If registered, such an option will entitle the holder (B) to assume the rights and obligations of C as set out in any subsequent sale and transfer agreement concluded between A and C. In Austria, a right of pre-emption can only be exercised if the owner receives a binding offer from a third person and the holder accepts the conditions under which the third party buyer C would have bought it.

English law also recognises an option to purchase as a property right, which will run with the land if a prior notification is appropriately noted in the Land Register. It will therefore bind A’s successors-in-title if the option has not yet been exercised. In order to create such an interest, the normal rules for the creation of a contract to purchase land need to be complied with. A’s transfer to a third party (C) in breach of the terms of the option makes A liable in damages and such a transfer may be restrained by injunction. This differs from the position in civil law countries where a breach of the rights of pre-emption will entitle the holder to assume the rights and obligations of the third party purchaser (C).

German law recognises that an option which takes the form of a right held by B to purchase the property (Ankaufsrecht) is a personal right which can be given real effect against C by prior notice (Vormerkung) in the Land Register. The registration of the priority notice does not technically create a real right, but it protects B’s right to purchase the property from A vis-a`-vis third parties like C.

Most jurisdictions accept that the grant of a principal time-limited interest (such as a hereditary building lease or a hereditary land lease) may contain maintenance obligations relating to the buildings on the land which will be enforceable against the successors-in-title of the holder. Maintenance obligations relating to the land surrounding the development contained in the constitutive agreement will, however, only be effective between the parties themselves.5

3See the Spanish, Danish, Hungarian (where an option is valid for a maximum of five years) and Polish reports. The Danish Supreme Court will even order C to restore the property to its former condition.

4See e.g. the German, Austrian, Portuguese and South African reports.

5See the Portuguese, Belgian and Italian reports which attribute such consequence to the numerus clausus principle.

In England, this situation is covered by the law concerning positive covenants. The purchaser of the surrounding land (as opposed to the development site) will not be burdened by the duty to maintain gardens on the surrounding land because outside the leasehold context the doctrine of privity does not permit a third party to be burdened with positive covenants to which he/she was not privy because such covenants do not ‘run with the land’.6 Consequently, B cannot directly enforce the obligation against A. In practice, however, if A, in his/her contract with B has bound himself/herself and his/her successors to maintain the gardens, A will only sell the land to C subject to C’s agreement to assume the obligations relating to maintenance of the garden. South African law will fortify a chain of conditions that burdens all A’s successors to maintain the garden by the insertion of a penalty clause in case of non-compliance. Otherwise, A will be liable on the ground of breach of contract for damages suffered by B. The Belgian report notes that if A imposes the same obligation of maintenance on C, such a clause will, in general, qualify as a stipulation in favour of a third party (derdenbeding/stipulation pour autrui). In such a case, B has a contractual right against C to compel performance of the obligation.

English law encourages this result by holding A liable for the failure to comply with the positive obligation even after the transfer to C. If A is sensible, he/she will have entered into an indemnity agreement with C whereby C covers A’s losses. This can amount to an indirect method of enforcement of covenants, albeit a highly cumbersome and unsatisfactory one.

Most jurisdictions doubt whether the constitutive agreement to create a time-limited interest supplemented by a praedial servitude consisting of a positive obligation on A to maintain the gardens surrounding the development, will be enforceable.7 Exceptions are, however, recognised in the case where the positive duty can be construed as ancillary to a registrable right such as a hereditary building right or a hereditary land lease.8

6Leasehold covenants are an exception. The position will therefore be different if the purchaser acquired the development site itself, where leasehold covenants could come into play.

7See e.g. the Scottish report.

8See the German, Spanish and Belgian reports. Depending on their exact phrasing, such rights and obligations constitute an integral part of the real right of superÞcies or emphyteusis if registered together with the principal right and are therefore effective against third party purchasers. See the Scottish report for further exceptions.